Electricity distribution companies accuse FG of shortchanging power firms

Electricity Distribution Companies (DisCos) have slammed the Federal Government over the recent takeover/restructuring of 5 distribution companies, claiming that the 11 Discos were shortchanged by BPE when the facilities were privatized in November 2013, while the government failed to pay the N100 billion subsidy on electricity since the privatization of the sector.

The Discos under the aegis of Nigerian Electricity Distributors (ANED), while expressing concern on the restructuring of these 5 Discos as announced by BPE on July 5, in collaboration with the Nigerian Electricity Regulatory Commission (NERC), described the move by the Federal government as backdoor renationalization of the power firms.

This was made known by the Executive Director, Research and Advocacy, ANED, Sunday Oduntan, on Sunday, July 31, 2022, when he said that although some of the affected power firms had commenced legal actions against the move, the association viewed the restructuring to be inconsistent with all the guidelines necessary to comply with the framework of privatisation agreements and the rule of law.

What the Discos representative is saying

Oduntan said, “We believe that it is reasonable to conclude that the resultant outcome has been an expropriation or backdoor renationalisation of the Discos by the Federal Government,” ANED stated in a statement issued in Abuja.

• “Such renationalisation or expropriation must be viewed through a historical context as necessary for a proper understanding of the performance challenges that the Discos have been faced with since privatisation.
• “Fundamentally, the basis of privatisation was flawed from the beginning due to conditions that were not met by the Federal Government, while expecting the Discos to meet their performance obligations.
• “Not only were the investors shortchanged because of insufficient and unreliable data that was provided by BPE to them during the privatisation process, but the government also committed to and failed to deliver on debt-free financial books; payment of ministries, department and agencies electricity debts; and N100bn subsidy.”

ANED lists other areas of FG’s failure to the power sector

The ANED top official listed other areas of failure by the Federal Government in its obligation to power sector to include;

• Inability to implement a cost-reflective electricity tariff, stressing that this singular unfulfilled condition had led to accrued significant debt and liabilities on the Discos’ financial books, as Discos continued to sell electricity below the cost price.
• Failure of the federal government in the private management of the Transmission Company of Nigeria (TCN), currently, a government-owned and operated entity. The privatisation of TCN was a major requirement for attracting private investment critical in addressing the transmission bottleneck currently belittling the Nigerian Electricity Supply Industry value chain.

ANED stated, “These commitments have remained largely unmet over the post-privatisation period and have belatedly been partially addressed – too late to rectify current performance challenges.

“While the Discos are not exonerated from responsibility for performance failures, it would be unrealistic to reach related conclusions without taking into consideration the factors that have been listed previously, as well as the Federal Government’s contributions to these challenges.”

ANED disagrees with process of changing board and management of Discos

The association said it was surprised at the process that was used to change the board of directors and management of the 5 Discos, noting that due process was not followed with the federal government being a minority shareholder.

It stated, “Furthermore, there is an established process by which a change of a corporate entity’s board of directors and management occurs. As such, it is with much surprise that the Disco investors awoke to the July 5, 2022, renationalisation or expropriation of the five Discos.”

ANED argued that due process was not followed and that the Federal Government, as a 40 per cent minority shareholder, was represented by the director-general of BPE on the board of each of the Discos and was party to all decisions concerning the operations of the Discos.

What you should know

• Recall that on July 5, 2022, the Federal Government through the BPE and NERC, had announced the restructuring and take-over of 5 electricity distribution companies (DisCos) across the country by some banks over their inability to meet up with its financial commitment and repayment of its debt obligations.
• This follows the activation of the call on the collateralized shares of Kano, Benin and Kaduna DisCos by Fidelity Bank with the initiation of action to take over the boards of these DisCos and exercise rights on the shares.
• The government also announced the take-over of Ibadan DisCo by AMCON, with the BPE also obtaining approval from NERC to appoint Kingsley Achife as interim Managing Director as well as the restructuring of the management and board of Port Harcourt DisCo to forestall the imminent solvency of the entity.