BPE Ready for Next Phase of Privatisation
By Ayodele Aminu
The Bureau for Public Enterprises, BPE, is now set to move to the next phase of the privatization exercise having concluded some
important privatization transactions in the last one-year.
Julius Bala, the director general of BPE, said the Bureau plans to conclude the privatization of the National Aviation Handling, Company, (NAHCO), Anambra Motors Manufacturing Company, Jos Steel Rolling Mill, and Katsina Steel Rolling Mill as well as the concessioning of the Ports in the next one year. According to Bala, the Bureau will also conclude the privatization of the Port Harcourt and Warri Refineries, Eleme Petrochemical, the petroleum products marketing company, PPMC, the Nigerian Gas Company as well as oil services companies. The other companies to be privatized in the next one year are Volkswagen of Nigeria limited, Leyland Nigeria, Steyr Nigeria limited, Peugeot Automobile of Nigeria, PAN, NICON Hilton Hotel, the National Telecommunications Limited initial public offer, EMCON, National Fertilizer Company of Nigeria, NAFCON, and the Nigeria Mining Corporation, NMC including its over 20 subsidiaries.
The concessioning of the National Stadium, Abuja and the Federal Airport Authority of Nigeria, FAAN, will also be concluded within the period. The BPE is commencing fresh moves to privatize NITEL after a botched attempt in 2002. Six companies have consequently indicated interest in acquiring 51 percent equity in the national carrier. Apart from appointing a core investor, the Bureau will take 20 percent of the shares of NITEL to the capital market next month in an initial public offer, IPO. The shares will be sold according to the provisions of the privatization guidelines and regulations on the basis of equality of the federal constituencies.
The IPO had been postponed several times since 2002. By the end of this month, Kaduna and Katsina States are expected to acquire the Federal Government shares in PAN. Bala explained at the briefing that the states through their investment companies entered into negotiations with the BPE to exercise their pre-emptive rights to acquire the 35 percent Federal Government stake in PAN. BPE has had its hand full in the last one year. A reference point in the activities of the Bureau during the period is the privatization of the Aluminum Smelter Company of�ALSCON for which it has received considerable attention. After almost ceiling the deal, the BPE had to re-open negotiations with new investors on the privatization of ALSCON. The Bureau disqualified BFIG, the American core investor group that originally won the bid. The company had offered 410 million dollar for ALSCON as bid price, but was disqualified for failing to pay the initial 10 percent of the offer price within the stipulated time.
Bala, however, explained during the opening of the technical bid of ALSCON and Daily Times Nigeria, DTN, in June last year that the greatest achievement of BPE on ALSCON was its ability to resolve the formation agreements signed with other shareholders without which ALSCON could not have been privatized. One of the grossly unfavourable agreements is the Turnkey Agreement by which
Ferrostal had the sole responsibility of completing the plant at the cost of $ 1.2 billion. After two subsequent agreements in 1995 and 1997 in the form of memorandum of understanding, MOU, which increased the cost of the plant to $ 3.5 billion, ALSCON remained less than 70 percent completed. Ferrostal further requested for additional $120 million to complete the plant just before the termination of the contract, but BPE's Advisers indicated that only $25 million was required to complete the plant. The Metal Uptake Agreement, another controversial agreement which gave Reynolds the sole right for ten years to market and sell ALSCON products at three percent discount of international price also stood in the way of the privatization of the company. Yet Reynolds was also entitled to sales commission as well as profit sharing as a shareholder.
These thorny issues were resolved by BPE, Bala explained.
Akin Kekere-Ekun, chairman, technical committee of the national council on privatization, NCP, also said during the technical bid of ALCSCON and DTN that the nature of the agreements was such that no investor would have been able to own the plant at all. But he explained that in November 2003, President Olusegun Obasanjo, Secretary to the Government of the Federation, SGF, the Minister of Power and Steel and the Attorney General of the Federation collectively supported the director general of BPE, to terminate the controversial agreements on December 19, 2003 and February 10, 2004 respectively. "A share holding restructuring and privatization agreement was signed in he said.
BPE also concluded the privatization transaction on the National Trucks Manufacturing, NTM, following the payment of USD 3.01 million by Art Engineering, the preferred bidder. Similarly, in the last one year, BPE concluded the privatisation of the West African Refinery, WARCO, when Majestic Oil, the preferred bidder, paid
USD 363,300. Following the payment of N1.25 billion by Folio
Communications, the preferred bidder, the privatization of DTN was also concluded.
The privatization of Delta Steel Company, DSC, will be concluded within the next 90 days. The financial bids opened on June 18, 2004 were won by the BUA Group, which emerged as the preferred bidder with a bid price of $25 million. Ihechiowa Oil Palm is also on the verge of being privatized. Following the identification of community issues and state government holdings in the enterprise as factors impeding the privatisation of the company, the BPE sought and obtained Power of Attorney from Abia State Government. "This development now increases the number of shares to be privatised. Accordingly, we are confident that this transaction would be concluded in the next 120 days," said Bala. The BPE has also been busy with crucial pre-privatisation activities such as the sector reform. Under the reform programme, the port sector came into focus. Given the much talked about inefficiency, corruption and lack of investment at the Nigerian ports, which has resulted in the loss of business to neighbouring ports, the need to strengthen the sector through privatisation became necessary. Consequently, BPE has carried out a lot of underground work in the last one year. Accordingly, significant progress has been made in the quest for ports reform Some of activities in this respect are the appointment of CPCS Limited as Ports Concession Adviser, evaluation of 110 expression of interests, EOIs, and prequalification of 96 prospective concessionaires. Meanwhile, CPCS Limited moved swiftly and produced several crucial reports, which are central to the privatization of the ports. The reports are: the inception report, draft concession plan, report on issues and restructuring framework, report on existing legal and regulatory framework and the final concession plan. The others are the information memoranda (terminals l -6), model concession agreements, and legal due diligence report, information memoranda (remaining concession 7 to 24), draft RFP (round 1), draft bidding plan (round 1 ) and the report on the proposed legal and regulatory framework. President Obasanjo consequently approved the proposed restructuring of the Nigerian Ports Authority, NPA, with four autonomous ports Authorities. These are presidential and interministerial committee for implementation of the restructuring and the concession arrangements in respect of alienation, duration, fee structure, resolution of encumbrances and so on. He also approved the timetable for concession transactions and the appointment of a reputable consultant to undertake corporate governance audit of the NPA pension fund. Similarly the President approved an actuarist to undertake actuarial evaluation and analysis of NPA employees and a consultant for establishing requisite manning levels and job description of evolving ports authority. Under the electric power sector, the Bureau has been up and doing in the last one year.
The Bureau recognizes the fact that the Electric Power Authority, NEPA cannot be privatised without an enabling power sector reform law. This informed the need for the passage of the power bill to enable BPE set up the national electric regulatory commission, NERC, and privatisation of new business units, NBUs. BPE has engaged relevant stakeholders to ensure the passage of the bill.
The bill has gone through the first and second reading at the Senate and has been sent to Senate Committee on Power in preparation for the final reading. The bill has also gone through first reading at the House of Representatives and the Presidency is putting its full weight behind the bill. In the oil and gas sector, the BPE has been pursuing problems such as lack of accountability of revenue from oil and availability of petroleum products with vigour. As a result of the noticeable improvement in the oil and gas sector in the last one-year, the World Bank has approved four advisers to enable the Bureau carry out the reform towards effective privatization of the sector. Bala said that BPE was embarking on sector reform to avoid the emergence of private monopolies in place of government monopolies. "We want to ensure that in privatizing we do not create monopolies. It is important to deregulate before privatizing, like the oil industry, the BPE advised government to deregulate the oil industry and now private individuals or companies can now own oil blocks and set up refineries."
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