• Tuesday, February 27, 2024
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BusinessDay

New power assets owners grapple with revenue challenge

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New investors in the power sector are groaning under the burden of acute revenue shortages because leakages which existed before they took over the assets remain largely unaddressed.

The leakages include insufficient gas supply to generating companies from the Nigerian Gas Company and the consequent inability of the generating companies to churn out the power output levels required by the distribution companies.There is also the problem of obsolete infrastructure such as weak transmission lines.

These all combine to cause revenue shortages for all parties in the value chain analysts said.

BusinessDay investigations revealed that plugging the leakages would remain one of the greatest challenges the investors would continue to contend with for some time to come because not much was done to mitigate the leakages before the assets were transferred to them.

An industry source disclosed to BusinessDay that because the government sold the power assets, especially the distribution companies, in their current conditions, the revenue shortfall would remain a problem.

Insiders say the new investors lose up to 53 percent of every N1 collected as revenue, meaning that 53 kobo of every N1 is lost.

Analysts say the solution is for government to resolve the value chain problems. An engineer in one of the distribution companies told BusinessDay that every link of the value chain of the operation was critical to revenue drive of the companies.

Goody Duru-Oguzie, principal consultant/CEO, PowTech Group Ltd, said as long as the old structures on ground are still there, there would continue to be revenue shortfalls. He added that the investors must embrace new technologies that would enhance revenue performance.

Aside from the issue of generation, there are also the problems associated with transmission lines. Most of the transmission lines are weak and as such, a large volume of power transmitted is often lost before arriving at point of use, informed sources said. At the distribution level, equipment such as transformers, cables and distribution networks are weak, they added.

Heavy investment is required in the areas of infrastructure that would enable the distribution and generation companies reduce revenue losses in all of the value chain, the analysts said.

By: Olusola Bello