Experts at the recently concluded 4th BusinessDay Power Roundtable with the theme, ‘Making the Power Sector Work in a Privatised Environment’, said over US$10 billion capital expenditure (CAPEX) is required over the next five years for the power sector in Nigeria to work.
A breakdown of this figure shows that PHCN Gencos require up to $4.2 billion to refurbish plants and increase output, the Discos require about $1.8bn to improve distribution efficiency and minimise losses while the Transmission Company of Nigeria (TCN) requires about $3.8bn for upgrading existing infrastructure and developing new ones to meet required transmission capacity.
Taiwo Okeowo, deputy managing director and head of investment banking division, FBN Capital, said that funding the privatised power sector thus far has been dominated by Nigerian banks with little or no contribution from foreign investors.
He said that with sectoral limit constraints now faced by local banks, Nigerian power sector requires offshore financing estimating that Nigerian banks have committed up to N750bn in the acquisition financing during the privatisation. He identified sources of offshore financing for the sector to include development finance institutions (DFI’s), multilateral agencies, export credit agencies, Chinese funding and offshore commercial banks.
Rumundaka Wonodi, managing director and chief executive officer of Nigerian Bulk Electricity Trading plc, identified massive deployment of pre-paid meters as a form of rolling payment and getting advance payment from power consumers to help finance CAPEX.
He said that incredible amount of progress has been made in the power sector but acknowledges that infrastructural development takes a long time to manifest, adding that in the next five years, more stability in the transmission infrastructure will boost power delivery in Nigeria.
Benjamin Dikki, director general of the Bureau of Public Enterprises (BPE), said that investment in the power sector requires long-term funding as revenue cycle at this point has not matured to sustain the high interest rate of short-term funds, adding that it was one of the reasons the government opted for shared-sale and not asset sale to prevent the private owners from asset stripping and pledging the assets for loans. He said that post-privatisation, the power sector has witnessed about 50 percent revenue loss which amounts to an accumulated N200bn due to transmission, financial and technical hitches.
Don Adinuba, representing Bath Nnaji, chief executive of Geometric Power, in his own contribution said that the huge capital required for the power sector can only come from offshore and these offshore financiers can only respond if government shows considerable respect for contracts and rules.
He cited the examples of cancellation of the 5-year $23.72m management contract for the Transmission Company of Nigeria (TCN) awarded to Canadian firm, Manitoba Hydro International, a critical component of the power reform and privatisation programme and the inability of Geometric/Aba Power to light up Aba ring-fence with their 141MW power project, as a negative that will influence due diligence reports by foreign financiers coming to Nigeria.
Eyo Ekpo, commissioner, market competition and rates, Nigerian Electricity Regulatory Commission (NERC), in his contribution said that half the challenges being experienced with power generation have to do with gas supply and called for the creation of a robust domestic gas market to drive the sector pointing out that the non-existence of a policy specifically made for gas is a contributory factor to the draw-back.