The Nigerian Electricity Regulatory Commission (NERC) is set to commence enforcement actions against poor payments by operators and the federal government has also disclosed that it would restructure the total debts owed to service providers in Nigeria’s privatized electricity market by the 11 electricity distribution companies (Discos) with the aim of easing the debt burden and allowing them to source for monies to fund their capital projects.
The Minister of Power, Works, and Housing, Mr. Babatunde Fashola, who was represented by the Permanent Secretary in the ministry of power, Mr. Louis Edozien, stated this at the 17th edition of the monthly power sector operators’ meeting hosted by the Abuja Electricity Distribution Company (AEDC) in Abuja.
Fashola explained that having set up an N701 billion intervention facility to support the power generation companies (Gencos) to continue to generate power, the government would now go ahead to restructure the Discos’ debts to the power market, adding that the Nigerian Electricity Regulatory Commission (NERC) would commence the process soon.
He noted that the proposed move was necessary to strengthen the balance sheets of the Discos and ensure they are favorably disposed to negotiate loans to fund their distribution networks. He said “Having done all these (various government policy interventions), the commission must now focus some attention on reviewing, dimensioning and restructuring the debts that the Discos owe the NBET and Market Operator. I believe that the re-dimensioning and restructuring of these debts are important for strengthening the balance sheets of the distribution companies and ensuring that they can raise the financing they need to meet their obligations to their customers”.
Recently the 11 Discos stated that the financial shortfall in the power market had reached N809 billion, but figures on their real debts to the market have remained quite debatable. Experts, however, told THISDAY that the planned debt restructuring would allow them to reduce and renegotiate their delinquent debts to improve or restore their liquidity.
These experts also noted that such debts restructuring should from standard practice, reduce the burden of the debts on the Discos by either decreasing the rates paid or increasing the time they would have to pay back. They added that this would ensure they continue with their operations and not fold up. Fashola, equally disclosed that the government’s administration of the N701 billion NBET facility for Gencos’ has remained steadfast with payments for January; February; March; and April approved and at various disbursement stages.
He said: “On the liquidity concerns that have bedeviled the industry, you are all aware that the government has approved in the context of the power sector recovery plan, the sum of N701.9 billion support program for the Nigeria Bulk Electricity Trading Plc. The payment for January under that payment assurance program is now virtually completed. ”The payments for February are fully approved and are in progress and nearly complete; the payments for March are awaiting their administrative approvals from the CBN, Ministry of Finance, and would soon be completed and payments would commence; the payments for April under this program are just beginning the approval process.”
He also noted that government was of the view that, “there is the need for the industry to move more determinedly towards bilateral contracts”, as the best way to move out of its various challenges. Meanwhile, the NERC has said it would commence enforcement actions against Discos that have consistently failed to meet up with their monthly payments for power sent to them. NERC’s commissioner in charge of planning, research, and strategy, Mr. Musiliu Oseni, stated this while reading out the final communiqué of the meeting. Oseni, stated: “The Market Operator lauded Eko Disco for making full payments for services provided and Yola Disco for making 91 percent payments. No other Disco made payments up to 50 percent and NERC has commenced enforcement procedures for non-payment in the sector.”
When asked by THISDAY to provide details on the regulator’s planned enforcement actions against the Discos, Oseni refused to answer, stating that the regulator would not give details of its intentions on the pages of newspapers. He rather referred the paper to the Vice Chairman of the Commission, Mr. Sanusi Garba, who also declined to explain the details of the enforcement action.