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.
The statement emphasized that while the privatization of the firms would not be reversed, there would be a restructuring of the Discos to improve their efficiency, with each being separated along state lines to better fulfill their responsibilities.
In addition to this, the Federal Government has ordered the sale of Discos that have been taken over by banks and the Assets Management Corporation from their original investors. Currently, four Discos are being managed by banks and AMCON.
The United Bank of Africa (UBA) is managing the Abuja Electricity Distribution Company, while Fidelity Bank is overseeing the Benin Electricity Distribution Company, Kaduna Electricity Distribution Company, and Kano Electricity Distribution Company. The Ibadan Electricity Distribution Company is under the management of AMCON.
These new managements have taken over as a result of the inability of the four Discos to repay their loans to the financial institutions. The government has stated that the original investors lacked the necessary expertise and financial capacity to run the companies when they were privatized in November 2013.
This development comes amidst criticism from the Senate Committee on Power, which has lambasted the Discos for their inefficiency since taking over the privatized assets over 10 years ago, and has called for a complete overhaul of the power firms.
During a meeting with the Senate Committee on Power, the Minister of Power, Adebayo Adelabu, revealed that the Federal Government has already begun the restructuring of Nigeria's 11 power distribution companies. He also mentioned that more than 100 projects of the Transmission Company of Nigeria have remained incomplete since 2001, spanning a period of about 23 years.
Adelabu explained that the Discos are being unbundled along state lines to enhance efficiency and effectiveness. Some Discos are currently too large to operate efficiently, such as the Ibadan Disco which covers seven states. By restructuring them along state lines, each state government will have a designated Disco responsible for their state. Additionally, Adelabu emphasized that both the federal and state governments should exercise their rights in the operation and management of the Discos, as they still own 40% of the firms.
The minister acknowledged that the private sector operators have not performed as expected, and thus, the government must take back control of the Discos. Furthermore, he disclosed plans to franchise unserved communities under the Discos, allowing smaller Discos to invest in those areas.
Regarding regulation, Adelabu mentioned that regulations on franchising will be introduced. Being a part of a larger Disco, such as Eko Disco, should not restrict smaller Discos from investing in unserved communities. Adelabu also highlighted that the Oyo State Government has expressed its desire to exercise its rights in the Ibadan Disco.
In order to hold Discos accountable for their performance, Adelabu stated that the Nigerian Electricity Regulatory Commission (NERC) must impose sanctions on non-performing Discos. Some power firms may even face license withdrawal for non-performance. Adelabu emphasized that the Discos are crucial in the power sector, and if they fail to perform, the entire sector will suffer.
To address the Discos currently under AMCON and banks, Adelabu announced that within the next three months, they will be sold to a technical power operator with a good reputation in utility management.
Reparaphrase :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.Reparaphrase :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.
0 Comments