BPE: Sam Amadi making wild allegations on power privatisation

The Bureau for Public Enterprise (BPE) has accused Sam Amadi, former chairman of the Nigerian Electricity Regulatory Commission (NERC), of making wild allegations concerning power sector privatisation coordinated by the agency.

In June, Amadi said the privatisation was designed to fail as the power assets were sold to investors who lacked financial and technical capacity.

In a statement on Friday, BPE said the former NERC chairman had churned out falsehood, adding that the design of the framework that led to the privatisation in 2013 was also endorsed by the electricity regulatory body.

“It is in the light of the above that we wish to respond to the falsehood emanating from Dr. Sam Amadi in the last few weeks using various media platforms,” BPE said.

“We present below some of the wild allegations made by Dr. Amadi and BPE’s response.

“On a general note we wish to state without any fear of contradiction that the Bureau worked closely with NERC in delivering the power sector transaction. The design of the reform framework was never the exclusive work of the Bureau given that the power sector policy, the Act that replaced the old NEPA Act and the eventual sector structure were subjected to stakeholder reviews through intensive workshops. The experiences of other nations and the opinion of critical stakeholders were incorporated into the eventual designs which were well received.

“It is also pertinent to note that all the transaction documents such as request for proposal (RFP), draft contracts, evaluation criteria etc. were all endorsed by NERC before they were issued to bidders.

“The members of the evaluation team had a combined experience of over 300 years in the relevant subject matter. It therefore beggar’s belief that somebody who was appointed Chairman of NERC with zero years of experience in the power sector should seat in judgment over the outcome of PHCN successor company’s evaluation.”

The BPE said aside providing an incorrect aggregate technical commercial and collection (ATC&C) loss level prior to privatisation, Amadi later carried out an ill-advised removal of the collection losses from the contract with investors, which led to a declaration of force majeure by the distribution companies (DisCos).

“Tthe power sector is yet to recover from that decision,” BPE said.

“The amendments made to the RFP were not done to reduce the threshold for qualification; rather they were done to provide more clarity and transparency to the transaction.”

“We make bold to say that the removal of collection loss component of the Aggregate Technical, Commercial and Collection (ATC&C) losses was the single most devastating decision so far taken in the power sector. The bidders had competed on the basis of aggressive reduction of ATC&C losses within a period of five years and preferred bidders were those who had scored 75% and above on technical evaluation and had the highest ATC&C loss reduction offer. The challenge to implementing this structure was that in the Multi-Year Tariff Order that NERC had released ahead of the transaction, it had estimated the ATC&C to average around 25%. BPE informed NERC that based on its own assessment the losses were between 40% and 50%.

“It is was then agreed between BPE, NERC and the investors that the transaction would go ahead with NERC’s assumed loss level of 25% but that after the handover to the preferred bidders, the new core investors in the distribution companies would work with NERC and within a maximum of one year come up with the actual loss levels. It was also agreed that once the actual losses were determined MYTO 2 would be adjusted to reflect reality. It was on this understanding that the Bureau proceeded with the transaction.

“After the handover to the core investors on November 1, 2013, a NERC supervised study was conducted and the actual losses were determined to be 49%, which vindicated the earlier position of the Bureau. In line with the agreement, NERC in December 2014 released a new MYTO that took effect on February 1st 2015.”