The Department of State Security has moved in to secure the assets of the five distribution companies (DisCos) that have fallen into receivership following their banks’ decision to activate the call on the collaterised shares, BusinessDay has learnt.
Sources with knowledge of the events say that the erstwhile management of Kano, Kaduna, Port Harcourt Ibadan, and Benin DisCos are under the radar of security agencies and the assets of the organisations are under close observation.
The application of receivership applies to the assets of the entities used to acquire the utilities, including shares and interests in related companies and entities, in addition to the monies kept in banks across Nigeria.
BusinessDay reported exclusively on Tuesday that the Central Bank of Nigeria was no longer willing to continue to allow Nigerian banks to carry their huge non-performing loans associated with the funding of the privatisation of the power sector without having to provide for them.
The apex bank, which has supported the beleaguered electricity sector with both cash injection as well as forbearance, is now contemplating a change in the rules in light of the poor performance of at least five of the DisCos that account for over 85 percent of value shortfall in the sector.
The CBN has already compelled the DisCos to open up a dashboard where it can get a view of the revenue accruing to the sector enabling them to monitor inflows and outflows following accusations that some management of the DisCos were reckless with spending.
Read also: Uncertainty over financial health of DisCos as CBN forbearance runs out
By virtue of its N213 billion Nigeria Electricity Market Stabilization Facility made available to DisCos and power generating companies, the central bank has skin in the game and its forbearance has kept the sector afloat, even as operators fail to make the needed investment to grow their network, meter their customers and improve their operations.
The Nigerian Electricity Regulatory Commission (NERC), the electricity sector regulator, issued a note Wednesday morning confirming that the five indebted DisCos were being restructured.
NERC said: “Today, we were informed by Fidelity Bank that they have activated the call on the collateralised shares of Kano, Benin, and Kaduna (Fidelity and AFREXIM) DisCos and that they have initiated action to take over the boards of these DisCos and exercise the rights on the shares.
“Fidelity Bank’s action is contractual and commercial intervention and is between the core investors in the DisCos and the lender. BPE is involved because of the 40 percent shareholding of government in the DisCos.”
The appointment of receivership is based on the loan agreement DisCos entered with their bankers before they acquired the assets, which provide for the appointment of a receiver upon default in payment of the loan.
The Bureau of Public Enterprises is engaging with the CBN to ensure an orderly transition and to ensure that Fidelity Banks does not hold the DisCo shares in perpetuity, the memo said.
