Govt gives Tough Conditions for DisCos to Access $100m Facility from France

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The Federal Government has directed the Nigerian Electricity Regulatory Commission (NERC) to monitor access to a $100 million loan facility from France to the power sector.

The government directed that only power generating companies (Gencos) and their countetpart, the power distribution companies (Discos) that meet conditions of being listed on the floor of the Nigerian Stock (NSE) can access the facility.

It was learnt that a French-based financial institution, the Agence Francais de Developpement (AFD) had requested the Federal Government’s consent to release the negotiated fund to the 11 Discos, meant for implementing expansion of the companies’ network and other programmes leading to improved service delivery.

The deal is part of the recent meeting between ECOWAS and directors of AFD on the agency’s development scheme for key economic factors that could help member countries measure up towards the 20 developing countries to be reassessed in the 2020 million growth initiative.

While other countries had indicated their pressing needs in other areas, Nigeria reportedly stated that it would want the multilateral agreement focused on its electricity sector, which has remained largely down for decades.

“It is on the strength of the understanding that the French agency had set aside the $100 mllion fund to facilitate growth in the power section, but the inability of the operators, especially the distributing arm, to have enough financial muscle to carry on with the needed input in the sector has remained a debilitating factor for growth in the sector, even after privatising it since 2013,” said an official of NERC on condition of anonymity.

He said that an official letter had been addressed to the Discos, stating the various financial commitments, both locally and internationally that the government had already enterred into on their behalf and prior to the current facility expected from France.

Included among them were the World Bank negotiated $2.4 billion national grid expansion facility, and the African Development Bank (AfDB) $200 million loan facility for the Gencos.

The loan facilities were guaranteed for the sector by the Federal Government, through series of meetings with the Minister of Power, Works and Housing, Mr. Babatunde Fashola, under the government’s Power Sector Recovery Plan, in collaboration with major international financial institutions.

According to the memo, the policy included: “Directive to NERC, and Discos to accelerate rollout of meters across all customer classes of their franchises.

“Policy interventions to facilitate financing for metering and network facilities that reduce losses and improve services and collections. This work is ongoing with a US$100 million funding commitments for lending to Discos by Agence Francais de Developpement (AFD),” it stated.

But as part of the government’s possible policy drive, government has insisted that it would be carrying auditing ofvthe operators’ bookals withbtue intention of wedding out the unserious ones.

It also said that a minimum capital base of N10 billion would now be required of each Disco, in addition to meeting all conditions that public quoted firms are required to meet before being quoted on the capital market.

Said the memo to all operators: “The new measure being put in place is aimed at strengthening all financial transparency and discipline to ensure that all industry revenues are fairly distributed to all market participants and their suppliers according to contractual commitments.”

It explained that the policy interventions to be adopted were: “Ministerial policy directive to the commission (Nigerian Electricity Regulatory Commission) and to Central Bank of Nigeria (CBN) to establish a revenue management and collection distribution scheme based on the current NEMSF (Nigeria Electricity Market Stabilisation Fund) escrowed collection account for a transitional period to impose a fairer revenue distribution regime for the industry.”

It added that the NERC had started consultations on this.

Source: Ripples Nigeria

 

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