PHCN core investors faced acrimonious entry into market

Sam Amadi, NERC02 January 2014, Abuja – The Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi has stated that the initial challenges in the stabilisation of operations within Nigeria’s privatised electricity market were largely caused by the hostile reception of the new core investors by the market.

Speaking recently in Abuja on the progress of the sector, Amadi said the new owners of privatised successor generation and distribution companies did not enjoy a peaceful entry into the market as the handover of the companies took place amidst palpable hostilities from workers’ union that threatened the whole privatisation process.

According to him, the core investors did not have the time to access the operational status of the companies, stressing that “they came into the scene a little bit frightened and the mode of entry was acrimonious.”

“There were two kinds of problems in the sector: consumers and market anxiety. The second issue is actually about the owners themselves. They came into the market with talks about losses and the Multi Year Tariff Order (MYTO). With that kind of mind-set, there was twisty movement initially. But I think we did very well. Because of the supposed alignment between MYTO and the actual losses they have, we agreed that the full regime of MYTO might not operate in the interim period, and also with an interim rule that allows for settlement. At the end of the day, they unanimously approved the interim rule and one of the CEOs came to me and said, this is wonderful, for the first time,” Amadi said.

He continued: “The problem we had was also compounded by the mode of privatisation. The ‘Fit and Proper’ guideline also has to do with financial strength. So we expect them to acquire the assets with their shares corresponding to the amount of equity they have. But unfortunately, many of these assets were acquired with debt borrowing from Nigerian financial institutions, which may not be convenient for them. The money was paid in August and takeover in November, so apart from the agitations for interests, by the time they took over, the term for the money was due to service the loan and that put pressure on the investors. That is why all these run around and complaints that this market will collapse because of the mismatch. But some of them are picking up like Ikeja and Eko Discos and when we see the performance of private generation companies, they cannot be allowed to perform less because the whole idea of selling the network is to improve it.”



– This Day

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