1. The Company Bureau of Public Enterprises Transmission Company of Nigeria The Role of The Management Contractor For TCN The Company Brian Wales and Geoff Stott Principal Consultants, British Power International 29 November 2011

2. The Company 1.An overview of TCN 2.Power sector reform 3.Rationale for a management contract 4.The role of the management contractor 5.Governance 6.Conclusions The Role Of The Management Contractor for TCN 2 Agenda

3. The Company  One of the 18 successor companies ‘unbundled’ from PHCN; set up as a corporate entity in 2006  A national strategic asset, to be retained in state ownership for the time being  Owns the transmission system, 132kV and above, responsible for its efficient operation, maintenance, expansion and reinforcement. Capital programme 2011- 2016, between 618 and 823 billion Naira  Performs three principal functions Market Operations (MO), System Operations (SO) and Provider of Transmission services (TSP) The Role Of The Management Contractor for TCN 3 An overview of TCN

4. The Company SO  Efficient scheduling and dispatch  Demand forecasting, system and operational planning  Grid Code compliance  Fault management and restoration The Role Of The Management Contractor for TCN 4 Three Principal Functions MO  Settlements (energy and cash balancing)  Payments (collections from discos, payments to gencos)  Bulk metering TSP  Design, specification, commissioning, construction of assets  Inspection, preventive and planned maintenance  Connections  Field workforce  Project management

5. The Company The Role Of The Management Contractor for TCN 5 Key lever for power sector reform Generation  Successor Gencos (6)  IPPs  NIPP Plants Direct supply to large customers, international interconnections TCN  Market Operations  System Operations  Transmission System Provider Distribution  Successor Discos (11) Customers/ end users NBET EPSR 2005 Licence(s) Market Rules Tariff Oder (MYTO) Grid and Metering Code Governed by:

6. The Company  Roadmap 2010 - the lack of a management contractor is … one of the eight principal obstacles to achieving the objectives of the 2005 Reform Act 1  Prof Bart Nnaji 2011 - appointment of a management contractor for TCN … one of the nine key levers for successful power sector reform 2  TCN IM 2011 - the appointment of a management contractor … critical step in introducing a commercial orientation and facilitating the essential investments in Transmission 3 The Role Of The Management Contractor for TCN 6 Why it is important? 1.Road Map for Power Sector Reform August 2010. 2.‘An Overview of Power Sector Reforms in Nigeria’, 25th May 2011. 3.Information Memorandum November 2011.

7. The Company  Injects expertise in capital programme planning and delivery – success in this is critical to sector growth  Provides clear targets and incentives to deliver (by design of the management contract)  Brings in experience on market development and the evolution of the MO, SO and TSP functions – essential to smooth sector evolution  Enables knowledge transfer to, and development of, national staff The Role Of The Management Contractor for TCN 7 Basic rationale for the MC

8. The Company  Those submitting bids will make their own assessment of risk. Considerations include The Role Of The Management Contractor for TCN 8 Risks and mitigation RiskMitigation  Funding network investmentReview of funding by FGN underway  Regulatory and tariffMYTO  GovernanceSupervisory Board, SODA  LabourSector wide settlement being negotiated  Contract lengthContract terms, break clause

9. The Company The Role Of The Management Contractor for TCN 9 Appointment process 2006-7 initiative aborted High level due diligence of TCN - Diagnostic Report Management contractor selection strategy Preparation of  RfP  MC  IM Conduct selection process Appoint management contractor September – November 2011 December 2011 – January 2012

10. The Company The Role Of The Management Contractor for TCN 10 Role of the management contractor

11. The Company  Contract structure  Goals and Objectives  Milestones The Role Of The Management Contractor for TCN 11 Role of the management contractor

12. The Company  Documents developed based generally on WB model and best practice  Contractor is incentivised to deliver  Network and financial performance improvement  Regulatory compliance  Formal milestones (including essential transitions to facilitate reform)  Up to five year term  Break clause (FGN objective is a long term concession) The Role Of The Management Contractor for TCN 12 Management contract structure

13. The Company  To transition the Company into a financially sustainable, stable, self-sufficient and market driven company that transmits generated energy throughout Nigeria and that is available 24 hours a day, 365 days a year  A key prerequisite in attaining this goal is to develop the capacity of local personnel such that, by the end of the contract period, they can capably assist the holder of the proposed concession with the efficient and effective ongoing management and operation of the Company The Role Of The Management Contractor for TCN 13 The Goal

14. The Company  Objective 1: to ensure a reliable, cost effective network for the supply of electrical energy and help facilitate the increased availability of electricity throughout Nigeria  Objective 2: to build the capacity of local personnel such that they can capably assist the holder of a potential long-term concession with the efficient and effective ongoing management and operation of the Company.  Objective 3: to develop the Company’s capability to build for its long-term future and sustainability. The Role Of The Management Contractor for TCN 14 Objectives (1)

15. The Company  Objective 4: to improve financial management and increase profitability in line with modern business practices ensuring the commercial viability of the Company and creating an environment conducive for private sector investment  Objective 5: to separate the activities of the three principal functions of the Company (MO, SO and TSP) to enable them to operate as distinct viable business units  Objective 6: by introducing appropriate modern business practices and effective application of information and communications technology improve the overall efficiency and skills of the local personnel so that they may fully contribute to the effective management, operation and performance of the Company The Role Of The Management Contractor for TCN 15 Objectives (2)

16. The Company  Base Year Data Report  Performance Benchmark Monitoring System  The Company’s Organisation  Market Operator (MO) and Market Procedures  System Operator (SO) Operating Procedures  Transmission System Provider (TSP) Operating Procedures  Transmission System Security and Quality of Supply  SCADA and Operational Communications Plan  Safe Operation and Security The Role Of The Management Contractor for TCN 16 Milestones (1)

17. The Company  Health and Safety (H&S) and Environmental  Emergency Response Plan  Geographic Information System (GIS)  Transmission System – 10 year Rehabilitation and Upgrading Plan Review  Management Information System Plan (MIS Plan)  Financial Management  Human Resource Plan (the “HR plan”)  Transfer of Knowledge and Know-how  Handover of the Management of TCN The Role Of The Management Contractor for TCN 17 Milestones (2)

18. The Company The Role Of The Management Contractor for TCN 18 Governance

19. The Company The Role Of The Management Contractor for TCN 19 Governance

20. The Company  A high performing TCN is central to  Extending the network and improving reliability and security of supply (n-1)  Facilitating market development  The MC selected will have the capacity to  Deliver the major capital programme and improve network performance  Set up TCN to provide autonomous functions as MO, SO and TSP  Establish local staff training, transfer of knowledge and developing a succession plan The Role Of The Management Contractor for TCN 20 Conclusion

21. The Company The Role Of The Management Contractor for TCN 21 Management contractor for TCN Successor Gencos Successor Discos NERC ( regulation, tariffs, licences) NBET market rules NELMCo Funding for network investment

22. The Company Thank you The Role Of The Management Contractor for TCN 22 Brian Wales and Geoff Stott Principal Consultants British Power International 29 November 2011