A Review of the Nigerian Energy Industry

Govt to capitalise Electricity Trading Company with $550m

Power pylons07 May 2013, Abuja – Managing Director of the Nigerian Bulk Electricity Trading Company, NBET, Rumundaka Wonodi, says the company would soon be capitalised to the tune of about $550 million by the Federal Government.

According to Wonodi, the capitalisation, expected to happen before the end of this year, is to position the company to effectively carry out its responsibilities as designed in the nation’s emerging electricity market.

He said: “The issue of capitalisation of the bulk trader has about two elements to it. The first is that people look at our market today and say that the bulk trader is coming in to fulfill a role of a credit worthy entity.

“But, when they look at the market, they say there is so much shortfall coming from distribution companies.

“Therefore, if bulk trader is supposed to be in a position to pay for all the power it will receive from the generation companies, it will need additional capital to make up the shortfall and make payment to the generation companies.

“From the bulk trader, that is not what we see. Government is not privatising this whole power sector so that tomorrow the new owners will take over distribution companies and not be able to pay for their power”.

Wonodi explained that the capitalisation was meant to address the gaps in when his company is making payments and receiving payments because, according to him, the company has to make payments to generation companies to give them that confidence, even what there is a shortfall in their collections from the distribution companies.

On the source of funding for the capitalisation, he said said: “Last year, as part of gradual capitalisation which we call working capital of the bulk trader, the federal government budgeted N18.6 billion but because of the pace of the reform and how much was done, about N8.9 billion was released last year and warehoused in the Central Bank.

“This year, a provision of N14 billion has been put in place and if all that is released, we will have over N20 billion by the end of the year which approximates to about $130 million, then the government is going to the market, $1 billion Eurobonds, to support the power sector and for that, depending on the needs, about $350 and $400 million would come to the bulk trader depending on government’s priority to be able to make sure that the components of the sector gets the kind of attention required.

“In totality, we seeing between $450 to $550 million overall capitalisation at the end of the year and that is in for a wholesale electricity market that is approximately between $140 to $150 million a month depending on how much capacity is added and so with that money, we can make power purchase agreement payments for three months on a stretch.”

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