Power firms begin nationwide disconnections

…Says MDAs owe over N78bn after April
Oscarline Onwuemenyi
09 May 2016, Sweetcrude, Houston, Texas – The 11 electricity distribution companies (Discos) operating in the country have announced plans to begin a nationwide disconnection of historical debtors made up mainly of government ministries, departments and agencies (MDAs) whose collective debts now stand in excess of N78 billion by the end of April, this year.

This was disclosed at the weekend in Abuja by the executive director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan.

Briefing journalists on the updates of their operations and the challenges they face, Oduntan said that by the end of April, 2016, MDAs’ debts stood at a total of N78.6 billion with the military being the highest debtor at N38.7 billion.

A breakdown of the debts showed that the Abuja Disco is owed N18.6 billion, Benin Disco, N5.8 billion; Eko Disco, N8.6 billion; Enugu Disco, N7.2 billion; Ibadan Disco, N6.8 billion; Ikeja Disco, N5. 9 billion; Jos Disco, N6.5 billion; Kaduna Disco, N8.2 billion; Kano Disco, N1.2 billion; Port Harcourt Disco, N6.8 billion, and Yola Disco, N2.4 billion.

Other major debtors, according to the debt profile, include the Nigerian Air Force with a total of N3 billion; Nigerian Navy, N3.2 billion, and Nigeria Police, N4.6 billion. Other paramilitary bodies owe a total of N241 million.

Similarly, federal ministries and parastatals owe N9.7 billion, while state ministries and parastatals owe a total of N16.2 billion debt.

Oduntan, who stressed that the huge debt profile had made their operations extremely difficult, also explained that contrary to what is believed, the N230 billion Central Bank of Nigeria (CBN) loan to the power firms had only been accessed by some of them.

He added that despite the privatisation law which stated that the investors should have 30 per cent of the required capital and were eligible to borrow up to 70 per cent from the banks, the banks had to stop lending money to the sector because it was no longer bankable due to the non-cost reflective tariff that existed until February this year.

He said, “On the N230 billion CBN intervention loan, the loan had not been released to all Discos, because the CBN itself was not comfortable with the old tariff; it wanted a tariff that can repay the loan, and part of the agreement was also that the legacy debt owed by the defunct Power Holding Company of Nigeria (PHCN) should be repaid with the loan.”

On the call by the Minister of Power, Works and Housing, Mr. Babatunde Fashola, that the Discos should divest their equity shares to raise money for inputs such as meters and transformers in their various franchises, the Discos stated that the call was not feasible as contractual agreements would not allow them to do so.

The investors pointed out that the agreement at the point of sale of the assets did not allow them to sell more than five per cent of their shares in five years, even if they wished to, as it would amount to circumventing legal agreements.

However, the Discos stated that “since government owns 40 per cent of the shares, government could consider divesting part of its own equity to help raise the needed liquidity in the sector.”

Recall that during the privatisation of the power sector, the federal government retained four per cent equity in the assets while the investors bought 60 per cent.

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