The power sector operators are jittery over plans by the Nigerian Electricity Regulatory Commission (NERC), to announce new recapitalisation benchmark for operators in the industry.
The agency said it will soon release a minimum recapitalisation level required to be met by core investors in the power sector.
NERC identified capital adequacy as a major issue in the power sector, pointing out that the successor companies of the Power Holding Company of Nigeria (PHCN) were handed over to the core investors without any liability.
As a result, after three years of operating the successor companies, there have been colossal losses, thus necessitating the need to set minimum capital adequacy requirement by the investors.
The NERC Vice Chairman, Sanusi Garba, gave the indication at the 14th Power Sector Stakeholders’ meeting presided by the Minister of Power, Works and Housing, Babatunde Fashola, at the National Control Centre, Power Line, Oshogbo, Osun State.
The recapitalisation plan comes as the Association of Nigeria Electricity Distributors (ANED), kicked against NERC’s plan to escrow revenue accounts of distribution companies (DisCos).
The decision to escrow the bank and operational accounts of some DisCos in Nigeria became imperative following their refusal to pay generation companies (GenCos) for electricity wheeled to them by the Transmission Company of Nigeria (TCN)
Meanwhile, Garba, however, did not indicate how much the core investors in the GenCos), and DisCos are expected to beef up their capitalisation, or the timeframe for its actualisation.
He said: “Another issue that I will like to bring to the attention of our sector stakeholders is the issue of capital adequacy. At the time of privatisation, these PHCN successor companies were handed over to core investors without any liability. But operating them over the past three years, there have been colossal losses.
“We have a feeling, looking at the audited accounts we have received so far, that the capital base of these companies had been grossly eroded. Therefore, we have started working and evaluating the minimum capitalisation that will be required to make sure that our licensees have the required resources to do what they need to do.”
Garba said that within the next few weeks, the necessary consultation will begin, and will direct the core investors to meet the new minimum capital so that they will be able to do the required investments, reinforcements and service delivery that consumers need throughout the country.
Furthermore, he said NERC plans to direct the DisCos to connect all the Ministries, Departments and Agencies (MDAs) with prepaid meters as a means of curbing indebtedness to them.
This is against the backdrop of the audit report, which revealed that debts owed by Federal Government MDAs to the DisCos had increased to N51 billion, representing 86 percent of the total debts of N59.3 billion owed by top 100 customers. The bulk of the debts were owed by the Military, Defence, and MDAs.