New Problems for the Power Investors
The investors in the power sector have started complaining about the huge loan burden they now have to factor into their operations following the new realities of foreign exchange regime.
Several banks such as First Bank of Nigeria Holdings Plc; Zenith Bank Plc; United Bank for Africa Plc (UBA); Guaranty Trust Bank Plc (GTBank); Access Bank Plc; Diamond Bank Plc; Fidelity Bank Plc; and Skye Bank Plc collectively provided portfolio loans worth N402 billion to power sector investors
According to the first quarter Statistical Bulletin of the Central Bank of Nigeria (CBN), credit to electricity and energy investors has been rising. The independent power plants and power generation companies (Gencos) owed N340 billion in December 2015, N357 billion in February 2016, and N357 billion in March 2016.
It was learnt that the electricity firms were already facing difficulties in servicing the over N402 billion loans, which they collectively borrowed to purchase the plants when they were privatised in 2013. This is because when the power companies took loans from local and international banks to acquire the electricity investments, the foreign exchange (forex) rate was about N157 to $1. They are now finding it difficult to pay back as the rate has risen to over N320 to $1.
To underscore their financial situation, the Gencos are threatening to shut down their power plants if the N156 billion owed by government agencies is not paid. Specifically, the Nigerian Bulk Electricity Trading (NBET) Plc owes Egbin Power Plc N68.71billion; Transcorp Ughelli Power Limited – N28.29 billion; Shiroro Power Station – N9.66 billion; Geregu Power Plc – N7.98 billion; Kainji/Jebba power stations – N20.94 billion; and Sapele Power Plc – N9.9 billion.
In actual fact, the debt is not owed by NBET, but the electricity market. The final electricity customers have not been paying 100% of the bills they receive from the electricity distribution companies. The Discos hardly receive 35% of the invoice which goes back pay or reflate the value chain or settle all operators. This is essentially where the problem is.
To grant the power operators some reprieve, the Central Bank of Nigeria (CBN) designed a N213 billion bailout package to cover revenue shortfalls and help the companies meet debt-service obligations on bank loans.
Information available indicate that a total of N120.2 billion has been disbursed to different electricity distribution companies (Discos), power generating companies (Gencos), service providers and gas companies. But the Gencos say they are no longer interested in the bailout fund. “We are only interested in funds owed to us for power already generated,” they said in a statement.
The Chairman, Egbin Power Plc, Kola Adesina, had told press men that dollar scarcity was one of the critical challenges in the country’s power sector. “At the point of acquiring these power assets, the exchange rate was N155.76 to a dollar, which has since doubled and not even readily available to those of us that work in this sector. Our plant is largely run with offshore equipment, spares and tools and these spares can only be procured in dollars. Invariably, there is a need for a special allocation, if we are to get the entire mix right. Otherwise, the tariff structure will not be affordable to be able to assist in the industrialisation vision of the administration,” Adesina said.
He noted that the huge debts owed generation companies have put them in a cash liquidity crisis that has reduced their ability to pay for gas supplies, and hence threatens to completely undermine the electricity value chain and ability to continue to serve customers.