Power Firms Struggle to Survive Over Low Bank Investments

Strong indications have emerged that local power firms comprising Generation companies (Gencos) and Distribution companies (Discos) are facing difficulties hard accessing funds from banks to expand their investments two years after they took over the assets from government.

According to sources, almost all the Discos and some Gencos were having difficulties accessing funding to meet their investment obligations, despite making efforts to secure more loans from the banks but to no avail.

The delay in sourcing funding has affected the expansion of electricity projects, the sources said.

Many of the firms used loans from local banks to purchase the assets of the defunct Power Holding Company of Nigeria (PHCN) but defaulted along the way, which led to intervention by the Central Bank of Nigeria (CBN).

CBN Governor Godwin Emefiele said recently that the bank has suspended the disbursement of the N213 billion loan initiated early last year to finance the sector due to some documentation issues with the electricity regulators. Before the suspension, some companies benefited from the bailout.

The CBN disbursed N57.8 billion to 11 of the companies.

The Bureau of Public Enterprises (BPE) was reported in the media to have said the embargo on the funds would be lifted when the crises surrounding tariff adjustments are resolved.

Beside failure to invest further, the power firms also failed to meet obligations of their monthly payment for electricity delivered.

The Discos had paid less than 60 per cent of their monthly payment between February and April last year. This was contrary to the rule of 100 per cent payment in the activated Transitional Electricity Market (TEM).

Experts said the shortfalls had caused accumulated debts for gas-to-power supply, which affected the supply volume to the Gencos.