Operators in Nigeria’s power sector on Sunday rejected the Federal Government’s selection of the Transmission Company of Nigeria as the firm that will manage a N72bn investment fund expected to boost electricity distribution networks across the country.
The government has hinted of plans to invest N72bn in the distribution assets in order to effectively distribute more power.
The Managing Director, TCN, Usman Mohammed, recently stated that the transmission company would manage the fund.
But the power distributors on Sunday kicked against the move, as they argued that as holders of up to 60 per cent shares in the distribution assets, their boards should be allowed to deliberate and decide on the conditions for such investment, if they would ever accept it.
According to a document made available to our correspondent in Abuja by the Association of Nigerian Electricity Distributors, the Discos said they did not trust the capacity of the TCN to manage the investment fund.
They said, “It will be difficult for the Discos to acquiesce to the TCN/Ministry of Power, Works and Housing adding a further N72bn of debt to the N1.3tn of debt (and growing) already to our financial books, given the Discos’ inability to access debt financing required to address massive capital expenditure requirements.
”The capital expenditure requirements far exceed the N72bn initiative required to inject the efficiency that electricity customers demand, the Discos’ regulatory constraints, and the uncertainty of projects built by an entity that is licensed only to transmit energy and not distribute energy.
“It should also not be forgotten that the Discos are already carrying, out of the total sum of N210.61bn, 72.25 per cent or N152.16bn of legacy gas and energy debt (incurred by the defunct PHCN) associated with the Central Bank of Nigeria’s Nigerian Electricity Market Stabilisation Facility, a debt unconnected with the Discos, a contravention of the debt-free requirement, that was a fundamental contractual requirement of the sale of the distribution assets.”
ANED said the N72bn initiative held for the Discos pitfalls that would undermine any expected positive outcomes that were the genesis of the government’s plan.
They said the basis of the planned funding was to evacuate 2,000 megawatts of electricity which they claimed was not stranded on account of distribution limitations but mostly by gas, frequency and line constraints.
The power firms also explained that given the heavily regulated nature of their business, they were not sure they could recover the investment through tariff because it might not adhere to the regulatory requirement for capital investment, which the Nigerian Electricity Regulatory Commission stipulated for them.
“To ensure that electricity customers do not unduly bear the cost of electricity inefficiencies, fundamentally, all related procurement is required to be implemented efficiently and on a best-value basis. The implementation of this N72bn initiative by the TCN, outside of the regulated procurement requirements that the Discos are subjected to, will leave the best-value requirement wanting,” they said.