EXCLUSIVE: FG Deprived of $40,000,000 in Failed Concession Deal

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The commercialization of a country’s extensive fiber optic transmission infrastructure (which is a part of electricity transmission lines) is a fundamental requirement for the stability and full optimization of the grid. This can be noticed in countries like Brazil, India, South Africa among others. Furthermore in few cases, the revenue derived from the commercialization of the fiber optic network is relatively higher, compared to the revenue obtained from electricity transmission.

A large number of service providers make use of these facilities worldwide because of the comparative advantages it offers to these investors. These advantages includes; the length of span, coverage area, right of way among others. Companies or service providers who can key into this platform includes; Cellular operators, fixed line operators, internet service providers, banking institutions, commercial dark fibre providers, commercial broadband service providers, government institutions, LECs (Local Exchange Carriers) amidst others.

The Nigerian Transmission Network is not left out in all of this. The national grid consists 8,336km of 130KV transmission lines, 8,071km of 132KV transmission lines and 191 330/132/33kv substations. Attempts have been made in years past for the commercialization of this infrastructure and concessions were made with other companies as regards commercialization.

In this report, we access the on-goings as regards the concession agreement the Transmission Company of Nigeria (TCN) inherited from the defunct Nigeria Electric Power Authority (NEPA).

 

     Read Also; Understanding The Nigerian Power Sector (TCN)

THE CONCESSION

The TCN’s transmission lines are built with fiber optic lines, which can convey telecommunication signals nationwide. In 2006, the then Nigeria Electric Power Authority (NEPA) entered into two separate concession agreement with Phase 3 Telecom Limited and Alheri Engineering company Limited (concessionaires). In pursuant of the Electric Power Sector Reform Act of 2005 led to the creation of the Power Holding Company of Nigeria (PHCN). PHCN inherited the concession. TCN in-turn inherited the concession as a result of the unbundling of the PHCN.

The concession agreement provided the concessionaires the right to take over operations, build and transfer enhancement of TCN’s fiber optic network (which is a part of TCN’s electricity transmission lines) over a period of fifteen (15) years, and in turn use the assets to provide telecommunications services to third parties.

The concessionaires were to pay a concession fee of $40 million each for the use of the 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. The agreement also provided for shelter fees of 2.5% royalty on gross revenue.

 

THE STATUS – QUO

From the report recently released by the Minister of Power, Works and Housing, Mr Babatunde Fashola, one could infer that the concessionaires are presently making use of the TCN’s infrastructures as agreed in the concession agreement. They are also presently providing telecommunications services with third parties. Their customers include all the Mobile Network Operators in Nigeria, who rely on the TCN’s fiber optic network, through the concessionaires, to deliver services to their 139 million subscriber lines nationwide.

The concessionaires have also faltered on some terms of the agreement. Both companies have failed to build most of the enhancement the concession agreement required them to build, operate and transfer, and have also not paid the concession fees in full.

 

INTENDED IMPACT OF CONCESSION

The effective commercialization of TCN’s fiber network would have transformed the 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. Several calls have been made on the improvement in transmission capacity, as the country’s poor transmission capacity presently pose a serious threat to the incremental power policy of the Ministry of Power, Works and Housing. Such revenue could be added to the Federal Government of Nigeria budget allocation could have been used to improve on the current unsustainable state of the TCN facilities – grid rehabilitation and expansion, and also to effectively finance its operations.

 

Read Also; TCN Reveals The Three Big Devils of Nigeria’s Power Growth

 

BREACH OF TRUST

The concessionaires have been accused of breach of trust as regards the 2006 concession agreement. The report filed in by Mr. Babatunde Fashola, clearly stated an utmost breach of trust on several clauses of the agreement. They include;

  1. Misrepresentation of ownership of the fiber optic network – The concessionaires had claimed ownership of the fiber optic network. This false claim was presented to Nigerian Communication Commission (NCC) and their customers, which enabled them enter into Indefeasible Right of Use (IRU) with some Mobile Network Operators without the knowledge and consent of the TCN.
  2. Non-payment of electricity bills – The concessionaires have operated their facilities housed in TCN’s substations without payment for the use of electricity for eleven years.
  3. Non-adherence to the use of stipulated portion – The concessionaires were clearly stipulated to make use of 50% of the network, but they have in many places in the network taken more than 80%.

 

CONFLICT OF INTEREST

The minister stated in his report that the concession was entered into under circumstances of conflicts of interest. He stated that the owner of  one of the concessionaires is married to the daughter of the then Minister of Communications, under whose regime the company obtained the long distance license. Further, he stated that the then Managing Director of NEPA who signed the concession agreement on behalf of NEPA is now an executive with the owners of Alheri engineering company limited. Also, the infrastructure concession regulatory commission (ICRC) mediated between TCN and the concessionaires over non-payment, and the former DG of ICRC who presided over the mediation talks, was once an employee with the owners of Alheri engineering company limited for several years.

 

    Read Also; TCN to Spend N1.4trn on Network Upgrade

VERDICT

Based on the aforementioned breach of trust and conflict of interest, the minister of Power, Works and Housing, Mr Babatunde Fashola has in a letter addressed to the office of the presidency called for the termination of the concession agreement which he termed a failure. He also called on relevant government agencies to assist in the recovery of its outstanding concession fees in the sum of US$75,500,000.00  from the two concessionaires. He also made a plead for the take-over of the commercialization of the critical fiber optic infrastructure by the federal government.

If the facts presented by the Mr. Fashola are true, then it is very disheartening that the proposed commercialization of TCN’s fiber optic network has not yielded any positive result for the past eleven years. Hence the call by the minister is not a far cry from what is expected to be done to savage what is left of the infrastructure. Similarly, the call for the Federal Government to take over the commercialization of the TCN’s infrastructure seems to be a step in the right direction if and only if what happened in the past eleven years does not reoccur.

 

 

 

 

To get a copy of Mr. Fashola submission to the office of the presidency with clearly stated facts and figures sent to your mail, subscribe to this post by inserting your mail address in the dialogue box below.

 

 

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About Omobude Bright 115 Articles
A FUTA Alumnus, a geophysicist, a cartographer, a freelance writer and poet. Loves adventure, music, movies, football and food. Hates monotony. Hobbies are reading, writing and travelling. Interested in human, society, academics and power(energy) sector.

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