There are strong indications that banks and other
financial institutions are worried over the possibility
of not being able to recoup their investment in the
power sector.
Indications to this emerged at the just-concluded
Seventh Lagos Economic Summit, tagged Ehingbeti
2014, where some chief executives of financial
institutions expressed concern over the revenue
profile of the power companies, especially the
recently privatized electricity distribution companies
(Discos).
Consequently, they called for an increase in the
electricity tariff and price of gas to boost the
income generating capacity of the companies.
Speaking at a session tagged, ‘Funding the power
sector – creating banking projects/companies,’ the
executives explained that increasing electricity
tariff, as well as the price of gas, will improve the
fortunes of the power companies and make it
possible for more investors to stake their funds in
the sector.
Members of the panel included Mr. Rossie Turman,
Partner, Skadden, Arps, Slate, Meagher & Flom LLP;
Mr. Idris Mohammed, Partner, Development
Partners International; Mrs. Sola David-Borha, Chief
Executive Officer, Stanbic Holdings, Mr. Ayo
Gbeleyi, Commissioner for Finance, Lagos State and
Mr. Akin Ogunranti, General Manager, Power and
Infrastructure, Zenith Bank Plc. Mr. Batchi Baldeh,
Senior Vice President, Power, African Finance
Corporation was the lead speaker, while Mr.
Solomon Adegbie-Quaynor, Country Manager,
International Finance Corporation, IFC, was session
chair.
David-Borha explained that the problems bedevilling
the power sector will be addressed with appropriate
pricing and tariffs. She noted that the distribution
companies’ ability to pay back their indebtedness
will improve as their ability to generate more cash
improves.
She maintained that pricing is key in the power
sector as it will help ensure that the numbers add
up. She added that if the pricing issue is addressed,
everything else will fall in place.
“If we really want more investors to come and
invest in the power sector, it is necessary that they
should be given the right incentives and
opportunities. We have to encourage investors by
putting more money on the table; by ensuring the
right tariffs are in place,” she said.
Also speaking, Ogunranti called for an increase in
the tariffs, noting that a number of investors are
waiting on the sidelines and will not hesitate to
come in and invest in the sector once the pricing
issue is tackled.
He said, “Increasing the tariff will encourage more
investors to put in more money. If we did do not get
the tariff issue right, we will not see the rapid
improvement we desire in the power sector.
Adegbie-Quaynor pointed to the fact that what the
masses are paying via the use generators is very
high.
He said the fact is that the masses are paying life
cycle power costs of US$0.40 (N64) to $0.50 (N80)
per kilo watt hour, with small petrol or diesel
generators.
He said that this makes it critical for private
investors, regulators and the government to come
together and discuss key issues that can make the
power reforms successful so that the ordinary man
and woman do not have to pay such large amounts
for power.
The key issues, he noted, include reliability and
availability of gas, which will require investment in
gas supply and a pipeline network; strengthening
and expansion of the power transmission network;
investment in the power discos to reduce the
Aggregate Technical, Commercial and Collection
(ATC&C) losses, that may be as high as 60 per cent
in some discos; and rehabilitate and expand the
generation companies (Gencos) and the
Independent Power Projects (IPPs)”.
He noted that resolution of these key issues
requires significant investment, management and
technical skills, adding that government, regulators
and the private sector need to come together and
reach a solution that will lead to the necessary
investments, and at the same time not be adversely
impactful on the common man or woman.
Continuing, he said, “The World Bank’s position is
that government, regulators and the private sector
owners of power assets should come together,
deliberate, and find a fair and balanced solution so
that Nigeria has reliable and affordable power to
fuel inclusive growth and economic development.
“IFC, World Bank and Multilateral Investment
Guarantee Agency (MIGA) are committed to
supporting government, regulators and the private
sector in making the power reforms successful
through the World Bank Group’s Energy Business
Plan which aims to support financing and risk
mitigation for the addition of at least 1,500MW of
additional generating capacity in the next 12 to 18
months.
We would also, “Support capital expenditure
financing in two to four distribution companies;
support development, investment and financing of
Public-Private Partnerships (PPPs) in both power
transmission and gas pipeline networks; support
development and financing of affordable renewable
energy solutions through solar lanterns and cook
stoves, amongst other products, to the common
man and woman, and also off-grid solar solutions to
Small and Medium Scale Enterprises and critical
centres like hospitals and schools using
photovoltaic technology.
However, in a separate session at the summit,
Nigerian Labour Congress, NLC represented by its
General Secretary, Mr. Issa Aremu, warned that
until the problems in the sector are resolved, any
attempt to bring about increase in electricity tariffs
will be seen as criminal and will be sternly resisted.
He said that tariffs should be commensurate with
service delivery. “It is stealing if you increase
tariffs without improved service”, he said.
He said Nigerians are actually looking for improved
service delivery as regards power supply and will
actually like to see what they are paying for before
tariff increase is considered.
He noted that the nature of the power sector
reforms and how they are carried out are critical,
and also wondered why the reform process is being
rushed, especially when the operators are of the
view that a lot still have to be put in place to drive
the process.
In other panel sessions at the three-day summit,
the issue of revamping the power sector in the
country took the centre stage, while improving
electricity supply to Lagos was also given adequate
attention.
For instance, Mr. Charles Momoh, Chairman, West
Power and Gas, owner of the Eko Distribution
Company, emphasized the need to revamp the
country’s power infrastructure, saying that the
country is still using power infrastructure in
operation since 1896.
He blamed the epileptic power situation across the
country on the non-availability of gas and the
reduction of power supply to the distribution
companies.
Specifically, he said that the total gas available for
Lagos State, cannot power more than 500 mega
watts of electricity, adding that the company is
currently receiving less than 200 mega watts, down
from the 400 mega watts promised when it took
over the assets.
Momoh further blamed the Transmission Company
of Nigeria, TCN, for the “blinking” power situation,
saying, “The TCN introduced frequency relays to
protect their equipment, which is at the expense of
consumers’ appliances, because this relay is
responsible for the two minutes on and off power
situation in Lagos.”
He noted that Eko Distribution Company currently
have the capacity to deliver 700 mega watts of
electricity, but it is currently receiving only about
240 mega watts.
He however noted that Eko Distribution Company
has commenced the process of increasing power
supply by about 500 mega watts, adding that it is
talking to 45 companies interested in embedded
generation and two other companies for captive
power.
On his own part, Mr. Sola Adeshina, Managing
Director, Sahara Power, owner of the Ikeja
Distribution Company, also noted that unavailability
of gas and a non-cost reflective tariff structure is
hampering the effective delivery of power to
consumers.
In addition, Mrs. Funke Osibodu, Chief Executive
Officer, Benin Electricity Distribution Company, said
that operators are aware that Nigerians are fed up
with the power situation and want a change.
She however noted that what is lacking is the fact
that a vast majority of Nigerians do not have the
information that the change that is expected will
require more from every one.
According to her, fixing the problems in the power
sector is a long haul and it will take a long time for
operators to achieve their goals.
“Nigerians should be aware that infrastructure is not
power. The government and some politicians will
donate transformers to a community and they will
think their power problems are over.
“We should know that transformer is not power.
Power has to be generated first before the
transformer and other equipment can distribute.”
In his own view, Mr. Anil Sardana, Managing
Director, Tata Power, who spoke via live webcast
from India, said the reforms in the Nigerian power
sector will not succeed unless there is direct
support and oversight from the government.
He noted that financial prudence in the transition
process is key, adding that emphasis should be
placed on the change management process, as well
as in the valuation of the business.
He said customer satisfaction should be the key
goal for the reforms process, adding that the
reforms should also focus on working to reduce the
cost of distribution.
No comments:
Post a Comment