• Thursday, February 29, 2024
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High indebtedness makes case for power sector stimulus

President Muhammadu recently reiterated his administration’s resolve to give the fullest possible attention to boosting power supply in Nigeria, saying he was convinced that steady electricity will launch the country into faster socio-economic development. Buhari stated this when the Permanent Secretary in the Ministry of Power, Ambassador Godknows Igali led some top officials of the ministry to brief him at the presidential villa, Abuja adding that his administration had already identified the critical problems in Nigeria’s power sector and was taking appropriate actions to address them.

“The problems besetting our power sector are not difficult to identify. Therefore, priorities can be easily set in order to tackle them. The problems are more with transmission than generation, and we equally need to secure the power infrastructure round the country. We will address all these issues”, said Buhari.

One the area that needs to be tackled is the high indebtedness to the power sector value chain. Ikeja Electric for instance is being owed the sum of N5.276 billion by the military, federal government ministries, departments and agencies as well as the Lagos State Government.

“What we see today is a shortage of money in the value chain; from the consumer all the way through to the gas provider at the start of the chain. If power distribution companies (DISCOs) are not collecting enough money, this has the knock-on effect for power generation companies (GENCOs), infrastructure and pipeline owners, and ultimately the gas suppliers to make it economically viable and attractive for investment”, said Stephen Tierney, Managing Director of Accugas.

“The Federal Government should provide a strong stimulus for the initiation of large structural changes. Once the government goes a certain distance, we will see more participation of the private sector in infrastructure investment and gas development”, Tierney added.

The breakdown of the indebtedness to Ikeja Electric reveal that the Ministry of Defence topped the list of customers owing the company, with a debt of N3.927bn as of June 30, 2015, according to a document obtained from a source close to the Nigerian Electricity Regulatory Commission. The Ministry of Police Affairs followed as the second biggest debtor on the list with a debt of N995.958m. Other ministries indebted to the company include communication technology (N51.310m), education (N4.496m), works (N8.405m), health (N2.646m), information (N375,340.68) and finance (N12.260m).

The Ministry of Petroleum Resources had yet to pay its debt of N395,613.54. Other debtors include ministries of transportation (N1.922m), aviation (N156.182m), agriculture (N241,453.14) and State Security Service (N13.079m). The Lagos State Government, which has reduced its reliance on the national grid in recent years through its independent power plants

owes Ikeja Electric N102.138m as of June 30.

It was also gathered that heavy debt owed the new power plants constructed under the National Integrated Power Projects (NIPPs) is weighing down their operations. The total debt owed the Niger Delta Power Holding Company (NDPHC) Limited, operator of the NIPPs, by the Transmission Company of Nigeria (TCN) according to sources is about N58 billion.  NDPHC has seven of its 10 power plants currently contributing about 25 per cent of the country’s current electricity output of 3,400 megawatts (MW).

The TCN debt cover the period January 2011 and December 2014, and include N30,388,365,072 for legacy debt on energy supplied from January 1, 2011 to 31 October 2013, as well as N27,379,680,072 for debts incurred after the government’s privatisation of PHCN successor companies.

Efforts by NDPHC, the Market Operations (MO) which is under the Transmission Company of Nigeria (TCN), Federal Ministry of Power and the Nigerian Electricity Regulatory Commission (NERC) to reconcile and offset the debt has rather been slow to the detriment of the NIPPs’ operations.

NIPPs’ current assets are valued at $11billion. The 10 plants are valued at $7.1billion, gas assets at $0.5billion, Transmission assets at $2.0billion and the Distribution assets at $1.5billion.

It is critical that these debt overhangs are resolved quickly. It is also crucial to offset the market debts by Discos and the federal government to generation plants to keep the tempo of generation going. The privatisation transaction of the 10 NIPPs is currently stalled since there is no adequate gas for full commercial operation.

On completing the privatization which it shifted to January 2016, governments is expected to get over $5billion which would be ploughed in for the next Phase which would be hydropower projects.