The federal government, through the Central Bank of Nigeria is providing funding for the newly privatised power firms in the country to help pay off inherited debts incurred from gas supply and to stabilise their operations
| By Anayo Ezugwu | Oct. 6, 2014 @ 01:00 GMT |
THE federal government is trying hard to convince Nigerians that it was not providing bailout fund for power firms who recently purchased the successor companies from the Power Holding Company of Nigeria. The government’s action is because of the misconception over the N213 million intervention fund the Central Bank of Nigeria, CBN, in collaboration with deposit money banks provided to support the power firms. The fund will be managed by a dedicated fund manager.
Both the Nigerian Electricity Regulatory Commission, NERC, and the Presidential Task Force on Power, have explained that the N213 billion provided by the CBN was to pay the debts arising from the supply of gas to the companies. It was also to address the revenue shortfall in the power sector in the country.
Also, the facility is tailored to address the three key challenges facing the power sector, which includes inadequate gas supply for power generation; misalignment between electricity tariff and the true cost of running electricity business; and the inability of generation companies to reliably produce electricity with reduced volumes of gas. The fund will be used to settle the legacy gas debts which stands at N36 billion, execute agreed metering programmes; procure transformers by distribution companies; execute maintenance programmes; and procure equipment by generation companies. The beneficiary companies are expected to repay loans obtained from the fund with a first-line charge on their revenues over a 10-year period.
According to Sam Amadi, chairman, NERC, said after the privatisation of the power generation and distribution firms, it was discovered that accurate data was not provided on the level of loss in the companies which was later discovered to be higher that what was benchmarked initially. This was attributed to the fact that Nigerians were not paying full for the power have been consuming over the years, which led to some shortfalls that had accumulated as debts owed the gas and power generating companies.
Corroborating, Dagogo-Jack, chairman, Presidential Task Force on Power, pointed out that the power firms were still in their nascent stage. “You cannot bail out companies that are just starting. The newly privatised power industry has not fully taken off even. So, why should we be talking about bailout?” he queried.
According to him, the power sector took off on the right pedestal as liabilities had continued to trail the operations of the privatised firms from the outset. “Labour did not also help matters. We thought that a significant part of the money realised from the sale of the firms would be reinvested in the sector, but the demand by labour almost consumed the larger chunk of the proceeds. Normally, in other markets, labour is meant to bear some liabilities after the privatisation; but that is not the case here.”
Lending credence to the above, Diezani Alison-Madueke, minister of petroleum resources, on Friday, September 19, said the fund was aimed at ensuring efficient gas supply for power generation, and finding a lasting solution to power supply challenges. “With most of the operators having just acquired PHCN successor generation companies, they could hardly afford the reduced income due to the shortfall in revenues for reasons that I have just set out. The newly privatised companies have borne the brunt of these issues and the consequent shortfalls in revenue since handover last November. This is hampering the much needed investment in the sector and has slowed down efforts to improve electricity supply.
“This scenario, which existed for several years, has now given way to recent reforms by the Goodluck Jonathan administration. And as a country, we can now address these issues with much more confidence that Nigerians will reap the dividends of increased electricity supply,” Alison-Madueke said.
“There will be a moratorium on repayment of the credit facility from the banks, by Distribution Companies until electricity supply across the country improves. This will ensure that the cost of electricity for the ordinary consumer continues to be at affordable levels,” Alison-Madueke said.
On the modalities for operating the intervention fund, the minister said the discos, the gencos and the transmission company must undertake to deploy the funds to address specific challenges as preconditions for accessing the fund.