• Discos faults Dangote on call for reversal of privatisation
The Association of Nigerian Electricity Distributors (ANED) has raised the alarm that the revenue shortfall in the power sector would hit N809.8 billion by the end of December 2016 as a result of the federal government’s inability to meet its commitments in the performance agreement with the investors who acquired the power asserts during the power privatisation.
Speaking with journalists in Lagos yesterday, ANED’s Executive Director, Research and Advocacy, Mr. Sunday Oduntan, also faulted the call by Africa’s richest man and President of Dangote Group, Alhaji Aliko Dangote, that the power privatisation should be reversed.
Oduntan said the performance agreement stipulates that there would be cost reflective tariffs from November 1, 2013 but added that investors reality showed that this never happened as “R2 customer class was politically frozen and collection losses removed in 2015” by the previous administration for the purpose of winning 2015 elections.
“Sculpting or under-recovery of cost will result in N164 billion revenue shortfall, for the period of 2016 through 2018. Delay in reflecting costs means a growing increase in deficits,” he added.
“A far cry from where Nigerian Electricity Supply Industry (NESI) currently stands, with electricity market revenue shortfalls projected at N809 billion by December 2016, a direct consequence of the non-cost recovery nature of the tariffs,” Oduntan said.
Oduntan also stated that the federal government also committed that tariffs should reflect reality but added that tariffs have not changed despite the devaluation of naira from N197 to N305, while inflation has also increased from nine per cent projected in the performance agreement to 17.9 per cent.
He also stated that the performance agreement was based on projected generation of between 5,000 megawatts and 7,500 megawatts between 2014 and 2016 but argued that generation averaged 2,000mw-3,000mw during this period due to pipeline vandalism and transmission constraints, which are oustide the commitments of the investors.ß
The Discos also revealed that the generation companies are owed in excess of N184 billion contrary to the performance agreement, which guaranteed the credit worthiness support of Power Purchase Agreements (PPAs) by the Nigerian Bulk Electricity Trading Plc (NBET), better known as the Bulk Trader.
Oduntan also disclosed that the government made commitment to guarantee increased investors’ access to gas supply but added that there is no improvement in gas supply as a result of pipeline vandalism, which resulted in an average of 50 per cent reduction in generation for the period of May, June and July 2016.
According to Oduntan, while the performance agreement also guaranteed clean balance sheets to give the Discos and the Gencos the ability to borrow funds to invest in power sector, the investors’ reality showed that the sector is operating at a loss of two and a half years plus with no bank willing to lend money to the Discos Or Gencos, as the banking sector is already exposed to oil, gas and power sectors by over N3 trillion.
He further stated that 3,000MW has been lost to vandalism, while the Ministries, Departments and Agencies (MDAs) are indebted to the sector to the tune of N100 billion.
Oduntan said Dangote’s call to the federal government to reverse the privatisation was unfair to the investors.
Oduntan mainatined that the additional assertion by Dangote that the investors “went in without even understanding what they were doing…” was wrong, adding that “it would be difficult for anyone to suggest that people, seasoned and successful investors, who committed $2.3 billion of their money, 30 per cent or $690 million of which is equity, did so without knowing what they were doing.”
Oduntan stated that Dangote’s “assertions are all the more troubling, given his pre-eminence in the private sector, his role and history of being a major beneficiary of previous government privatisations and the clearly uninformed conclusions that have been credited to him”