DisCos’ Investors Demand Federal Government Resolution Of N1.3 Trillion Tariff Gap

Fashola

***Says No Gain Yet After Investing N427 Billion

By CLEMENT NWOJI, Abuja

Core investors in Nigeria Electricity Supply Industry (NESI), the 11 eleven electricity Distribution Companies (DisCos) have urged the Federal Government to resolve the increasing tariff gap which current estimate is N1.3 trillion.

The DisCos Core investors further declared that after acquisition of 60 percent equity in 2013 at colossal sum of $1.4 billion (about N427 billion), they are yet to make any return from their investments.

These declarations were made by the
Association of Electricity Distributors and Investors and the Association of Nigerian Electricity Distributors (ANED) during a joint press conference, Tuesday.

They spoke against the backdrop of allegations by the Minister of Power, Works and Housing, Babatunde Fashola, who accused the DisCos investors of not doing enough to improve power distribution in the country.

The ANED Executive Director, Research and Advocacy, Chief Sunday Oduntan, specifically said the tariff gap burden is responsible for the lapses in electricity supply chain and the debt being owed to Nigeria Bulk Electricity Trading (NBET) by the DisCos.

He said: “That is, the gap between what the government has specified as the price of the electricity that we distribute or retail and the true cost of the product.

“It is this gap that has solely contributed to the excess of N1.3 trillion that the DisCos are carrying on their financial books, an impediment to both the sustainability of the electricity market and the ability of the investors to meet the obligations of their Performance Agreement with the government, which should result in the improved metering, customer service, increased customer connections that electricity consumers demand and deserve.

“The Honourable Minister has made reference to the debt owed to the Nigerian Bulk Electricity Trader (NBET) by the DisCos. It is this tariff gap that is solely responsible for this debt and a debt that continues to grow, unless it is addressed. Importantly, no provision was made in the relatively recently passed federal government budget, to address this problem.”

On the inability of the Core investors to recoup their investments five years after, Oduntan said: “DisCo investors, who paid $1.4 billion (N427 billion) for the distribution assets have not made any return on their investment, a condition which was the basis of the investment after the five-year performance period.

“Even worse is that, with current conditions, it is unlikely that they will recover their investment, which is already in the negative, anytime in the near term.

“However, this lack of sight of a return of investment or on investment, certainly, does not encourage the injection of borrowed capital or equity, that is key to driving the turnaround of NESI or providing the efficiency and signaling that will result in improved generation and the resultant tariff reduction.”

He accused the Federal Government of channelling much funds to Rural Electrification Agency (REA), noting that the agency embark and site projects where it is not needed.

According to Oduntan, “Instead, funding, inclusive of $350 million from the World Bank, is being made available to the Rural Electricity Agency (REA) to implement projects that, from our perspective do not make sense.

“Examples of such projects include providing solar-powered in Effurun, Warri, an area replete with cheap gas; and gas-powered electricity in Ife, an area without access to gas but replete with lots of solar energy.”

On his part, the Chairman of Aura Energy Company (AURA), the core investor in Jos DisCo, Alhaji Tukur Modibbo, speaking for investors said the firms have not made any return on their investments, adding that records of the assets potentials presented to them by the Bureau of Public Enterprises were faulty.

He said: “I was part of the team; we had to rely on records given to us by BPE. I can tell you that the records were not accurate as there was no technical audit or a financial audit of the firms when they were under PHCN.”

“We have invested much in the utility but we have not recorded any gain,” the added.