Interest Charges Push Discos’ Market Debts to N576bn

The interest charges by the Nigerian Bulk Electricity Trading Plc (NBET) on the outstanding obligations of the 11 electricity distribution companies have put the total market debts to N576.2 billion as at April 2017, THISDAY can report.

A document obtained by THISDAY revealed that interest charges on the N477.8 billion market debts owed by the 11 Discos rose to N98.4 billion, representing 17 per cent of the total market debt.

The interests were levied on Discos’ financial shortfalls to the market by the Nigerian Bulk Electricity Trading Plc (NBET) at the Nigerian Interbank Offered Rate (NIBOR) plus 10 per cent.

There were indications at a Lagos meeting between the Discos and generation companies (Gencos) that the interest charges would have to be paid along with the outstanding liabilities of N477.8 billion. But the Discos contended that the huge debts had eroded their equities and made it quite difficult for them to look for loans or financial facilities to support their operations.

The meeting was convened to discuss extant financial challenges of the market, vis-à-vis the impacts of the absence of a cost-reflective tariff and NERC’s seeming disinterest in operationalising two tariff reviews it had done so far.

Meanwhile, a former Managing Director of the NBET, Mr. Rumundaka Wonodi, had described as unnecessary last week ‘s decision of some of the Discos to notify the Bureau of Public Enterprises (BPE) of their intention to declare force majeure on their operations. He believed the Discos were scared of the competition that would be created when the eligible customers regulation on which they based their reasons for the force majeure takes effect.

Wonodi, who spoke on a TV programme monitored in Abuja, noted that by latching on the eligible customers’ regulation to declare force majeure, the Discos were perhaps ignorant of the business opportunities they could take away from the regulation .

“I am a little bit shocked by that because this is something that took time to take place, and it is a provision under the law,” he said.

“We have always felt that some Discos are laidback and do not want to do more than they are doing now. The Discos need to wake up, they have held the industry to ransom in some instances like metering.

“One of the expectations is also that we see the metering within the industry deregulated and open up the industry. Competition frightens people, who are in a monopoly industry and Discos are reacting very badly to this because there is a lot to do in the market, and the Discos still have the primary advantage to serve the eligible customers at a higher tariff too. It is a provision they could actually take advantage of,” noted Wonodi, who added that the force majeure was premature and unlikely to give out the desired result to the Discos.

In another development, the Interim Managing Director of the Transmission Company of Nigeria (TCN), Mr. Usman Mohammed, has revealed that major contractors engaged by the TCN took advantage of leadership gap in the company to dictate its proceedings and operations.

Mohammed, who disclosed this in an interaction with journalists in Abuja, specifically stated that because of the lack of firm managerial leadership and transparency in the company, its contractors practically converted it to their respective ‘farmlands’ with pockets of loyalty and power silos that were frequently serviced.

Recruited early this year from the African Development Bank (AfDB) by the federal government to manage and revive the TCN shortly after the government disengaged the Canadian firm, Manitoba Hydro International (MHI), it engaged in 2013 as a management contractor for the company, Mohammed also stated that with juicy incentives, these contractors were able to divert the loyalties of the workers of TCN to themselves to pave the way for their biddings to be done unrestricted.

He stated that while the TCN never audited its accounts for the entire period it was managed by MHI, an audit of these accounts had however been initiated up to 2017. He noted that even the practice of issuance of Letters of Intents to contractors which was abused, had been stopped.

Mohammed, however, said: “We are here to reposition the TCN and also expand the grid. We didn’t come as an arrangement between the AfDB and Nigeria, I came out of my willing- ness to assist Nigeria.

“When we came in, we met TCN in shambles in terms of leadership, there was an absence of leadership and transparency because then there was no coordinated leadership, you see an organisation that had pockets of leaders and powers all over the place.”

He further explained that, “The unfortunate part of it was that we discovered that in some areas, contractors were running the show, because some of the contractors were paying some of the staff and their loyalties were to the contractors.”

“They took the TCN like their farms, and so all those projects that they were getting, we have stopped them from getting them. All the arrangements they made with the TCN including Letters of Intent, we have stopped them. I have cancelled 150 Letters of Intent, since I came, and we do not issue Letters of Intent anymore,” he added.