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Published On: Fri, May 23rd, 2014

Power investment: BPE faults rumour on collapse of banks

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By Etuka Sunday

The Director General of the Bureau of Public Enterprises (BPE), Mr Benjamin Dikki has faulted claims of the collapse of commercial banks in the country over their exposure to the power sector.

Dikki who spoke at an all-parties meeting on Wednesday, in Abuja at a presentation to the owners of the Power Holding Company of Nigeria (PHCN) Successor Companies (SCS), noted that the fears by some of the eminent takeover of SCS due to the purported non servicing of loans or about the prospect of stress to the banks due to their exposure to SCS, were misplaced as the Successor Companies did not borrow directly from the banks for their own books.

A statement by the Head, Public Communications, BPE, Chigbo Anichebe, quoted the DG saying that, “no assets of the SCS were pledged as collateral. It should be noted that it was the acquiring companies or SPV’s that borrowed based on their cash flows and accounts. The SPA signed also requires that the consent of the BPE is obtained before the Core Investors can borrow.

“The banks lent to the Core Investors based on their capability to pay. The investors are supposed to have made adequate provisions to take care of their obligations to their financiers from the outset. They knew that they were not going to make profit immediately on takeover of the SCS. Their financiers also were aware of this”, he stressed.

It would be recalled that Nigerian banks had expressed concern over the possibility of losing about N1 trillion they invested in the acquisition of the privatized assets of the Power Holding Company of Nigeria (PHCN) Successor Companies (SCs).

The banks expressed fears that they may be unable to recoup their investment following the myriad of problems facing the sector.

Group Managing Director/Chief Executive Officer, Diamond Bank Plc, Dr. Alex Otti, had at a power investors’ forum in Abuja, said that as at 2013, the banking industry had invested well over N750 billion in the power sector and that they were ready to do more.

Consequently, the banks called for an increase in electricity tariff and in the price of gas, saying it would boost the revenue profile of the power companies and their ability to repay their debts. Some of the chief executives of banks, who spoke at the just concluded Seventh Lagos Economic Summit, tagged Ehingbeti 2014, complained of the revenue profile of the recently privatized power companies, saying it is not meeting the expectation of investors.

 

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