The Managing Director, Transmission Company of Nigeria (TCN), Dr. Usman Gur Mohammed, on Monday said that shareholders of the electricity distribution companies (DisCos) that consist of the Federal Government and the private investors in the firms, are to jointly raise $4.7 billion to recapitalize the firms to upgrade power distribution equipment in the country.
Upon the privatization of the 11 Discos of the Nigeria Electricity Supply Industry (NESI) in 2013, the Federal Government retained 40 percent of the equity in the DisCos and divested 60 percent to private investors.
Power supply has however remained epileptic as the DisCos complained about lack of cost reflective tariff and the government refusal to activate its stake in the companies.
But Mohammed who broke the news of government’s plans to upgrade the distribution network yesterday in Abuja, noted that the Federal Government is ready to inject $1.7billion into the DisCos while the private investors are expected to pay up the balance that is proportional to their 60 percent equity in the companies.
From the plan, which stated that the DisCos have 8million customers, each of the DisCos is expected to raise $500million and the Nigerian Electricity Regulatory Commission (NERC), according to the plan, is expected to make a declaration that all the procurement processes for the equipment shall be competitive.
Commenting on how to raise the fund, Mohammed said that “this money can be raised. The government was about to collect $1 billion from the Word Bank for DisCos to finance the capitalization of the DisCos. AfD and others are talking about another $1billion for distribution expansion.
“NERC should do a regulation consistent with the declaration of ECOWAS directive that all procurement of DisCos and transmission should be done competitively so that this money that will come in, and it will not be squandered by people giving contracts to their cousins and wives.”
He was emphatic that the private investors would not raise their loans from commercial banks, stressing that “this money has a repayment period of about 20 years and a moratorium period of about five years. So, they (private investors) should bring the same type of money.”
According to him, the recapitalization that is expected to boost power distribution throughout Nigeria, will also lead to increase in tariff.
He said that with the moratorium of five years, it means there will be fund to reduce the Aggregate Technical and Commercial losses, which is now an average of 50 percent.
In the next five years, a reduction of the losses is also expected to bring down the tariff so if there is going to be any increase, it will be marginal.
The TCN boss said that “Tariff may go up as a result of the fact that there is going to be repayment of those capital and also payment of interest.”
Accepting that government was right to have privatize the companies, the TCN chief added that the only mistake that the government committed in the privatization exercise was that of the capitalization of the DisCos.
He noted that the firms were privatized to investors that have no financial capability to run them but succeeded in deceiving the country with foreign technical partners that pulled out immediately after the privatization.
Stressing that government cannot remain passive in the operation of the DisCos, Mohammed revealed that government ownership must be represented by four directors in the firms.
His words: “What we are saying is that to correct this thing, we have to recapitalize the DisCos. The recapitalization requires $4.3billion, which means they have to bring the balance. What we are saying is that government cannot be passive anymore… Government ownership should be represented by four directors just like proportional to the investment. Government should bring its own 40 per cent capital. We have simulated the grid to examine the investment requirement by the DisCos. And we have come to $4.3billion. Government is going to bring its 40 percent of $4.3billion which is about $1.7billion.”
Mohammed submitted that “what I think that Nigerians should do is that either we have power or we play politics.”
He revealed that the TCN is working toward the attainment of frequency control of which it has already recorded 60 percent.
According to him, the TCN has given the GenCos such as Transcorp Power Generation an ultimatum to put in place their frequency control.