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Published On: Wed, Jul 18th, 2018

DISCOs technically insolvent – BPE

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By Christiana Ekpa

Bureau of Public Enterprises (BPE) yesterday disclosed that most of the Distribution Companies (DISCOs) in the country were technically insolvent.
Alex Okoh, BPE Director General disclosed this during an interactive session held at the instance of House Committee on Power, with critical stakeholders in the Nigeria’s power sector including Nigeria’s Bulk Electricity Trading Company (NBET), Electricity Distribution Companies (DISCOs) and Generation Companies (GENCOs).
According to the BPE helmsman, the assessment conducted by the Bureau showed that “many of them are technically insolvent. Their current liabilities are in excess of their assets; most are owed to NBET. They are unlikely to pay because of poor tariff.
“They need to improve infrastructure that consumers can pay for; but technically they don’t have the capacity to do so,” he noted.
He harped on the need to immediately solve the challenges bedeviling price structure and liquidity of DISCOs.
“We need to solve the liquidity challenge. How do we make the industry viable in terms of liquidity? If we take all the energy that the DISCOs buy and the energy sold, assuming there’s minimal losses on collection side, we find it difficult that there is enough revenue to push us through.
“There’s a gap in the price structure. There’s an empirical way of bridging other gaps. If we identity what that the gap is, then government can handle the other issues,” he noted.
While noting that the proposed N75 billion for the DISCOs by government is an ad-hoc arrangement and unsustainable, Okoh stressed the need for medium and long term solutions to myriad of challenges facing the industry.
He observed that the N701 billion subsidy provided by government through NBET was part of government’s intervention towards subsidizing the system.
Okoh, who noted that the subsidy when introduced will not be wholly paid by government at the end to the day, explained that the tariff subsidy can be paid back through future adjustment in the tariff as part of efforts to solve the liquidity issue.
While stressing the need for expedite action in addressing the liquidity challenge, he argued that “If we don’t address that now, it’s a time bomb; and I just pray it won’t explode on our faces.”
In his representation, Eugene Edeoga, NBET Director of Procurement lamented that the company is “technically dead and insolvent with huge liabilities” arising from over N800 billion owed it by the DISCOs.
Speaking earlier, Ernest Mupwaya, MD/CEO Abuja Electricity Distribution Company (AEDC) affirmed that the major challenge borders on price differential, adding that the DISCOs paid up to 100% of the tariff, as a result of the movement of tariff from 2015 to December 2017.
According to him, the electricity tariff is impacted mostly by movement in foreign exchange and inflation. He added that the challenges facing DisCos need holistic, sustainable solutions, including, “adjustment in tariffs, so that there will be regular light,” pointing out that Ministries, Departments and Agencies (MDAs) of government owe DisCos over N72 billion.
“It is important to point out that some government institutions are owing the DISCOs over N72 billion; and there are individuals and corporations who are by-passing meters and stealing energy,” Mupwaya said.
While noting that the DISCOs have not implemented five minor reviews which ought to take place within six months, he lamented that the “delay has led to the erosion balance sheet of the DISCOs; if you borrow from bank to carry out the transformation, it will affect the balance sheet.” He added that the “price differential hinders every aspect of the supply change because it does not have enough revenue.”
On the tariff adjustment, he urged government to recognize in the books by deferring the debts to enable the DISCOs raise more funds, when the balance sheet is cleared with the aid of CBN.
He also called for resolution of the historical debt due to tariff shortfall, as well as put mechanism in place to automate the payment by MDAs and other public institutions by ensuring central payment.
According to him, in 2016 April to June, AEDC experienced “series of vandalism; and instead of heating average of 300MW, we got only 160MW but price of electricity shot up by almost 100%, despite getting about half of the supply.”
He, however, confirmed the receipt of some payment from the MDAs debt, though it’s still growing, just as he called for further government’s intervention.
The power purchase agreement should be transparent and cost efficient, because if not efficient it will be high; and thereby, hit the entire supply chain.
While calling for stiff sanction on electricity theft, he called for punitive sanction of 25 years imprisonment in order to ensure deterrent like India and Zambia.
While responding to question on enumeration of consumers, the AEDC who said that carrying out the exercise is costly for the DISCOs, noted that it will cost about $128 million to conduct enumeration.
The Committee resolved to expedite actions in order to provide solutions to the various challenges faced by NBET, DISCOs and GenCos; and by so doing, guarantee stable electricity supply to all Nigerians.
Some of the lawmakers, who spoke during the session, warned that Nigerians will resist any hike in electricity tariff amidst failure of operators to ensure stability in power supply across the country.
The lawmakers also frowned at the failure of DISCOs to adopt innovative marketing strategies and ensure prompt enumeration of consumers after taking over of the power assets.
While speaking, Mutiu Sadimu, acting chairman of the Committee on privatisation and commercialisation, explained that the interactive session was aimed at finding lasting solution to the endemic challenges facing the power sector, just as he called on various stakeholders to proffer lasting solution to the liquidity problems which started from the generation and cut across the entire value chain.

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