Queries as FG plans sale of TCN to complete power sector privatisation

• Amadi: Unbundling TCN may go the way of DisCos, GenCos
• Faniran: Govt has no good track record in asset sales

Plans by the Federal Government to complete privatisation of the electricity sector, eight years after initial attempt, has led to stakeholders tasking government on what to do to make a difference.
Already, the Federal Government has commenced process to privatise Transmission Company of Nigeria (TCN) as a way to stop subsidising the sector, while attempting to warehouse existing debt, especially tariff shortfall in the Nigeria Electricity Liability Management Company (NEMLCO). The Bureau of Public Enterprises (BPE), the government entity in charge of privatisation had announced plans for the unbundling of TCN and eventual sale between January 2021 and November 2022.
BPE, according to Bloomberg, is currently considering various strategies to reform TCN. Director-General, Alex Okoh, was quoted in a report as saying the agency would share its proposal “very shortly” with the National Council on Privatisation for the unbundling. This is coming after the Nigerian Electricity Regulatory Commission (NERC) issued a consultation document dated June 2020, with reference NERC/CP/2020/01, consulting stakeholders on unbundling of TCN.
But a lot of stakeholders see this move as a time bomb, which may eventually collapse the bed-ridden power sector, while others say the plan is just propaganda. More critical voices are afraid if government can get best value from the sale given the current state of the sector.

They express worry about the capacity of the BPE, alongside its team of presidential task force as well as private consultant to deliver on the TCN sale, having failed to get best value from sale of DisCos and GenCos, leaving loopholes that are currently hurting the sector.

They see the power sector situation as suffering failure of an attempt to solve a multidimensional problems using an unidirectional approach, abuse of due process, refusal to follow laid down rules, corruption, lack of capacity of responsible state actors, labour problems, political interference and under-valuation of assets.

In 2013, government sold shares to private individuals and raised about $2billion from the unbundling of Power Holding Company of Nigeria (PHCN), creating a number of distribution and generation companies.

Privatisation of TCN, the Niger Delta Company of Nigeria, other independent power plants, and renewable projects were expected to complete the exercise. But the process has remained a mirage since the coming on board of this administration, apparently as it did not originate the privatisation exercise.

Despite privatisation, the power sector has continued to wobble, as generation remained at 13,000WM while distribution and transmission capacity hovers around 3,500WM. Where as, the plan was to increase electricity generation to 40,000MW by 2020. The dismal performance of the sector has been attributed to the fundamental loopholes embedded in the privatisation arrangement.   
Apart from the malaise of poor generation and distribution, the sector is afflicted by financial crisis as government keeps pumping in taxpayers’ money to manageably keep it alive. Reportedly, N322 billion, N403 billion and N524 billion were recorded as tariff debts in 2017, 2018 and 2019. Vice President, Yemi Osinbajo had noted that the Federal Government recently pumped in about N1.301trillion as subsidy or intervention fund.  

TCN is to electricity transportation what a gas pipeline is to gas utility and road infrastructure to road users. But like the Nigerian road syndrome, TCN transmission lines create nightmare for the electricity sector. Just like a road with unbearable potholes, the electricity grid faces perpetual collapse amidst inability to wheel enough energy.  

This is despite the $1.6 billion invested through the World Bank, African Development Bank (AfDB) and other corporations. The $1.6 billion investment is in addition to other budgetary allocations to key power infrastructure and other revenues generated by the government-owned agency.

To most stakeholders, especially those who are pessimistic about government’s sincerity on all matters, to sell the TCN might be a tall order, because the company remains the basic power sector agency where political actors embezzle funds and arrange their candidates for employment.  

A member of the Presidential Committee, who was in charge of initial sale of PHCN insisted that the lack of capacity in BPE to successfully transition sold assets into viable organisations would only throw up litigation matters that could worsen the power sector, unless proper plans are put on ground.  

“I can tell you for free that government will not sell TCN. That is where politicians are pushing their relatives to for employment. And if TCN is sold, our brothers, who are filling up all government agencies will have nowhere to go. If you have gone to TCN recently, you will see how people are loitering around the corridor without office,” the source said.
Former Chairman of NERC, Sam Amadi however told The Guardian that selling or unbundling the transmission segment of the market may not have much impact. “If it is privatized at this point, it may complicate the situation of the sector. It is doubtful if the electricity market can attract an investor it requires for financial and technical capacity to fund and manage the sector at this point to the level of expertise,” Amadi said.

According to him, the facility may end up being acquired by such same investors that took many of the generation and distribution assets. He said while the Buhari government has been extremely incompetent in managing the electricity sector; there should be caution in privatising TCN because of its public value.

“The proposal in the EPSR Act of unbundling it into ISO and TSP and making them a sort of public trust may be a better plan than an outright sale. For now, the overhaul required is to unbundle it and appoint independent boards as required by NERC regulation.

“Again, the ministry of power should follow the regulation process in the appointment and management of TCN. If they allow TCN to be fully regulated, then it will be more efficient. Instead of sale to the private sector, turn it into a public trust for now and much later it can be privatized when the market has become more financially strong,” Amadi said.
Energy expert, Michael Faniran noted that government has no good track record in asset sales, stressing that some of the previous disposals by government have been bedevilled with many challenges.

“Transfer of ownership and realisation of funds from the transaction should not be the ultimate of the divestment plan for TCN,” Faniran said. He insisted that if government must go ahead with the sale, there was need for the process to be auditable and comply with international leading practices, have independence and absence of undue interference from the government, ensure transparency and fairness as well as due diligence and evaluation of the bidders.

“The government must realise fair value from the sale of the asset. Government must also guarantee that other post-sales economic benefits such as tax etc. will accrue to the government. There must be improved performance, service delivery of the asset after sales. The objective of government in the power sector must be realisable with the asset after the sales,” he Faniran noted.

Mineral/Energy Resource economist and former president of the Nigerian Association for Energy Economists (NAEE), Wunmi Iledare noted: “Often too many, a temporary agency for a defined agenda just becomes a permanent agency. That’s my feeling with BPE’s involvement with the flying kite in TCN. What happened to the Canadian arrangements? GenCos and DisCos buying NEPA assets with government participation is not full privatisation because of the enormous liabilities with respect to workers.  Perhaps, TCN’s liabilities are less,” he said.

Iledare noted that in the long run, the value of TCN remains the interest buyers, adding that that is currently something to worry about.

“The ability to recover your investment is tied to successful DisCos and GenCos.  A consortium without government’s dictation and a non-governmental referee is the way to go. I stand corrected, but the failure of DisCo to perform can be traced to the bidding process for NEPA assets in a pseudo monopoly setting with no proper guard rails,” Iledare said.

“The government must move away from centralised planning in a democracy, with a competitive market system goal or in some situation, a regulated market system with no government when there is no evidence of market failure. Autocratic governance of the energy sector is why the deregulated electricity market has not work,” he added.

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