They argued that the expectations of incremental quality and quantity in electricity supply are dependent on the satisfaction of certain key conditions, which they said include respect for established electricity market rules; adherence to agreed key performance indicators (KPIs) and indeed sustained financial commitments to capacities expansion of privatised power generation and distribution assets by their new core owners.
They said with the overall objective of the federal government’s power sector privatisation as contained in the Electricity Power Sector Reform (EPSR) Act 2005, it is expected that the sale of successor generation and distribution companies created from the unbundling of defunct Power Holding Company of Nigeria (PHCN) should put Nigeria’s power sector on the pathway to efficiency.
Two industry players who spoke to THISDAY on the condition of anonymity posited that while the government had successfully selected preferred bidders and handed over the generation and distribution assets to the new investors, it cannot be said to have done that with absolute competitiveness and may have from this instance initiated patchiness that could in turn affect the progress of the sector.
They said the decision of the government through the National Council on Privatisation (NCP) to lower the standard processes and accommodate certain interests in the exercise meant that it had first of all compromised and allowed the acquisition of mostly PHCN distribution companies by investors that may be finding it difficult to now operate their assets.
One of the experts specifically stated that almost all the new owners of the various distribution assets have so far shown serious concerns as to how the new electricity market will evolve, vis-à-vis the efficient workings of the market operational rules and procedures.
He noted that most of the new owners of the distribution companies may face serious challenges of funding operations of their companies considering the low level of equity to debt financing ratio that they acquired, adding that most of the investor had in their financing portfolio more debt from the banks than their equity contributions.
“The reason why government actually sold the assets incredibly cheap to them is to have them revamp and sustain the operations of these companies without serious challenges par say.
“Government wanted them to start off on a clean slate without any labour issues and all that clogging their operations from day one, that is why all liabilities had to be wiped out and transferred to NELMCO to give them a fresh balance sheet; with that, they were expected to raise funding such that their equity will be higher than their borrowings from the banks,” said one of the stakeholders”, he said.
He added: “But typical of the society we live in, a rent-free society, they decided to raise capital from the banks with very low equity such that by the time they were able to get the assets, interests on their debts was beginning to build up to the extent that they became frustrated and are now looking for every means to arm-twist the government into either bailing them out or sabotaging the regulatory integrity.”