Enabling Private Sector Investment To Deliver Privatisation Bolanle Onagoruwa Director General Bureau of Public Enterprises Presidential Power Sector Workshop Monday 07 May 2012

Overview Transaction Schedule Issues Affecting The Transaction - Implementation of TCN Management Contract - Funding For Settlement Of Labour Liabilities - Gas Agreement Issues (GSAAs & GTAs) - Financing Issues Conclusion/Summary of Approvals Sought

Transaction Timeline - Milestones Achieved MilestoneDate Achieved Draft Industry Agreements Posted 15 August 2011 Deadline to confirm intention to bid, $20,000 fee due for purchase of RFP documents 26 August 2011 Issuance of RFP, Information Memorandum Documents 01 September 2011 Access to virtual Data Room 01 September 2011 Pre-Due Diligence Conference 14 October 2011 Opening of Physical Data Rooms 24 October 2011 Bidders’ Site Visits 14 November 2010 – 30 January 2011 Transaction and Industry Review Conference 28 & 29 November 2011

Transaction Timeline MilestoneDate for GenCosDate for DisCos Issue Revised Legal Documents 30 March 2012 Submission of Comments by Bidders on the Legal Documents 20 April 2012 Distribution/Issuance of Final Industry and Bid Documents 11 May 2012 Bid Submission 17 July July 2012 Finalize Technical Evaluation 14 August August 2012 NCP Approval of Technical Evaluation 28 August September 2012 Deadline for Submission of Post-Qualification Security 18 September October 2012 Financial Bid Opening 25 September October 2012 NCP Approval and Announcement of Preferred Bidder 09 October October 2012

Implementation Of The TCN Management Contract (1)  A private operator, Manitoba Hydro International (MHI), has been selected as Management Contractor (MC) for TCN and will take up the appointment by 01 July 2012 if funding issues are addressed.  Funds are required to pay the MC and also for the rehabilitation and capital expansion programme of TCN to facilitate the evacuation of the substantial projected increased load for the period  The 2012 budget allocates only N35 billion as CAPEX for TCN, whereas the actual requirement is over N150 billion.

Implementation Of The TCN Management Contract (2) In order to address the funding gap identified in TCN we recommend that:  Approval is sought for TCN to borrow its additional financing needs through the assistance of FMoF and DMO;  Transmission tariff in MYTO 2 has provisions to service the interest;  The AfDB approved $150 million for the power sector and approval is sought for the concessionary loan to be used to finance the needs of TCN.

 Total estimated cost of the labour liabilities for active staff of PHCN is approximately NGN 185 Billion.  The cost estimate covers gratuity, pensions, repatriation and severances.  Already the FGN in the 2012 Budget of the FMoP has allocated N87 billion which can be used to address payment of severances, gratuity and repatriation. We recommend that the shortfall of N98 billion is sourced from the proceeds of the sale of PHCN Successor companies. Direct DMO to raise the N87 billion which was included in this year’s budget. 7 Funding For Settlement Of Labour Liabilities

Gas Agreement Issues (GSAAs and GTAs)  GSAAs and GTAs  Need to increase the term of GSAAs and GTAs from the current 10 years to a minimum of 15 years in line with other industry agreements.  It is imperative that the GSAAs and GTAs of respective PHCN Successor Companies are executed by 31 May  Need for NGC to accept the pricing of gas transportation in Naira.

Financing Issues  Approx $10 billion of capital investments would be needed over the next 5 years to fund acquisition and investment in the power sector;  International financial sensitization indicates that foreign banks are willing to fund power projects but with a short maturation period of 5 years;  To address the above challenge, we recommend that some form of domestic financial capital is injected into the power sector so as to complement funds that can be sourced from abroad;  Approval is sought to reinvest part of the sales proceeds into the power sector;  Approval is sought for a high-powered committee from FMoF, CBN, DMO, BPE and other key agencies to develop the framework for sourcing long- term (10-20 year) financing for the power sector through pension funds, insurance companies, capital markets and local banks.

Conclusion/Summary of Approvals Sought  We have made significant progress towards successful completion of the transactions;  We have resolved numerous issues critical to the transactions;  However, certain approvals as identified below, are essential for sustainable impact of the privatisation program: 1.Approval is sought for TCN to borrow its additional financing needs through the assistance of FMoF and DMO. 2.Approval is sought to use the $150 million dollars loan from AfDB to finance the needs of TCN. 3.Approve that the shortfall of N98 billion for funding of the labour liabilities is funded from privatisation proceeds; 4.Direct DMO to raise the N87billion which was included in this year’s budget to address labour liabilities; 5.Direct NGC and GACN to increase the term of GSAAs and GTAs from the current 10 years to a minimum of 15 years in line with other industry agreements. 6.Direct that gas transportation should be priced in Naira. 7.Approval is sought for a high-powered committee from FMoF, CBN, DMO and BPE to work out the framework for sourcing long-term (10-20 year) financing for the power sector through pension funds, insurance companies, capital markets and local banks.