Govt to extend initial 5-year period of investment by Discos

15 September 2015, Lagos – There are indications that the initial five-year target given to the private investors that acquired the 11 electricity distribution companies in November 2013 to make a total investment of $1.8 billion for the upgrade and replacement of infrastructure would be extended.

Dr. Sam Amadi.

Dr. Sam Amadi

Under the privatisation agreement between the federal government and the private investors that acquired the assets, the investors were required to invest a total of $1.8 billion in the companies at an average of $357.663 million yearly from 2013 to 2017.

The new investments, it was learnt, would be in the areas of proper metering of all customers;  reduction in number of customer interruptions due to network failures; rolling out of new customer connections and network expansion programmes.

THISDAY however gathered that due to the inadequate gas shortage to the power generation plants, which resulted in inadequate power supply and shortfall in the revenue generated by the new owners of the assets, the new investors did not immediately commence massive upgrade or replacement of the infrastructure to improve power supply.

A source close to one of the investors told THISDAY at the weekend that the government’s assessment would be based on the investment commitments of the asset owners from January 2015 and not November 1, 2013 contained on the privatisation documents.

“All the assumptions in terms of gas supply, power generation and revenue targets on which the privatisation agreement was signed turned out to be unrealistic. The government did not deliver on its commitments on gas supply and this led to shortfall in power generated during the first one year. The drop in revenue affected the capacity of the private sector to deliver on their investment commitments. So, the five-year plan is no longer feasible. Power supply is a complete value chain and once there is a missing link, all the participants are affected,” the source told THISDAY in an emailed message at the weekend.

Chairman of Nigerian Electricity Regulatory Commission (NERC) Dr. Sam Amadi, had stated in one of the post-privatisation interviews that when NERC released the new tariff for which the privatisation agreement was based on July 1, 2012, the agency had projected 9,062 megawatts for the second half of 2014.

“But as at March 30, 2014, when we began to review our mark up date for 2014, power supply was about 3,600 or 3,700mw. What I mean is that for the distribution companies, the revenue they expect to get is less than the projection. If there is a huge revenue shortfall because of inadequate generation, it means that down the line, the value chain has broken. They will not have money to replace transformers and they will not have enough money to implement their metering plans,” Amadi had said.

Under the initial five-year plan, Kann Consortium Utility Company Limited, plans to invest $183.03 million in Abuja Disco from 2013 to 2017; Vigeo Holdings, $121 million in Benin Disco; and Interstate Electrics, $136million in Enugu Disco.

Integrated Energy Distribution and Marketing Limited plans to invest $219 million in Ibadan Disco and $65 million in Yola Disco; Aura Energy Limited, $113million in Jos Disco and Sahelian Power SPV Limited, $151 million in Kano Disco.

Integrated Energy has since returned Yola Disco to the Federal Government due to Boko Haram insurgency, which made it impossible for the company to run the disco.

Others include West Power & Gas Limited, $225 million in Eko Disco; KEPCO/NEDC Consortium, $293million in Ikeja Disco; and 4Power Consortium,  $127million in Port Harcourt Disco.

An investment of $149 million would also be made in Kaduna Disco by Northwest Power Consortium.

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