Private power firms to Nigeria: We owe you 100 days of light

Two days ago, the chapter and era of the Power Holding Company of Nigeria (PHCN) came to an end. That was also the last dance for power supply or management by the public sector. That paved the way for the private sector firms that bought the generating and distributing sub sectors to take over.
Unveiling the agenda and strategic plan for the sector in an interview, chairman of the DISCOs Roundtable, a forum of all the successor companies that bought over the assets, who was also the pioneer Chairman and Chief Executive of Nigeria Electricity Regulatory Commission (NERC), Dr. Ransom Owan, declared to Abuja Metro, the readiness of the companies to light the nation steadily in the first 100 days after commencement of operation.

DISCOs Roundtable
This association includes eleven successor companies of PHCN. The reason they came together was because of their common interests. It is better for them to come together and deal with government collectively instead of individually so that if you solve one, you have solved all. However, each distribution company still has some specific peculiarities, which they still have to deal with. The goal of the association is to treat the customers as kings because it is the customers that pay for electricity, nobody in the value chain will succeed in this process if the customer is not there. Post privatisation will fail if the customer is not there to support the system; the value-chain is three-legged stool, you have distribution. So, the need to support one another.
The Federal Government still owns the transmission company 100 per cent, so the people still own the transmission lines. For the generating companies sold, government is selling 80 per cent and keeping 20 per cent for the people. So, of the distribution companies, eleven of them that have been sold, government only sold 60 per cent and is still holding 40 per cent for the people; so transmission company is 100 per cent owned (TCN) generating companies (GENCOs) 20 per cent owned by government and 80 per cent private sector ownership. For DIPCOs, 60 per cent own by private sector, 40 per cent owned by government. So, as you can see, government has not entirely taken its hands off. I know someone would ask why government still holds interest in the transmission and in DIBCOs. For the GenCOs & DISCOs, the 20 per cent and 40 per cent held by the government is insurance for government that the people are the ones, who have invested to bring these companies to the way they are today. So, government holds this share in trust for the people.
But government is not going to invest in the GENCOs, and the DIBCOs because it is a minority shareholder. It won’t invest anymore in the assets that have been sold, so the private sector would turn around the business. Remember, for the DIBCOs, we bought PHCN problems.  The business has not been making money and performing, all the people who have bought these, bought assets that have not been performing well. So their number one goal is to turn the businesses around, but also carry the consumers along because, they are the ones to pay. If the consumer didn’t pay, then he doesn’t believe in the system. So all those monies they borrowed they won’t be able to pay back, so they would have a failed system. To avoid failure, I can tell you, we must treat the customers as kings. That’s the goal of the association.
In return, the association is also taking care of all the stakeholders, because their main stakeholders are all Nigerians.  They are not going to serve their private interest, because, they are not going to keep the power in their pockets, they must sell it. But if DISCOs don’t have power from their generating companies, they can’t sell. If the transmission doesn’t have power, they can’t give it to them, they can’t sell it to the people. So within the DISCOs, if the transformer is bad or the meters are spoilt, they can’t sell to customers, therefore, the three parts of business modules have to work very well. If you build a bridge to the middle of the river and stop, nobody will benefit, therefore you have to complete everything. So, in the power sector, there is nothing like 99.99 per cent complete; it has to be 100 per cent complete.

Total take-over
Regarding the issues of hand-over of distribution and generation companies to new buyers, the new buyers are now proud owners of the Nigerian power sector as distribution companies. After the actual hand over two days ago, we are faced with the task of doing some final house cleaning. You know, when you are a new driver and you buy a car, if you take the keys, that car may not reach home, someone needs the show you the way, so these people who have bought these assets need to now come in, discuss with current management, how to do turn this one on? They need to understand the business a little better.
We had what was called “shadow management” opportunity within the last six months, but due to some bottle-neck with government and bank liabilities, buyers didn’t have full access to learn the business, so that’s neither here or there. Everybody still has faith in the system and pay on time and anytime when you have 99 per cent success, if you score 99 per cent in an exam, I think you’ll get an ‘A’. So all Nigerians should be proud of what has happened and it is a vote of confidence for the sector, a vote of confidence for the government, that the government is serious about what we are doing, otherwise, people will not come in. So, I think everybody should congratulate himself for what happened on Monday.

Business plans
Before the handover, government required them to file their business plan. So now their business plans have been approved by the government signified in the takeover; so nobody now has any excuse not to function effectively. Today, we have gone from planning to implementation. I believe now that we should be looking at things like, what should be expected in first hundred days now that we have got the full impetus and ownership.

There shall be light
In general, one thing everybody likes to know is how many times they are having light a day. They don’t want to know about the rest of the world. So I don’t want to give predictions, but all the buyers of these assets want the quickest turn-around. I know it is not going to be easy because, in their business plans, they have said what they want, they are to face their activities, 90 days activities, 6 months, one year activities. All of them have five year business plan required by government; therefore, they are going into implementation stage and Nigerians should be comfortable because they have invested a lot of money in buying these assets. I will also ask for the little bit of goodwill to be given for the newcomers, because, essentially, they have bought the problem over; and now they need time a little bit to put in their business success plan.
So in this regard, I believe that in a very short period, the value-chain would start to change because if power generation does not improve, transmission has nothing to deliver and distribution companies have nothing to sell; so I think most importantly, the DISCOs need power to sell and they will encourage those who want to generate to generate and sell to them. How is that possible? The government has put in place two things; there is something called “The Central bulk trader of electricity” “The Nigerian bulk electricity trader”. This is a central buyer of electricity from the generating companies to give them confidence because government has backed that company. That company also needs to put together a letter of months credit to the people generating the power so from there, the distribution companies are also putting three months of letter of credit or bank guarantee for the power they are going to buy.  So we move back-back guarantee. So generators know that they will get paid and the discos know that they will get paid as well, so the value-chain is complete.

Take off time
In terms of the private side that has taken the opportunity to borrow money and come to the market, yes there is a profit motivation.  Let us be fair about it, but I say that, the consumer is the king; and in this business if you do not treat the consumer well, the consumer would not be happy. For example, if the new buyers continue caving in that would not be good for the system. However, if the new owners, before you build a house, the moment you get your permit to build the house, we will come and see you; we noticed that you have received permission to build a factory, a house, a college or a university, how can we help you plan your power needs?, where is your location?, we are going to plan to put a new transformer in that area so that it won’t be overloading; you can see how the marriage would work: so that if you become sensitive to the need of a consumer. For example again, these new owners will have account officers who will be given territories to cover, if a business wants to expand, you’ll say how much is the capacity building, we will now plan to give you more power when you need it.
So what has been happening now, sometimes people can erect buildings and factories without letting the electricity companies know, after that, they will now come and say you come and hook me up with the next one, but that there is no power for them because they didn’t plan for it. So in our business, proper planning will prevent poor performance; so if you do not plan well, it means you are planning to fail and I have said earlier, failure is not an option. So in that regard, as new owners of the business, they must do critical planning. They must forecast the need for the consumers, because before the consumer came, it means you are prepared to meet and satisfy their interest.  If you don’t, you have failed.
Like I said, because of the money they have borrowed and for the essence we can’t allow post-privatization to fail. And that is why we are asking states and the federal government to remain in support of the power sector. For example, the states need to remain engaged because these companies are operating in their states; they need peace and security. There haz to be good cooperation between them and owners, so we strongly encourage a partnership between the new owners and governors, because if governors don’t provide the security and access, even occupancy right, you won’t be able to build anything, you can’t construct anything, so they have to be engaged. Now, if the federal government also washes their hands off the power sector, but also are the people controlling the policy, it is not good. So in my mind, then it will be a big situation for all stakeholders to work together for the successful benefit of privatization in Nigeria power sector.

Hand over and labour issues
For the record, I do not speak for the government. I don’t pretend to do so. But as an interested party in this business of electricity, we highly commend the government side. They have worked tirelessly to get us to where we are today. The negotiations with the labour  was very difficult. The liability that government owned was also very huge and you have to follow a very steady approach so that you don’t disturb the system too much. So, with that steady approach, the buyer understood by government has made about 99 per cent of everything before the business closed. But we have also agreed with government that the same things that are left are not enough for the process to be stopped or delayed.
Therefore, all buyers did everything that they could to beat the deadline. The second thing that we are happy about is keeping to agreement (“The sanctity of contract”) it was important for the buyers to show good faith and pay, because government has shown good faith. So because of the good faith on both sides, government has done its best, and has paid generating companies, they are paying second packages for the discos, they have made all sorts of commissions, they have set up things that now allow us to come into the market place; so, by and large, everybody has pulled their weight and kept the faith and confidence in the system so while we are in the process, it is never a complete full stop.