Privatisation: Power firms risk takeover over cash crunch

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By Adewale Sanyaolu

For failing to meet the terms of agreement, 11 power distribution companies (Discos) that bought over the assets of the defunct Power Holding Company of Nigeria (PHCN) risk losing about N200 billion investment.

The power firms were handed over to their new investors on November 1, 2013 despite stiff resistance from labour unions.  Four years after the take-over of the assets, the investors have failed to meet the expectations of Nigerians, in terms of increasing generation capacity and metering.

Daily Sun gathered that part of the agreement the investors reached with the federal Government inject money to fund its operations, which is not being done at present.

Highlighting the Discos’ failure to keep to the agreement, former Minister of Power, Prof Barth Nnaji, had, during the Nigeria Gas Association (NGA) Natural Gas Business Forum held in Lagos last week, told Daily Sun that majority of the Discos and Gencos had reneged on the agreement they had with the Federal Government before the assets were sold to them.

He said under the agreement, the power investors had a six-year period to deliver on their mandate, or the Federal Government will take over their assets.

Nnaji advised the power investors to shop for co-investors in order to avoid the assets being taken over by the Federal Government, saying 10 per cent ownership of a viable business was better than 100 per cent of nothing that works.

The former minister also said that apart from having financial capability, the Discos were under obligation to have technical know-how.

Said he: “The conditions we set out for privatisation then were that every single company bidding to acquire the asset must have two things: technical capability and financial capacity. If you don’t have any of those, you don’t qualify. But if you have both, you should not have a problem either as a generation or distribution company.”

Nnaji, who is currently the Chairman of Geometric Power Limited, explained that the intention of government for privatising the power sector was to ensure that both distribution and generation of power was taken out of the control of government, with the agreement that investors will reduce Average Technical and Commercial Losses (AT& C) to a certain level that an investor bided, for which he said was the actual bid.

Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola, had, two weeks ago, during the 16th monthly meeting with operators of the power sector, threatened to sack the management of any Disco that failed to deliver on its mandate

The Discos, under their trade association, Association of Nigerian Electricity Distributors (ANED), had stated in March that the revenue shortfall in the market had reached N809.8 billion, an indication that all was not well with their operations.

ANED’s Director of Research and Advocacy, Mr. Sunday Oduntan, had claimed that the amount, which covers the period from November 1, 2013 when the new owners of power companies took over, to date, includes a balance of N90.41 billion from the N213 billion interventions by the Central Bank of Nigeria (CBN) to pay-off gas supply legacy debt.

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