Banks have stopped lending to power firms — Amoda

24 January 2015, Lagos – Chief Executive Officer, Eko Electricity Distribution Company, Mr. Oladele Amoda, in this interview with ‘FEMI ASU, speaks about the challenges plaguing the power sector and the prospects ahead

Eko ElectricThe privatisation of the power sector recently entered its third year, what should we expect going forward?

We should expect tremendous improvement. What we have gone through is like a learning curve. We have gone through some challenges – regulatory, financing and so on. But I think we are set to go now. We have been operating below our costs. That is why we have not been able to make tremendous impact. But from next (this) year, there is light at the end of the tunnel. It is hoped that the power sector will actually make significant impact in terms of improvement, services to customers and making everybody happy. I think we are moving in the right direction. Nigerians should be hopeful; all our customers should brace for this new change that will come into the power sector.

Liquidity is still said to be a major issue in the sector; some of the investors, we understand, do not have money to invest.

The problem is that when you don’t have a cost-reflective tariff, the banks will not want to give out any money because they want to see your cash flow. With the tariff that we are running now, the cash flow is not encouraging. Once we have a cost-reflective tariff and the banks that will give us the funds see that we have a very reliable cash flow, then they will be able to release money to us. Right now, the investors are spending their personal money to sustain the industry. You can go and find out, because banks are not lending. So that’s the liquidity issue that we are having due to non-cost-reflective tariff. It is like when you buy something for N10 and you sell it at N8, even at that, part of the commodity is being stolen by some people. You can see how deep your financial problem will be. So that’s the issue.

But recently some of the operators got intervention fund from the Central Bank of Nigeria. What has happened to the funds?

The CBN fund is a loan, though it was supposed to be like a subsidy from government for some issues that we met on ground, that were not expected after the privatisation. But they converted it into a loan to us. So, it is only very few companies that have accessed the money because of very stringent conditions to be met. But I am sure in the first quarter of 2016, other companies will access the funds. The funds are meant to help in rehabilitating the network, bringing in more transformers, improving the power stations and all that. And for those that have collected, they are actually spending the money to improve the system, to introduce technology, to improve customer services and so on.

It is not a lot of money though. For instance, in Eko, we plan to spend N52bn on metering alone. It is not small money. So that is the situation. But we are hopeful that in the New Year, things will turn out to be better and with government that is very focused on the power sector now and with an action person in the ministry, I think the progress of the sector will be much more accelerated.

It was gathered that the CBN N213bn intervention fund was actually suspended. Why?

It was because of the regulatory issues that we had. At a point in time, the regulator removed some components of the tariff which made liquidity problem to be more acute. They removed the collection loss component which made us to be very deep in liquidity issue. The central bank is like fund administrator for the money. They have a fund administrator that monitors how the money is spent and how it is repaid, and they saw that with the removal of that component of the tariff, a non cost-reflective tariff for that matter, then the ability of the companies to pay back is affected. So they suspended it. I’m sure when we have a cost-reflective tariff, they will release the money. And I think the minister and the Vice President are on top of that.

The Nigerian Electricity Regulatory Commission in December approved a new tariff regime effective February, but many Nigerians are still complaining about over-estimated billing. Do you think there is a need for a cap on estimated billing?

We don’t just give people estimation just arbitrarily. There is a method that we use: we look at the feeders, the availability of supply and so on. But the problem with some of our customers is that if they are taking, let’s say 10 units, maybe we have 10 hours of supply this month, we estimated them on 10 hours of supply and next month the supply improves to about 18 or 20 hours, they still want to be paying what they were paying when we had low supply. That’s the issue. They will always complain, but we understand their problem. We sympathise with them. That is why every distribution company is making efforts to roll out meters so that people will stop all these complaints. However, customers have an option.

I don’t know why they are complaining bitterly like that. The CAPMI (Credited Advance Payment for Metering Implementation) scheme is there; any customer that feels he is being estimated unjustly can key into the CAPMI project. They will pay the Discos and the Discos will meter such customers, and the Discos will start to pay back the money. It is like a loan with interest. The money will be paid back with interest. So no customer should actually complain about estimated billing.

It is either they wait until the Discos roll out meters to their premises because every Disco has a metering plan, which has been approved by the regulator and we are going to go according to that, or they should apply for CAPMI meters if they are not comfortable with their estimated billing. The performance agreements that we signed with the Bureau of Public Enterprises is for us to meter every customer within five years. So people should be patient; they should see reasons with us.

Another problem that is deepening the liquidity issue is that a lot of people steal electricity. Electricity theft also adds to our problems. So we want to appeal to Nigerians to report those stealing or bypassing our energy; it is for the good of everybody. Even with the new tariff that is coming, it pays more than running a generator. It is like maybe one third of what people spend on fuelling or maintaining their generators, and it is still very cheap, compared to neighbouring countries or other countries all over the world.

Before the privatisation, Nigerians were made to understand that the purpose of the privatisation was to transfer the power firms to investors with deep pockets for them to rapidly develop the sector. But this appears not to be the case; why?

A lot of them had deep pockets. But the pockets got shallow when they started spending from the deep pockets and there was nothing in the system to give them confidence or to give the banks confidence that they will do according to the plan. There is a performance agreement. From the agreement, what they signed was that at the onset, there will be about 6,000 to 7,000 megawatts of electricity available at that time. But what we had was less than 3,000MW in 2013 when we came in and it is just increasing to about 4,800MW. This was part of the problem and there are some other issues that militated against rapid improvement.

It is not that the investors are not spending money; they are spending their own money. In fact, they are finding it difficult to access funds from the banks and they are spending money. For instance, in Eko, our investors have spent close to N20bn because they are not looking at profit. They are looking at sustaining the company. As we go along, when we have a cost-reflective tariff, we will be able to do a lot of things – change transformers, change all the obsolete equipment, run new lines, improve customer services, introduce technology and so on to make life better for everybody within the five years of performance agreement that they signed.

In fact, if not for the investors, the industry could have collapsed. You can see what is happening in TCN (Transmission Company of Nigeria), they are not getting enough money and the TCN is now the weakest link in power value chain. So we should be thankful to all the investors for sustaining the industry right now. You can see Egbin Power Plc; they moved from less than 400MW to over 1,000MW. In the next two or three months, they will be on full capacity. They have spent a lot of money. Also go to Transcorp Ughelli Power and so on. Investors are spending money.

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