At this point, the liquidity crunch is an over-flogged issue in the Nigerian Power Sector. However, reports have emerged that NERC is set to release a minimum recapitalisation level required to be met by core investors in the power sector. What this means is that after observing that successor company of the defunct PHCN were handed the reigns without any financial liability, NERC has now taken steps to ensure that all investors in the power sector follow a minimum capital adequacy requirements.
These recent reports come hot on the heels of ANED decrying NERC’s plan to escrow revenue accounts of distribution companies (DisCos). However, NERC claims that the decision to escrow the bank and operational accounts of some DisCos in Nigeria had become the last resort option as the DisCos had refused to pay generation companies (GenCos) for electricity wheeled to them by the Transmission Company of Nigeria (TCN)
Meanwhile, NERC Vice Chairman, Sanusi Garba, however, did not indicate how much the core investors in the GenCos), and DisCos are expected to beef up their capitalisation, or the timeframe for its actualisation. “Another issue that I will like to bring to the attention of our sector stakeholders is the issue of capital adequacy. At the time of privatisation, these PHCN successor companies were handed over to core investors without any liability. But operating them over the past three years, there have been colossal losses.
“Another issue that I will like to bring to the attention of our sector stakeholders is the issue of capital adequacy. At the time of privatisation, these PHCN successor companies were handed over to core investors without any liability. But operating them over the past three years, there have been colossal losses.
“We have a feeling, looking at the audited accounts we have received so far, that the capital base of these companies had been grossly eroded. Therefore, we have started working and evaluating the minimum capitalisation that will be required to make sure that our licensees have the required resources to do what they need to do.” He Said
It is Noteworthy that the recent audit report revealed that debts owed by Federal Government MDAs to the DisCos had increased to N51 billion, representing 86 percent of the total debts of N59.3 billion owed by top 100 customers. The bulk of the debts were owed by the Military, Defence and MDAs.
On ANED’s side of the story, Executive Director, Sunday Oduntan, in a statement on Monday, noted that any attempt to go ahead with this plan to escrow the revenue accounts is tantamount to nationalisation or expropriation of the DisCos.
Oduntan said: “To date, the government has not met the privatisation transaction foundational requirements of providing N100 billion in subsidy to the sector.
“Indeed, any efforts at escrowing our accounts runs counter to the objectives of the National Electricity Power Policy, 2001 (NEPP) and the Electric Power Sector Reform Act, 2005 (2005), of a private sector-owned and managed electricity sector.
“It would also send very wrong signals to domestic and international investors that Nigeria is not fully open for private sector investment and that we are still partial to the old habits of nationalisation, preventing the injection of the cheap and sorely needed capital that is critical to the rehabilitation and improvement of electricity infrastructure.
“You cannot have a, supposedly, private sector-owned and managed business in which the government now seizes control of its revenues. It is a contradiction in terms and practice. The same principle applies to any consideration of regulations or government action that intrudes into corporate responsibilities of procurement, financial management or personnel management.”