FG’s N213bn to settle power sector gas debts, revenue shortfalls

The Federal Government in an effort to boost electricity supply has announced an injection of N213 billion bailout fund for the new electricity generation (GenCos) and distribution companies (DisCos).

The GenCos and DisCos have seemingly been battling to provide stable electricity to consumers.

The bailout fund, it said, is meant to settle legacy gas debts of N36 billion (up from N25 billion in August) as well as the shortfall in revenues to the sector since the new power firms took over the successor companies of the Power Holding Company of Nigeria (PHCN) in November 2013.

Briefing journalists at the Presidential Villa, Abuja, at the weekend, the minister of petroleum resources, Deziani Allison-Madueke, said the facility will be repaid to government on the first line charge revenues of the companies over a 10-year period, but after a moratorium period which will run “until electricity supply across the country improves”.

As part of the facility agreement, the gas suppliers will ensure the medium term gas supply growth that can stabilise power plants within a period of 12-24 months.

“The CBN in collaboration with the deposit money banks will provide a total facility of N213 billion to settle both the legacy gas debts as announced on August 2nd and also the shortfall in revenues to the sector since the handover of the PHCN companies on November 1, 2013.

“NERC will publish a reset tariff order that will take into account the CBN provided facility, current levels of energy output, the new baselines gas price and other variables that more closely reflect the true cost of running electricity business.

“The electricity market, which now consists of mainly private operators, will repay this facility as first line charge on their revenues, over a 10-year period.

“There will be a moratorium on repayment of the credit facility from the banks by distribution companies, until electricity supply across the country improves. This will ensure that the cost of electricity for ordinary consumers continues to be at affordable levels.

“The CBN will on a case-by-case basis, be working with the deposit money banks on some of the prudential guidelines associated with acquisition loans for electricity assets through extended restructure of the debts repayment during the moratorium period. This will only apply where it is clear that strains on loans are a direct result of recent unforeseen adjustments in the policies that guide the electricity market.

“The credit facility will be disbursed via commercial banks and a special purpose vehicle, which will be managed by a dedicated fund manager. This structure will ensure that the funds are repaid in full, within the time fame of the reset tariff order”, Alison-Madueke said.

She added that there will also be strict conditions attached to receiving any payments via this intervention.

The distribution companies will also give their commitments to deploy this backlog of outstanding payments obtained via the credit facility on agreed metering programmes and transformer procurement. This should reduce estimated billing and improve their revenue collection. They will also have to meet commitment to rapidly expand their networks. This will ensure that more Nigerians, especially in rural areas of the country, have access to electricity.

The generation companies will be required to target the outstanding invoices that they will receive via this intervention, on equipment procurement and maintenance programme. This will help ensure that they can reliably supply the quantum of power that they have committed to, in their power purchase agreements.

The Transmission Company of Nigeria (TCN), which is operated by a private management contractor, will also sign commitments to ensure that a minimum of electricity that is produced by the generation companies, reaches the distribution companies.

The minister of power told journalists that government has put all parameters in place to support the 5,000 megawatts commitment before the end of the year or early next year.

He added that the high tariff may come down after the stability of electricity in the country.

 ELIZABETH ARCHIBONG