• Saturday, June 22, 2024
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Poor business culture raises banks’ apathy for Nigerian power firms

3D Electric powerlines over sunrise

Banks and other lenders are becoming increasingly wary of issuing loans to power sector operators on account of perceived tardy business practices on the part of the latter. The lenders say they see poor application of discipline and prudence by power sector firms in managing funds already loaned to them and that there is a consistent failure to produce results  on previous contract projections.

Apart from the fact that some power plants in the country have not been given comprehensive routine service since they were constructed over three decades ago, power distribution companies (Discos) have also been accused of not having workable business plans, or failing to work according to the ones they presented, while seeking funding from commercial banks.

According to Dolapo Kukoyi, of  Detail Commercial Solicitors, who was speaking at the West Africa Power Distribution and Metering Summit in Abuja,“banks are reluctant to further lend to the power sector because they don’t know where the working capital already lent to banks would be recovered from, some of the Discos don’t know exactly the number of customers they need to meter, the figure is staggering, as some Discos haven’t even done enumeration of their customers.” 

The Central Bank of Nigeria (CBN) in order to increase liquidity in the sector and ease pressure, created a N213 billion intervention fund for the power sector.

Kukoyi noted that banks have funds but the Discos have to show commitment that revenues are increasing with increase in capital expenditure, as against the current situation where losses are rising, despite what is now close to cost reflective tariffs.

She said if this trend continues, the sector would collapse, as quarterly reviews show that some of the Discos keep their share of the CBN facility in bank accounts most of the time, stressing further that “that behaviour must change.”

On the generation side, one of the major problems confronting the new owners of Gencos is that the legacy power stations they acquired from government were not serviced since they were constructed, thereby greatly constraining their output.

“Jebba, a hydro power plant in Niger State, was commissioned in 1985 but serviced only recently in 2013, whereas the maintenance schedule provides for the power plants to be serviced every five to six years,” said a competent source from the office of the minister of power, who spoke with BusinessDay on the condition of anonymity because he was not authorised to do so publicly.

BusinessDay findings show that although Nigeria has about 28 power plants owned by six power generating companies, with a total generating capacity of 19,744mw, the country has a meagre 4,000mw on its national grid, as the transmission network cannot cope with any load above 5,000mw without system collapse.

Nigeria’s 11,769mw capacity thermal powered plants, which are run either on gas or coal, are Egbin AES Barge, which is now delivering just 270mw, with its thermal phase that is currently under construction to deliver up to 1,320mw in 2019.

Others which are partially operational, are the Aba power station (140mw); Afam (IPP), 624mw; Alaoji, 1074mw; Calabar (NIPP), 561mw; Geregu I, 414mw; Geregu II, 434mw; Ibom power (NIPP), 190mw; Ihovbor, 450mw; Okpai (NIPP), 480mw; Olorunsogo I, 336mw; and Olorunsogo II (NIPP), 675mw.

There is also Omotosho I (336mw), as well as Omotosho II (450mw), Sapele IPP (1,020mw), Sapele NIPP (450mw); and Transcorp Ugheli (900mw), which are all partially operational, while the 150mw Omoku (NIPP), Omoku II (225mw), the 932mw Afam (FG-owned), Egbema (NIPP), 338mw; power plants are totally non-operational.

The nation’s 2,040mw capacity hydro power stations which are currently in full use, are Kainji (800mw), Jeba (540mw), Shiroro (600mw), and Zamfara (100).

Those that have been proposed or are under construction can cumulatively generate 4,935mw and include the Kano power station (100mw), which has exceeded its completion dateline fixed for 2015; the Zamfara power station (100mw), slated for completion in 2012 but remains partially completed; the Kiri power station (35mw) to be completed this year; and the Mambilla power station (3,050mw), which will be completed in 2018.

Other proposed power plants are Azura, a 450mw gas fired power plant that is expected to come on stream next year, as well as Itobe, a 1,200mw coal fired power plant, which is expected to deliver 600mw at the completion of its first phase in 2018.