Power distribution companies in Nigeria are currently being unbundled along state lines due to their large sizes that often result in efficiency and ineffectiveness, the Federal Government declared on Monday.
It stated that the privatisation of the firms would not be
reversed, but stressed that the Discos would be broken into more efficient
structures along state lines so as to be able to deliver on their mandates.
This came as the Federal Government also ordered the sale of
Discos that have been taken over by banks and the Assets Management Corporation
from its original investors/owners.
Currently, four Discos are under the management of banks and
AMCON.
The Abuja Electricity Distribution Company is under the
management of the United Bank of Africa (UBA), while Fidelity Bank manages
Benin Electricity Distribution Company, Kaduna Electricity Distribution
Company, and Kano Electricity Distribution Company.
The Ibadan Electricity Distribution Company is under the
AMCON management.
The four Discos are under these new managements due to their
inability to repay their loans to the financial institutions.
The government stated that those who acquired the Discos
when the firms were officially privatised in November 2013, lacked the required
expertise and financial capacity to run the companies.
This came as the Senate Committee on Power lambasted the
Discos for being so inefficient since they took over the privatised assets over
10 years ago, and called for the overhaul of the power firms.
In his address, while playing host to the Senate Committee
on Power, led by their Chairman, Senator Eyinnaya Abaribe, the Minister of
Power, Adebayo Adelabu, stated that the Federal Government had commenced the
restructuring of Nigeria’s 11 power distribution companies.
He also revealed that over 100 projects of the Transmission
Company of Nigeria have not been completed since 2001, a period of about 23
years.
Adelabu said, “We are unbundling the Discos along state
lines. Some of the Discos are too big for efficiency. They are too big for
effectiveness. Ibadan Disco covers seven states. It is practically impossible
for them to be efficient.
“So we are rearranging and restructuring the Discos along
state lines so that each state government will know the responsible Disco for
their states. Also, the federal and state governments should start exercising
their rights in the operation and management of the Discos because we still own
40 per cent in the firms.
“But we have left it for the private sector operators for
too long and they have messed it up. So the government must come back to take
over its own right in the Discos. We are also planning to franchise the
unserved communities under the Discos.”
The minister went ahead to state that “we will start seeing
regulations about franchising. The fact you are Eko Disco doesn’t mean that you
cannot have smaller Discos that are ready to invest in your unserved
communities. So we are looking at franchising.”
Adelabu further revealed that the Oyo State Government had
written to the Federal Government stating that it wants to exercise its rights
in Ibadan Disco.
He said the Nigerian Electricity Regulatory Commission has
been made to realise that it must sanction Discos that fail to perform, as the
licences of some of the power firms might be withdrawn for non-performance.
“We are transforming the Discos and very soon you’ll see
that a lot of tough decisions will be taken against these Discos because they
are the last mile in the sector. If they don’t perform then the entire sector
is not performing.
“So we have put pressure on NERC to make sure that it raises
the bar on the activities of the Discos. If it has to withdraw licences for
non-performance, why not? If it has to change the boards and managements, why
not?
“And all the Discos that are still under AMCON (Asset
Management Corporation of Nigeria) and some lenders (banks), within the next
three months they must be sold to a technical power operator with a good
reputation in utility management.
“We can no longer afford AMCON to run our Discos. We can no
longer afford the banks to run our Discos. This is a technical industry and it
must be run by technical experts,” the power minister stated.
Also commenting on the non-performance of Discos, a member
of the committee, Senator Danjuma Goje said, “The Discos have not added
anything significant to the power sector, but are just going about collecting
money.
“The Discos are complete failures and should be overhauled.
They have failed to live up to expectations and we have so many complaints
about their poor performances.”
The Senate committee also authorised an investigative
hearing on the electricity tariff hike and stated that this would be held on
April 29, 2024, at the Senate.
Privatisation problems
The power minister told his guests that those who acquired
the Discos when they were privatised, lacked the required expertise and
financial capacity.
Adelabu said, “Our problem started from the privatisation
era. Not that the privatisation has a problem in itself, but its implementation
and execution have robbed the process of its laudable objectives.
“We believe that people who bought the power companies do
not have the required expertise to run the utility firms. Secondly, they were
not buoyant enough in terms of financial buoyancy to pay for the power plants.
“All of them used bank loans to pay for the assets. And we
all know that the power business is a long-term business. It is not something
you recoup your capital and make profit in a short time. So they were all under
pressure to repay the bank loans that they used to acquire the power companies.
“This is why today a number of them have been taken over by
their lenders, either AMCON or the banks, both local and international banks.
They also promised to invest and enhance the distribution network, but they did
not do this.”
The minister stated that the investors had promised to
reduce the losses in the Discos, but stressed that up till now the losses had
remained at about 40 per cent across the power value chain.
“So the Discos are not investing as expected,” Adelabu
stated.
100 uncompleted projects
The minister told the lawmakers that over 100 power
transmission projects have not been completed since 2001.
“Since 2001 till date we have over 100 uncompleted projects
of the Transmission Company of Nigeria. So when we say the government has spent
so much in the sector, it is true. But all the spendings have not translated to
good impact on power users.
“This is because majority of these projects have not been
completed, though some of them are 80 or 90 per cent completed. We have over 65
projects on power substations that are still ongoing since 2001, which is 23
years ago.
“We have about 62 lines projects across the country that
were started and have not been completed. And these are being affected by
exchange rate calculations, inflation, variations, etc. One thing about power
projects is that if they are not completed 100 per cent, you cannot energize
them,” Adelabu stated.
He said all the investments are just there lying in waste,
“but we are saying that this year we must ensure that a significant number of
these projects are completed so that Nigerians can enjoy the investments in the
transmission company.”
On the metering gap in the power sector, the minister stated
that a company received $200m in 2003 to provide three million meters but
failed to do so.
“In 2003, the metering gap was less than four million meters
and the Federal Government gave out $200m to a particular company to acquire
three million smart meters for the industry. It was a revolving loan.
“But it is sad to let you know that this is 21 years after,
no single meter was acquired by this company and the $200m which was N32bn at
the time, nothing was got from the money until Mr President just gave us the
approval to terminate this loan.
“He also asked us to implement the metering of the Nigerian
Army formations to the tune of N12bn. You can imagine if we had acquire three
million meters 21 years ago. Today the metering gap that we have is over eight
million out of over 12 million customers of the power sector,” the minister
stated.
Adelabu, however, noted that the Federal Government was
working hard to close the metering gap.
“Mr President has come to our aid on this by forming a
Presidential Metering Council, which I’m the Chairman, and he has given us a
mandate that a minimum of two million meters should acquired and distributed to
Nigerians every year.
“This is going to continue till the next four to five years,
so that the current eight million metering gap that we have will be closed over
the next four to five years.
“The funding for this project is being sourced. We have been
given a seed capital of N75bn and the Nigeria Sovereign Investment Authority is
coming to our aid in terms of capital for this,” Aselabu stated.
The minister also stated that the target of the Federal
Government is to achieve 6,000MW of power before the end of this year, adding
that this has been submitted to the President.
He called for the payment of the outstanding debts to gas
companies and power generation firms.
He said the government is currently talking with two
investors that should invest in the construction of 3,000MW of solar-power
projects in various states to support the national grid.
The minister pointed out that Nigeria currently has an
installed power generation capacity of about 14,000 megawatts.
He said, “Today we have a total of 13,250MW installed
capacity in all the generating units, including hydro plants and thermal
plants. If we add the 700MW coming from the recently Zungeru plant we will have
close to 14,000MW installed capacity.
“But it is sad to let you know that the highest we have ever
generated in this sector is 5,800MW out of an installed capacity of over
13,000MW, which is less than 50 per cent. The infrastructures are there lying
fallow without adequate maintenance and the turbines are getting rusty.
“Two things are responsible, which include the inadequate
transmission capacity to evacuate this power even when it is generated. The
second thing is the inadequate demand coming from the Discos because they are
not getting full payments from the consumers when they distribute power to
them.”
Adelabu said the 5,800MW was generated in March 2021, which
was over three years ago.
“But we believe that with good investments and demand for
power, we can increase power generation to over 8,000MW once there is adequate
infrastructure,” he stated.
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