The Company

Bureau of Public EnterprisesTransmission Company of Nigeria

Transmission Company of NigeriaTransmission Company of NigeriaThe Role of The Management Contractor For TCNThe Role of The Management Contractor For TCN

The Company

Brian Wales and Geoff StottBrian Wales and Geoff StottPrincipal Consultants, British Power International29 November 2011

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

AgendaAgenda

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 TCNAn overview of TCN

The Company

SOEfficient 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 FunctionsThree Principal Functions

MOSettlements (energy and cash balancing)

Payments (collections from discos, payments to gencos)

Bulk metering

TSPDesign, specification, commissioning, construction of assets

Inspection, preventive and planned maintenance

Connections

Field workforce

Project management

The Company

The Role Of The Management Contractor for TCN 5

Key lever for power sector reformKey lever for power sector reform

GenerationSuccessor Gencos (6)IPPsNIPP Plants

Direct supply to large customers, international interconnections

TCNMarket OperationsSystem OperationsTransmission System Provider

Distribution Successor Discos (11)

Customers/ end users

NBET

EPSR 2005EPSR 2005Licence(s)Licence(s)Market RulesMarket RulesTariff Oder (MYTO)Tariff Oder (MYTO)Grid and Metering CodeGrid and Metering Code

Governed by:Governed by:

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 Act1

Prof Bart Nnaji 2011 - appointment of a management contractor for TCN … one of the nine key levers for successful power sector reform2

TCN IM 2011 - the appointment of a management contractor … critical step in introducing a commercial orientation and facilitating the essential investments in Transmission3

The Role Of The Management Contractor for TCN 6

Why it is important?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.

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 MCBasic rationale for the MC

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 mitigationRisks and mitigation

RiskRisk MitigationMitigation

Funding network investment Review of funding by FGN underway

Regulatory and tariff MYTO

Governance Supervisory Board, SODA

Labour Sector wide settlement being negotiated

Contract length Contract terms, break clause

The Company

The Role Of The Management Contractor for TCN 9

Appointment processAppointment process

2006-7 initiative aborted

High level due

diligence of TCN -

Diagnostic Report

Management contractor selection strategy

Preparation of

RfPMCIM

Conduct selection process

Appoint management

contractor

September – November 2011 December 2011 – January 2012

The Company

The Role Of The Management Contractor for TCN 10

Role of the management contractorRole of the management contractor

The Company

Contract structure

Goals and Objectives

Milestones

The Role Of The Management Contractor for TCN 11

Role of the management contractorRole of the management contractor

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 structureManagement contract structure

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 GoalThe Goal

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)Objectives (1)

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)Objectives (2)

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)Milestones (1)

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)Milestones (2)

The Company

The Role Of The Management Contractor for TCN 18

GovernanceGovernance

The Company

Supervisory Board

Non Exec 5 Exec 3 + MC by invitation

Company Secretary

Independent Functions

PR Audit Legal

Regulation Contract Management

Specialist Advisors

Management Contractor

F&A MO TSP SO

The Role Of The Management Contractor for TCN 19

GovernanceGovernance

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

ConclusionConclusion

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

The Company

Thank youThank you

The Role Of The Management Contractor for TCN 22

Brian Wales and Geoff StottBrian Wales and Geoff StottPrincipal Consultants British Power International

29 November 2011