Fashola Writes President Buhari, On TCN’s Recovery Of Government Assets

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Monday, 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 fibre network. 

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 the country. 

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 parties. 

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 transfer. 

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 Agreement. 

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 Million respectively. 

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 interest. 

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 concession fees. 

Proshare Nigeria Pvt. Ltd.

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