DISCOs, GENCOs revenue shortfall now N478bn

*Egbin Thermal Power Plant.

*Egbin Thermal Power Plant.

12 January 2016, Lagos — Revenue shortfall by generating and distribution companies, also known as GENCOs and DISCOs has risen to N478 billion since November 2013, when the defunct Power Holding Company of Nigeria, PHCN assets were unbundled and handed over to private investors.

Industry sources told Vanguard that the sector initially had a shortfall of about N290 billion from November 2013 to December 2014, while attributing the rise to the fact that data handed over to them was not in line with agreement signed upon privatisation.

The situation is further compounded by the N50 billion capital expenditure ceiling allowed for all the DISCOs in a year, further deeming the yearnings of Nigerians to have regular power supply as soon as possible.

Although the revenue shortfall was partly addressed by the N213 billion Central Bank of Nigeria, CBN, loan facility (repayable over 10 years with interest), bso far, only N65 billion has been disbursed to the power companies.

Whilst the Transitional Electricity Market, TEM, officially commenced February 1, 2015, the DISCOs were supposed to pay market bills in full, even though cost reflective tariffs were not in place.

According to a source, “From January to the end of October, 2015, the new additional sector shortfall rose to about N265billion, that is now N478 billion from take-over to date. If there is no immediate tariff review, the sector will continue to have a deficit of N20 billion a month. The Shortfall is being felt by gas suppliers, generating companies, transmission and distribution companies.”

He added that in spite of negative cash flow, over N26 billion has been invested by the DISCOs in the assets and improvements since take over.

The areas of investment include; plant and machinery, ICT including billing systems, customer service including call centres, office equipment, service vehicles and equipment, distribution network replacement and expansion. Others are safety equipment and training, building/facilities enhancements, meters and customer enumeration, energy loss reduction plan, recruitment of staff and capacity building.

Another source disclosed that about 50 percent of the power bought is not paid for due to power theft, inadequate collection, insufficient infrastructure or non-cost reflective tariff, exchange rate factor and insufficient capital expenditure, CAPEX.

“The way forward is tariff review, increase CAPEX spending to improve quality of power distributed. Also, full drawdown of initial CBN loan, provision of funding via CBN, banks, development finance companies and bond market to make up for the 2015 market shortfall and sculpting the shortfall for first 3 years after tariff review,” he added.

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*Sebastine Obasi-Vanguard

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