By Alex C
There are signals that banks and other financial institutions are worried over the possibility of not being able to recoup their investment in the power sector. Recent report of the Seventh Lagos Economic Summit, tagged Ehingbeti 2014, reveal that some chief executives of financial institutions expressed concern over the revenue profile of the power companies, especially the recently privatized electricity distribution companies (Discos).
They called for an increase in the electricity tariff and price of gas to boost the income generating capacity of the companies. The executives explained that increasing electricity tariff and the price of gas, will improve the fortunes of the power companies and make it possible for more investors to stake their funds in the sector.
Mrs. Sola David-Borha, Chief Executive Officer, Stanbic Holdings, explained that the challenge bedeviling the power sector can be addressed with appropriate pricing and tariffs. She noted that the distribution companies’ ability to pay back their indebtedness will improve as their ability to generate more cash improves.
She maintained that pricing is key in the power sector as it will help ensure that the numbers add up. She added that if the pricing issue is addressed, everything else will fall in place.
“If we really want more investors to come and invest in the power sector, it is necessary that they should be given the right incentives and opportunities. We have to encourage investors by putting more money on the table; by ensuring the right tariffs are in place,” she pointed out.
Mr. Akin Ogunranti, General Manager, Power and Infrastructure, Zenith Bank Plc, noted that a number of investors are waiting on the sidelines and will not hesitate to come in and invest in the sector once the pricing issue is tackled.
According to Ogunranti, “Increasing the tariff will encourage more investors to put in more money. If we did do not get the tariff issue right, we will not see the rapid improvement we desire in the power sector.”
Mr. Solomon Adegbie-Quaynor, Country Manager, International Finance Corporation, IFC, a arm of the World Bank, pointed out that what the masses pay through the use of generating set is very high.
He said the fact is that the masses are paying life cycle power costs of $0.40 (N64) to $0.50 (N80) per kilo watt hour, with small petrol or diesel generators.
Adegbie-Quaynor said that this makes it critical for private investors, regulators and the government to come together and discuss key issues that can make the power reforms successful as the average individual do not have to pay such large amounts for power.
Key issues, he identified, include reliability and availability of gas, which will require investment in gas supply and a pipeline network; strengthening and expansion of the power transmission network; investment in the power discos to reduce the Aggregate Technical, Commercial and Collection (ATC&C) losses, that may be as high as 60 per cent in some discos; and rehabilitate and expand the generation companies (Gencos) and the Independent Power Projects (IPPs)”.
Adegbie-Quaynor disclosed that resolution of these key issues requires significant investment, management and technical skills, adding that government, regulators and the private sector need to come together and reach a solution that will lead to the necessary investments, and at the same time not be adversely impactful on the common man or woman.
“The World Bank’s position is that government, regulators and the private sector owners of power assets should come together, deliberate, and find a fair and balanced solution so that Nigeria has reliable and affordable power to fuel inclusive growth and economic development.
“IFC, World Bank and Multilateral Investment Guarantee Agency (MIGA) are committed to supporting government, regulators and the private sector in making the power reforms successful through the World Bank Group’s Energy Business Plan which aims to support financing and risk mitigation for the addition of at least 1,500MW of additional generating capacity in the next 12 to 18 months,” Adegbie-Quaynor explained.
Adegbie-Quaynor continued “We would also support capital expenditure financing in two to four distribution companies; support development, investment and financing of Public-Private Partnerships (PPPs) in both power transmission and gas pipeline networks; support development and financing of affordable renewable energy solutions through solar lanterns and cook stoves, amongst other products, to the common man and woman, and also off-grid solar solutions to Small and Medium Scale Enterprises and critical centres like hospitals and schools using photovoltaic technology.”
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