Catch-22 in Nigeria’s retail electricity market as DisCos owe N22bn

Nigeria’s households will have to live with unlit houses at night, loud generator noise, air pollution and regular power outages as electricity distribution companies (DisCos) miss payments by 74.39 percent, presents a Catch 22 situation.

Eight of the 11 electricity Distribution Companies (DisCos) have remitted N11.38 billion only from the invoices of N44.44bn they received from Generation Companies (GenCos) for the electricity they purchased in February 2018; data from the Nigerian Bulk Electricity Trading PLC (NBET) has shown.

The update of monthly remittances for the 3,225 megawatts hour per hour (MWh/h) energy consumed by the DisCos posted on the website of NBET showed that the payment represented a paltry 25.62 per cent payment of the invoices.

BusinessDay’s examination of the financial statements of seven DisCos indicate that they are veering dangerously close to full blown bankruptcy with reported losses of over N196.23 billion to end the 2016 financial year.

To help improve the solvency ratio of DisCos, the Federal Government had considered raising its stake in the DisCos to 60 percent from 40 percent, BusinessDay learnt. But people with deep knowledge of the proceedings say hurdles against this move are enormous.

Analysts say for the Federal Government to succeed with the plan, it has to buy out the DisCo debt as equity, ensure that electricity tariff are market-based, and help DisCos get return on investments on their assets.

The action would also need to be in line with the Put/Call agreement government signed with DisCos.

Experts have urged government to dilute the shares of the core investors in the DisCos using the funding clause in their performance agreement as a way of resolving the current shortfalls in the electricity market currently valued at about N1 trillion.

“The FG should rely on the funding clause in the Shareholders Agreement which allows the BPE as a 40 percent shareholder in the Disco to inject capital into the DisCos in the event that there is a requirement for further funding which the core investor is unable to provide. The clause allows the BPE to dilute Core Investors equity in the DisCo by such funding,” Wesley Omonfoman, CEO of New Hampshire Capital Investments Limited, an energy consulting firm told BusinessDay last year.

The NBET’s February record showed that three other DisCos remitted zero amount in the month from the N8.68bn invoice prepared by the GenCos for them.

The three DisCos without any remittance, according to the data, are Kaduna DisCo with N3.30bn invoice; Port Harcourt DisCo, N3.75bn; and Yola DisCo, N1.63bn.

Leading the DisCos on the remittance list was Ikeja DisCo by 47 per cent after it remitted N2.63bn from its N5.59bn invoice; followed by Eko DisCo at 40 per cent after the firm remitted N2.09bn from N5.22bn invoice.

Ibadan DisCo came third, remitting N1.93bn (32.83 per cent) from its N5.89bn invoice. Although Abuja DisCo had the highest invoice of N6.19bn, it was fourth on the list having remitted 32.19 per cent equivalent to N1.99bn.

The sixth firm on the remittance level was Enugu DisCo on 26.63 per cent. The firm remitted N1bn out of an invoice of N3.75bn. At the sixth place was Benin DisCo which remitted N1bn of its N3.79bn invoice, representing 26.51 per cent, the record showed.

Jos DisCo remitted the least of N225 million from N2.26bn invoice it got, representing 9.92 per cent payment level; Kano DisCo was at 16.49 per cent as it remitted N500m from its N3.03bn invoice.

Late payment of N9.36bn was recorded for January 2018 invoices summing the February payment to N20.75bn, the electricity market intermediary agency noted.

STEPHEN ONYEKWELU