As a respite to the huge metering gap currently experienced in the country, FBNQuest Merchant Bank has announced plans with Kairos Investment Africa and New Hampshire Capital for a national meter asset finance and management SPV (“MAPCo”).
This is aimed at attracting long term finance for the mass roll-out of prepaid smart meters to millions of electricity consumers in Nigeria who currently are not metered by the electricity distribution companies (DisCos).
This is according to a report by the African Media Agency.
With an estimated metering gap of more than eight million nationwide, the plight of unmetered consumers continues to deteriorate especially as regards indiscriminate and unfair estimated billing. This plight has been a perennial issue that heralded the privatization of the power sector. Therefore, in response to the aforementioned issues, the present regime of President Muhammadu Buhari announced plans to ensure that the 8 million metering gap is closed within a two- year period.
Owing to a deficit of about $1billion in financing the metering gap, the Nigerian Electricity regulatory body issued the Meter Asset Provider (MAP) regulation in 2018.
This was aimed at increasing private participation in providing smart meters and other metering services to electricity consumers which will require about US$1billion.
Under the MAP regulation, the cost of providing prepaid meters has been unbundled from retail electricity tariffs.
To get a prepaid meter, an electricity consumer can either pay the full cost of the meter outright, or can opt to pay a fixed monthly meter service charge over a 10-year period, so as to cover the cost of the meter and on-going provision of metering services by the MAP.
It is this MAP regulation that liberalized the process and enabled the private sector to bankroll the metering gap. This is in addition to FG’s one-year waiver of the 35% import levy on prepaid meters which previously constrained the regulation.
Why it matters
Bridging the metering gap in the power sector will improve revenue collection by DisCos, improve consumer satisfaction and lead to an overall reduction in the collection and commercial losses in the electricity distribution sector.
In addition, it will also bring increased transparency to revenue collection by DisCos and is the first step towards a total phase-out of electricity subsidies.
What they are saying
Commenting on the proposed deal Odion Omonfoman, the chief executive officer of New Hampshire Capital said “MAPCo is proposed to be a key component of the Nigeria Power Sector Recovery Program (PSRP) to put the power sector on the path of sustainability and improved electricity services to Nigerians. The SPV will support the mass roll-out prepaid meters to unmetered electricity consumers and also enable MAPs provide smart metering solutions to Discos and their consumers using the Meter-as-a-Service (MaaS) business model.”
Mr. Oluseun Olatidoye, the Head, Capital Markets of FBNQuest Merchant Bank stated, “the MAPCo SPV will enhance the long term viability of Nigeria’s power sector by leveraging on the depth of the Nigerian capital markets and offer investors unique access to long term investment opportunities through securitization of future receivables backed by the prepaid meter assets. FBNQuest is delighted to be one of the sponsors of this very important SPV in the power sector.”
Ewaen Imohe, CEO of Kairos Investments Africa noted, “the SPV will create and issue financial securities that are backed by prepaid meter assets in the power sector. Given the stable and long useful life of the underlying pool of prepaid meter assets backing the financial securities, we anticipate that there will be a lot of interest from long term investors looking to diversify their investment portfolios. We are proud to be partnering with New Hampshire and FBNQuest on this very important initiative.“