| Conflicting signals
on power sector reforms
By Sun News Publishing
Tuesday, April
24, 2007
Two related developments in the power sector somewhat illustrate
the depth of confusion that has been the hallmark of the out-going administration
of President Olusegun Obasanjo in the matter of its responses to the current energy
crisis.
The first is the reported directive from the President to the
Minister of Energy, Edmund Daukoru, ordering the concessioning of the 1320 MW
Egbin thermal plant to the state-owned Korean Electricity Power Corporation (KEPCO)
under a Rehabilitate Operate and Transfer (ROT) arrangement. The President reportedly
directed the minister to set up a committee comprising representatives of the
Energy Ministry, the Bureau for Public Enterprises (BPE), the Power Holding Company
of Nigeria (PHCN), the Egbin Power Plc and KEPCO, to work out the details of transfer.
The arrangement would see the firm assume the responsibility for the turn- around
of the ailing plant, and thereafter manage it for a five-year period.
Egbin
plant is just one of the 18 business units carved out of the unbundled PHCN with
the name Egbin Power Plc, for which some 37 Expressions of Interest (EOIs) are
awaiting consideration. With the twist of events, the firm will not be included
in the basket of firms on offer when and if the privatisation takes place- a development
which amounts to short-circuiting the announced procedure.
The other development
is the reported rejection of the 18 successor companies of the PHCN under the
privatization plan by the president. The companies were carved out by the BPE
as business units, ostensibly to make for compact, manageable process of sale.
Directing the BPE to prune the number to a more compact figure, the president
described the 18 companies as “unwieldy”.
The president may
be right on the surface. In the context of the widespread disenchantment with
the performance of the energy sector, the president may be right to assume that
some shock treatment at this time would assuage the anger of the citizens. Only
an insensitive leadership will be indifferent to the frustrations brought on by
the interminable procedures of the BPE in the attempt to sell off the power entity.
The agency seems to have reduced the power reform agenda to sheaves
of paperwork. We do think however that the president picked the wrong target in
the BPE. It should be apparent that the absence of political will is what has
hamstrung the activities of the BPE. Dismissing the recommendations of the BPE
as being unwieldy, as the president did, certainly begs the issue. We even think
it is uncharitable.
We do not deny that the president means well.
Resorting
to the easy option of short-circuiting the process just to give the appearance
of breathing life into the process is what is troubling. The measures, in any
case, raise a number of puzzles, first of which is its timing. We would have thought
that such far-reaching decisions are now, best left for the in-coming administration.
Moreover, what happens to the thousands of Expressions of Interest (EOIs) submitted
by investors seeking to acquire the unbundled units? To put it simply, what happens
to the resources, in terms of time and finance, that have gone into the processes
to date?
The other matter is the place of Due Process, which the administration
advertises as providing the anchor for its economic reforms. With Egbin taken
out of the programme without recourse to the interest of the initial bidders,
in favour of the Korean company, there arises an entirely new set of issues around
the credibility of the entire programme. We have no reason to doubt that the Korean
firm could even match other investors if the process is allowed to sail as planned;
our point of departure is why the firm should be given preferential treatment.
Really, should government be tempted to jettison the requirements for due process
in the concessioning programme, the only ground in which it would make sense is
if it is in favour of Marubeni Corporation, the Japanese firm that built it.
The
Korean power firm is certainly at liberty to invest in any segment of the power
sector under the new regime of liberalisation. We believe the Obasanjo administration
should be winding down now. This is not the time to make far-reaching policy pronouncements
not to talk of entering into new commitments that would tie the hands of its successor.
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