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KonkNaija Media | May 3, 2016

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Power Privatisation: How Jonathan’s Govt missed the mark

Power Privatisation: How Jonathan’s Govt missed the mark

| On 10, Jul 2014

The transformation of the power sector from being publicly-owned to privately-owned entities was applauded by Nigerians on inception. However, as events unfolded, many Nigerians may wish it was still in the hands of the government due to its attendant challenges.

In this report, TUNDE DODONDAWA examined where it all went wrong for the new owners and the Bureau of Public Enterprise (BPE) and the way forward. One of the strongest selling points for the Federal Government has been that the government has no business managing skill and that business enterprise will strive if handled by private investors who have the technical know-how and financial muscle to drive a capital intensive business like the power business.

During the inauguration of Roadmap for Power Sector in Lagos in August 26, 2010, President Goodluck Jonathan announced the unbundling of the power firms into three hydro and seven thermal generating stations with a total installed capacity of about 6,852MW. The successors of thermal generating companies include Afam Power Plc; Sapele Power Plc; Ughelli Power Plc; Geregu Power Plc as well as Shiroro Hydro Power Plc and Kainji Hydro Power.

The 11 distribution companies are Abuja Electricity Distribution Plc; Benin Electricity Distribution Plc; Eko Electricity Distribution Plc; Enugu Electricity Distribution Plc; Ibadan Electricity Distribution Plc ;Ikeja Electricity Distribution Plc; Jos Electricity Distribution Plc; Kaduna Electricity Distribution Plc; Kano Electricity Distribution Plc; Port Harcourt Electricity Distribution Plc and Yola Electricity Distribution Plc.

Former Minister of Power, Bart Nnaji, also, argued that for Nigeria to attain 20000MW by the year 2020, the country needs an annual investment of $10million for 10 years, claiming that such fund cannot be provided by the government. On November 1, 2013, power sector was finally handed over to the private operators with the aim of providing the needed fund to boost generation and distribution capacities.

The motive of the government was to improve power supply to Nigerians, but as a necessity, the new owners channeled their energy towards revenue generation through improved estimated billing, otherwise called crazy bills; termination of existing contracts on providing prepaid meters to power consumers and repayment of bank loans used to secure these power assets.

In the past, during the rainy season, power output usually increases due to availability of adequate water to boost supply from the hydro power plants, however, presently, inadequate gas supply and inability for new owners to settle bills of supplied gas to the plants has been the trend. Experts in the capital market blamed the financial sector regulators for the inadequacies and inefficiencies exhibited by the new owners of power plants. A financial analyst, Mr David Andorin, stated that the use of short term fund/loan to finance huge and long term business like the power sector projects is a mismatch.

“The money market where banks operate is used to raise short term loan of 12 months duration or medium term loan of about two years maturity. The capital market should be approached to raise huge fund to be used for financing power projects.

“The effects of the investment by the new owners are supposed to be felt in near future,like six months after take over, because they are expected to plough back whatever they realised as revenue into further investment until the entire value chain improves in terms of generation, transmission and distribution.

“The owner of generating plant who raised money from a bank will demand for his money for power sent to the transmission company because he has obligation to fulfill with the bank. The same goes to the Distribution Companies (Discos) that have target to meet as inherited from their former owners,” he said.