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2016: Liquidity problem threatens power sector

By on January 2, 2016

The growth prospects of the nation’s power sector, whose privatisation recently entered its third year, may be dampened this year as funding challenge continues to hamper investors’ interests.

Many of the private investors, who took over the distribution and generation companies unbundled from the defunct Power Holding Company of Nigeria in November 2013, currently have little or nothing to invest in the system.

Most of the distribution companies, it was learnt, had failed to make full remittances in recent months to government-owned Nigerian Bulk Electricity Trading Plc for the energy supplied to them. NBET carries out bulk purchase of power from Gencos and resell to Discos through contracts.

Until recently, power supply in the country was hovering around 3,600 megawatts. It stood at 4,143.87MW on December 28, latest data from the Federal Ministry of Power showed on Thursday.

A top executive in one of the Discos told our correspondent on condition of anonymity that majority of the power investors were only using intervention fund they got from the Central Bank of Nigeria for the investment they are making.

He said, “We are supposed to bring money either from our investment or banks for capital expenditure. But what people are doing now is to reduce what they are supposed to pay to NBET and divert it to do CAPEX, thus depriving the market of funds.

“Under normal circumstances, we are supposed to pay 100 per cent of the bills for energy given to us. Before the privatisation, some people were paying 50 per cent, but now they have reduced it to 40 to 45 per cent.”

The Federal Government had in September 2014 announced a N213bn intervention fund to be disbursed by the CBN to the power firms. The fund was meant to be used for the settlement of legacy gas debts, execution of agreed metering programmes; procurement of transformers by distribution companies; execution of maintenance programmes; and procurement of equipment by generation companies.

Beneficiary companies were expected to repay loans obtained from the fund with a first-line charge on their revenues over a 10-year period.

Our correspondent learnt that the disbursement of the fund was later suspended because certain conditions precedent had not been met.
[Punch]