Strong indications have emerged that investors who acquired the nation’s electricity distribution firms in 2013 are still struggling to service the loans they took from financial institutions to finance the acquisition, The Punch reports.
The Federal Government, in its Power Sector Recovery Programme report, noted that a total of $1.42bn was invested by the investors to acquire 60 per cent stake in the Discos. It said the investors were allowed to borrow up to 70 per cent of the amount, which the government guaranteed through the put-call option in the performance agreement and direct agreement with lenders.
The report stated, “Evidence seems to suggest that the Discos are focused on servicing their acquisition loans rather than investing in metering, transformers, etc. to enhance their operational efficiency and reduce system losses. “While the acquisition loans are in dollars, unlike the generation companies that have tariffs that are 100 per cent indexed to the US dollars, the Discos’ tariff is 100 per cent in naira, thus the devaluation of the naira has massively exposed the Disco shareholders’ balance sheet.”
However, according to the report, the Central Bank of Nigeria can facilitate renegotiation of the shareholder loans outstanding and re-denomination of the loans from dollar to naira in line with the distribution firms’ revenue profiles. “Potential dilution of both the Federal Government and privately-held stakes will help bring some stability to the Discos’ balance sheet,” it said.