N931bn Revenue Gap Destabilises Electricity Since 2015

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A power sector shortfall of N931bn accumulated since 2015 has compounded the power outage issue in Nigeria, industry statistics and experts have noted.

This is as 24 power Generation Companies (GenCos) are yet to be paid N340bn in the electricity market, thereby blocking further chances of getting enough gas to generate electricity.

According to the Power Sector Recovery Plan (PSRP), an ongoing action plan of the Federal Government in the power sector; captured the N931bn shortfall to include N458bn tariff deficit (non-cost reflective tariff) and another N473bn market shortfall (poor bills collection and technical losses) accumulated in 2015 and 2016.

The plan, designed by the Office of the Vice President and the Federal Ministry of Power, Works and Housing, has been presented to the World Bank Group (WBG) and other Development Finance Institutions (DFI) to fast track the recovery of Nigeria’s ailing electricity sector.

Extracted statistics proved that Abuja Electricity Distribution Company (DisCo) is the most hit among the 11 DisCos with N64.1bn market shortfall. The lowest in the market is Yola DisCo, with N14bn shortfall.

Operators said the poor tariff bar had caused them to under recover cost of producing and selling electricity. For instance, while Ibadan DisCo has the highest customers under its service, it however, has the highest tariff deficit of N58.8bn, while Yola DisCo has the lowest of N20.6bn.

24 GenCos owed N340bn in 2yrs

From the N473bn market shortfall figure, 24 active GenCos were owed N340bn for years 2015 and 2016. The top three most owed GenCos are Egbin Power, with N55.6bn shortfall, Okpai Power N47bn, and Delta Power having N33bn market shortfall. The GenCo with the least shortfall is Omoku Power, with N1bn shortfall.

The three hydro GenCos are owed N57bn: Jebba is owed N21.3bn, Kainji is owed N15.9bn and Shiroro is owed N19.8bn, the data revealed.

Eight of the National Integrated Power Projects (NIPP) plants are owed N69.1bn. Five other GenCos include: Afam is owed N25.4bn, Afam VI (Shell) has N15.2bn outstanding, Geregu I is owed N10bn, Ibom Power owed N5.6bn, and Olorunsogo I owed N19.1bn.

Other GenCos comprising Omotosho is owed N18.8bn, Rivers IPP with N1.2bn shortfall, Sapele with N5.4bn, and Trans Amadi with N2bn market shortfall.

The Association of Nigerian Electricity Distributors (ANED) continually decries the liquidity crisis in the power sector which it claims is crippling operators’ investment capability.

Spokesman for ANED, Barrister Sunday Oduntan, told our reporter repeatedly that the shortfall had reduced the metering capability of the DisCos alongside the prevailing foreign exchange escalation.

Similarly, the Association of Power Generating Companies (APGC) said the Generation Companies (GenCos) were owed over N400bn of which about N200bn is for gas supplied to the mostly thermal plants.

The spokesperson, Dr. Joy Ogaji told the Daily Trust that the sector had come to a pitiable state where gas suppliers operated on ‘pay-before-service’ terms with the GenCos; saying this had further led to inadequate gas to power the over 80 active turbines for optimal electricity generation.

In the past weeks, an average of 30 turbines are inactive with daily electricity losses placed around 2,000 megawatts (mw) mostly because enough gas could not be supplied.

Triggers of the shortfall and FG’s solutions

Operators in the power sector have acknowledged that the shortfall and the prevailing liquidity challenge were caused due to certain indices that rose in 2015.

Bar. Oduntan said the current tariff-Multi Year Tariff Order (MYTO) 2015, was activated when a dollar rate was pegged to less than N200, but which had risen by double shortly after.

He noted that this affected the gas price which was pegged in dollars, the cost of spare parts for the plants, the loan repayment plans of power firms and the capability of operators to invest in meters, networks and plants’ turnaround works.

The plan also acknowledged that the DisCos acquired 60 per cent stake during the 2013 privatisation after paying $1.42bn.

“Evidence seems to suggest that the DisCos are focused on servicing their acquisition loans rather than investing in metering, transformers, etc. to enhance their operational efficiency and reducing system losses,” the plan clarified.

It further tied a cause of the liquidity challenge to the acquisition loans for the utilities which were pegged in Dollars even when the electricity market operated in domestic currency.

Another issue is that the GenCos have their tariff of 100 per cent indexed to Dollars but the DisCos tariff is 100 per cent in Naira and thus; “the devaluation of Naira has massively exposed the DisCos shareholders balance sheet,” it agreed.

To solve this, the plan posits that the Central Bank of Nigeria (CBN) should facilitate renegotiation of the shareholder loans outstanding and redenomination of the loans from Dollars to Naira in line with DisCos’ revenue profile.

It also advocated the potential dilution of both shares held by the Federal Government and the private investors to help bring some stability to the DisCos’ balance sheet.


Source: DailyTrust

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