January 15, 2018 11.00AM / Proshare WebTV
The Minister for Power, Works and Housing Mr Babatunde Raji
Fashola (SAN) last year (October 31, 2017) wrote President
Muhammadu Buhari over the concessioning of the Transmission Company of Nigeria
Mr. Fashola notified the President of the ongoing efforts by the TCN
to enforce its termination of two failed Fibre Network Concession agreements,
recover the outstanding $75.5ml from the Concessionaires and take position of
and commercialize its critical fibre optic infrastructure.
According to the Minister TCN operates the national grid, which
consists of 8,336km of 330kv transmission lines , 8,071km of 132kv transmission
lines and 191/330/132/33kv substations that convey electricity nationwide from
power stations where the electricity is produced, to distribution companies who
receive it for onward delivery to households, businesses and industries across
In terms of operations, Fashola wrote that the TCN transmission
lines re built with fibre optic lines which can convey telecommunications
signals nationwide. In 2006, National Electric Power Authority (NEPA) entered into two separate Concession
Agreements with Phase 3 Telecom Limited and Alheri Engineering Company Limited
("Concessionaires. The Power Holding Company of Nigeria (PHCN) inherited
the Concession Agreements when it was created pursuant to the Electric Power
Sector Reform Act of 2005.
TCN according to the Minister’s letter in turn inherited
theConcession Agreements when it was carved out of PHCN pursuant to the
unbundling of PHCN.
He further noted that the Concession Agreement provided for
the Concessionaires to take over the operation of TCN's fiber optic network
(which is part of TCN,s electricity transmission lines); build, operate and
transfer enhancements of the fiber optic network, over a period of fifteen
years; and use the assets to provide telecommunications services to third
On payments, the Minister stated The Concessionaires were to pay a
concession fee of $40 million each for the use, of TCN's assets to service
their customers. The concession fee was not just for the right-of-way upon
which the transmission lines are constructed, but also for the use of the fiber
optic network, which was built by TCN along with the transmission lines.
Stating further Fashola asserted that the agreements also provided
or shelter fees of 2.5o/o royalty/on gross revenue.
Clarifying the issues of payments, Fashola said Since 2006,
Phase 3 and Alheri have paid only g2 Million and 93.5 Million concession fees
respectively. The Concessionaires have also failed to build most of the
enhancements their Concession Agreements required them to build, operate and
A challenge identified was the inability of the management of TCN
in getting the Concessionaires to pay their outstanding debts , notwithstanding
the significant revenue they collect from the customers they service using TCN assets.
At the moment, the Minister observed their customers include all
the Mobile Network Operators in Nigeria, who rely on TCN fiber optic
network, through the Concessionaires, to deliver services to their 139 million
subscriber lines nationwide.
The Minister in his position shared with the President, that
effective commercialization of TCN's fiber network would transform TCN's
current poor financial position by adding an income stream that does not depend on
the current poor payment performance of the distribution companies.
He believed such revenue could have been used to supplement TCN's current
unsustainable sources of capital from FGN budget and multilateral lenders to
more effectively finance its operations, grid rehabilitation and expansion.
Ginging the peer transmission networks in India, Brazil, and
South Africa, Fashola noted the grid operators derive a significant part of
their revenue (in some cases higher than revenue derived from electricity
transmission) from the commercialization of their fiber optic network.
However, The Minister raised the concerm that in Nigeria
TCN's ability to draw on this important income stream was frustrated by
thecurrent failed Concession Agreements. For him the entire revenue stream has
been unfairly appropriated by the Concessionaires without commensurate benefit to TCN
as provided for in the Concession Agreements
He pointed out that Consequent to the default in payment by
the two Concessionaires, TCN management terminated the two contracts. This
unavoidable step was in line with Article 25.1.1 (g) of the Concession
This decision was taken after several meetings with the
Concessionaires failed to resolve default. TCN had previously sought the
intervention of Infrastructure Concession Regulatory Commission (ICRC) and
Nigerian Communication Commission (NCC) on the matter but to no avail.
phase 3 and Arheri still owe TCN a concession fees of 936.5 Million and g3B
Following the termination, both Concessionaires were given the
opportunity to propose remedies through arbitration. But after initial
engagement, they failed to make concrete proposals.
The letter reads further that “Their latest efforts to frustrate
the TCN’s legitimate right to recover its critical assets and its outstanding
concession fees, has been to institute a frivolous court action against TCN and
the Ministry of Power, Works and Housing challenging the termination in clear
violation of judicial directives precluding litigation in arbitration clauses”.
Mr Fashola also identified the following as procedures the
Concessionaires have breached; Misrepresentation to NCC by the Concessionaires
that they owned Fiber optic network, Non-payment for eleven years the use of
electricity to run the Concessionaires facilities, Non-adherence to the use of
50% of the network by the Concessionaires as stipulated in the agreements and
Concession agreements were entered into under the circumstance of conflict of
The Power, Works and Housing Minister in his conclusion and
recommendation in his letter to the President supported the position of the TCN
that the agreements were voidable and stand terminated. He called on the
President to issue a directive to the DSS, EFCC, Ministry of Justice, Ministry
of Communications, NCC and ICRC to support the TCN in its quest to recover
critical assets of the government and the recovery of its outstanding
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