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Dikki dispels fears over banks’ exposure to power companies

By on May 23, 2014

The Director-General, Bureau of Public Enterprises (BPE), Mr. Benjamin Dikki has said that concerns of an imminent collapse of commercial banks due to their exposure to the power sector were unfounded.

Speaking in Abuja at an all-parties meeting organised by the Africa Energy Team of the World bank, Dikki said the purported fears over the Power Holding Company of Nigeria (PHCN) successor companies (SCS) ability to service loans and a likely stress to the banks due to exposure to them were misplaced as the successor entities did not borrow directly from the banks for their own books.

Furthermore, he noted that no assets of the SCS were pledged as collateral.

He said:”The banks lent to the core Investors based on their capability to pay. The investors are supposed to have made adequate provisions to take care of their obligations to their financiers from the outset.  They knew that they were not going to make profit immediately on takeover of the SCS. Their financiers also were aware of this.”

In a statement by BPE’s spokesman, Mr. Chigbo Anichebe, Dikki also noted it was the acquiring companies or special purpose vehicles (SPV’s) which had borrowed based on their cash flows and accounts.
The share purchase agreement (SPA) also required that the consent of the BPE is obtained before the Core Investors can borrow.

Meanwhile during a presentation entitled “Reform of the power sector in Latin American countries in the 1990s”, aimed at sharing  experiences of  the power sector privatisation in these countries, Mr. Pedro  Antmann reminded investors that their primary focus should be to provide adequate and efficient power supply to Nigerian consumers.

He said that there were usually challenges at the initial stages of the privatisation exercise but that with determination and the right strategy, it would be surmounted.
Antmann urged the investors not to aim at making profit now but to endeavour to develop infrastructure and to meet the cost of supply.

The World Bank official advised the Nigerian Electricity Regulatory Commission (NERC) to make a provision in its rules to adjust tariffs in times of low generation and shortage of gas supply.

Antman, drawing from experiences in other countries, said these challenges are normal at the early stages. Urging Investors not to focus on short term gains, but invest in infrastructure that will guarantee sustained future profits. Nigerian banks had invested about N1 trillion in the acquisition of the privatised PHCN assets.

Group Managing Director/Chief Executive Officer, Diamond Bank Plc, Dr. Alex Otti, had at a power investors’ forum in Abuja, said that as at 2013, the banking industry had  invested well over N750 billion in the power sector and that they were ready to do more.

Consequently, the banks called for an increase in electricity tariff and in the price of gas, saying it would boost the revenue profile of the power companies and their ability to repay their debts.

Some of the chief executives of banks, who spoke at the just concluded Seventh Lagos Economic Summit, tagged Ehingbeti 2014, had complained of the revenue profile of the power companies, saying  it was not meeting the expectation of investors.

 

[This Day]