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Bulk Trader Sanctions NSIA’s Management of $350m Eurobond Fund

18 Feb 2014

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By Chineme Okafor in Abuja

The Nigerian Bulk Electricity Trading Company (NBET) Plc has expressed confidence that the Nigerian Sovereign Investment Authority (NSIA) will efficiently manage its $350 million Eurobond fund, which is expected to be escrowed to the NSIA.

The fund, which the federal government had raised through the Eurobond for the NBET and others to improve the funding fortunes of the Nigerian Electricity Supply Industry (NESI) is to be put under the management of the NSIA on behalf of NBET.
Minister of Finance and Coordinating Minister of the Economy (CME), Dr. Ngozi Okonjo-Iweala recently announced this at the last Nigeria power investors’ conference hosted by President Goodluck Jonathan in Abuja.

Managing Director of NBET, Rumundaka Wonodi had described the management arrangement was in order, considering the amount of benefits that would accrue from it.

Wonodi made the declaration on the sideline of a recent technical workshop organised by NBET to educate market participants in NESI of the underlying principles in the vesting contracts and power purchase agreements they signed with it.

He said: “The interesting thing to know is that the CME is the minister of finance and chairman of the board of NBET, so when she sits there, there is a dual role she plays and can direct how the resources of the bulk trader can be deployed.

We have three sources of capitalisation, the first is receipt from the distribution companies and their security, budgetary receipts that is about N16 billion in  our trading account, the escrow from PHCN privatisation and of course the Eurobond which of course the best place to keep them is not to keep them in accounts.”

He added: “It will be nice to have someone manage them so that it can earn interests and therefore the minister of finance has identified the sovereign wealth fund which is also owned by the federation as the best place to warehouse the money and we are very comfortable with that because we know by how we understand the fund as a stabilisation fund, that they will manage this, under that we can have access to the money under a month. It could be as quick as 14 days but you know we manage on a monthly basis."

He however assured of the safety of the fund noting, “We however  want people to understand that the money is put in tradable instrument that we can recall back and that is why the chairman thought that it should be put in that instrument.”
He also gave reasons for initiating the technical meeting with existing market participants in NESI.

“They were calling for changes in some of the terms and conditions of the vesting contract whereby they thought that the bulk trader should take some risks rather than passing it down to them, for instance in the power purchase agreement, there is a take or pay obligation for gas and in the vesting contract, we have said that the vesting contract must also include take or pay obligation of gas and if there is any gas cost that comes to the bulk trader, it is passed down to the distribution companies through the vesting contract.

The Discos, not being very clear on how retail tariff was, have said that the bulk trader should make that payment and they should not, so it will be stranded within the bulk trader while the bulk trader is just providing the service of getting the power and guaranteeing it and if the provisions made in the tariff allows you to cover such capacity payments that might come and there is a cover for it, the question should be is that fixed charge adequate to cover such risk because everything that happens has to come to the end user to pay,” he added.

Wonodi further stated: “The role of the regulator is to make sure that as that cost is being incurred along the value chain, that it is efficient and prudent and somewhere along the line, you have to say that you cannot pass this to the end user and maybe somewhere either government has to provide a relief for that; the essence of the workshop is to let them know how this would work while providing clarifications and letting them know how they can seek relief through the tariff.”

Tags: Business, Nigeria, Featured, Eurobond Fund

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