FG Plans To Unbundle 11 More DisCos, Direct Sales Of 4 DisCos Under AMCON, Banks
THE current unbundling of power distribution firms, or DisCos, in Nigeria was announced by the Federal Government on Monday, April 22. This procedure is motivated by the scale of the DisCos, which often results in inefficiencies and ineffectiveness.
The administration stressed that the privatization of the companies will not alter, but that the DisCos will be divided into more efficient structures that are in line with state borders. This action is intended to improve their ability to carry out their missions efficiently.
Additionally, the Federal Government oversaw the DisCos' original ownership by various investors, which are now under the supervision of banks and the Assets Management Corporation.
Currently, AMCON and banks oversee four Discos. The Benin, Kaduna, and Kano Electricity Distribution Companies (KEDC) are managed by Fidelity Bank, while the Abuja Electricity Distribution Company (AEDC) is under the direction of the United Bank of Africa (UBA). AMCON is in charge of the Ibadan Electricity Distribution Company, or IBEDC. The Discos' failure to pay back debts to banking institutions is the reason for these modifications.
The government made the point that the original investors did not have the knowledge or resources to properly run the Discos that were purchased during the official privatization in November 2013.
A thorough reorganization of the power companies was advocated by the Senate Committee on Power, which also chastised the DisCos for their protracted inefficiencies since assuming control of privatized assets more than ten years ago.
The Federal Government has started reforming Nigeria's eleven power distribution corporations, according to Minister of Power Adebayo Adelabu, during a meeting with the Senate Committee on Power, which is chaired by Senator Eyinnaya Abaribe. Furthermore, he emphasized that the Transmission Company of Nigeria has over 100 unfinished projects that date back until 2001—roughly 23 years.
Adelabu said, “We are unbundling the DisCos along state lines. Some of the DisCos are too big for efficiency. They are too big for effectiveness. Ibadan DisCo covers seven states. It is practically impossible for them to be efficient.
“So we are rearranging and restructuring the DisCos along state lines so that each state government will know the responsible Disco for their states. Also, the federal and state governments should start exercising their rights in the operation and management of the Discos because we still own 40 percent in the firms.
“But we have left it for the private sector operators for too long and they have messed it up. So the government must come back to take over its own right in the Discos. We are also planning to franchise the unserved communities under the Discos.”
The minister went ahead to state that, “we will start seeing regulations about franchising. The fact you are Eko Disco doesn't mean that you cannot have smaller Discos that are ready to invest in your unserved communities. So we are looking at franchising.”
Adelabu further disclosed that the Oyo State government has written to the federal government expressing its desire to utilize the Ibadan DisCo to exercise its rights.
According to him, the Nigerian Electricity Regulatory Commission, or NERC, has been forced to acknowledge the need to penalize Discos that don't deliver on their promises, or else some power companies risk having their licenses revoked.
“We can no longer afford AMCON to run our Discos. We can no longer afford the banks to run our Discos. This is a technical industry and it must be run by technical experts,” the power minister stated.
“So we have put pressure on NERC to make sure that it raises the bar on the activities of the Discos. If it has to withdraw licences for non-performance, why not? If it has to change the boards and management, why not?
“And all the Discos that are still under AMCON (Asset Management Corporation of Nigeria) and some lenders (banks), within the next three months they must be sold to a technical power operator with a good reputation in utility management.
Senator Danjuma Goje, a member of the committee, also made a statement against the lack of performance of DisCos, saying, “The Discos are just going about collecting money and have not added anything significant to the power sector.”
Additionally, the Senate committee approved the holding of an investigative hearing about the increase in electricity tariffs, stating that it will take place in the Senate on April 29, 2024.
The minister of power claimed that people who bought the Discos during their privatization lacked the necessary capital and experience.
Adelabu declared, “Our problem started from the privatization era. Not that the privatization has a problem in itself, but its implementation and execution have robbed the process of its laudable objectives.
“We believe that people who bought the power companies do not have the required expertise to run the utility firms. Secondly, they were not buoyant enough in terms of financial buoyancy to pay for the power plants
“All of them used bank loans to pay for the assets. And we all know that the power business is a long-term business. It is not something you recoup your capital and make profit in a short time. So they were all under pressure to repay the bank loans that they used to acquire the power companies.
The minister emphasized that although the investors had pledged to lower the DisCos' losses, the losses had stayed at roughly 40% of the total cost of energy up until this point.
Adelabu said, “So the Discos are not investing as expected.”
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