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Power distribution firms blame poor performance on losses

By BusinessNews Staff on July 30, 2014

The buyers of the country’s power distribution firms have given reasons why their performance is still below average several months after taking over the companies.

Early this month, the Operator of the Nigerian Electricity Market stated that the performance of the successor companies to the Power Holding Company of Nigeria was below 50 per cent.

Specifically, the ONEM, which is an arm of the Transmission Company of Nigeria, said it was shameful to note that the productivity of some power distribution companies, after they were privatised, was worse than the output before the firms were sold.

But the investors, in separate interviews with our correspondent, argued that their seeming poor performance was largely due to the huge revenue leakages, which they met when they took over the firms.

According to them, the actual revenue losses incurred by most of the firms before they were privatised were far beyond what they disclosed when they were being handed over to the private investors.

Chief executive officers of some of the power distribution firms told our correspondent that they were prevented by labour leaders from gaining full entry into the companies they bid for while trying to ascertain the level of losses by the firms.

The development left the investors with shallow knowledge of the enormity of the problems of the power firms before they were bought over.

The Managing Director, Abuja Electricity Distribution Company, Mr. Neil Croucher, explained that historically, the Discos were ill-positioned to meet their revenue targets.

“Obviously, we aim to get to a position where we pay them (ONEM) the full amount, but the truth is that the industry has not been in a position to do that historically. It’s very much improved now but there is still some distance to go,” he said.

He noted that during the transition period, the firms had to manage a lot of losses, adding that poor power generation was also a major challenge for the Discos.

“The aim of privatisation was to see how these losses would be reduced and, of course, for generation to pick up,” Croucher said.

On when to expect considerable improvement in supply, he said, “I think it is ongoing and I believe there is improvement already.

“As I said earlier, power generation needs to pick up as well. Nigeria has been short of electricity generation, which historically has been a sector lapse and that needs to improve. But we are fully confident that there will be improvement.”

The Managing Director, Benin Electricity Distribution Company, Mrs. Funke Osibodu, told our correspondent that the mandate to reduce the losses was for five years and gave an assurance that the firms were working hard to address this.

“The fundamental reason the companies were sold was to reduce losses. This mandate is for five years and each company has what is expected of it during this period,” she said.

The chief executive officer of a generation company stated that until the losses were adequately reduced, it might be tough to get 24-hour power supply across the country.

The CEO, who spoke on the condition of anonymity, said, “The losses in the various companies, which the Discos met, are very huge and they are struggling to address this. By doing so, they at times find it tough to make payments to the MO and this affects the money in circulation because if they don’t pay, we won’t get ours.

“And if we don’t get money from the market operator, how do we pay for gas? The gas companies themselves don’t like it when we owe them and so, they prefer to sell to manufacturers in the industrial sector. You now see why it may be tough to get 24-hour power supply fast.”

[Punch]

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