FG To Unbundle 11 Discos, Orders Sale Of Four
Power distribution companies in Nigeria are currently being unbundled along state lines due to their large sizes that often result in efficiency and ineffectiveness, the Federal Government declared on Monday.
It stated that the privatisation of the firms would not be reversed, but stressed that the Discos would be broken into more efficient structures along state lines so as to be able to deliver on their mandates.
This came as the Federal Government also ordered the sale of Discos that have been taken over by banks and the Assets Management Corporation from its original investors/owners.
Currently, four Discos are under the management of banks and AMCON.
The Abuja Electricity Distribution Company is under the management of the United Bank of Africa (UBA), while Fidelity Bank manages Benin Electricity Distribution Company, Kaduna Electricity Distribution Company, and Kano Electricity Distribution Company.
The Ibadan Electricity Distribution Company is under the AMCON management.
The four Discos are under these new managements due to their inability to repay their loans to the financial institutions.
The government stated that those who acquired the Discos when the firms were officially privatised in November 2013, lacked the required expertise and financial capacity to run the companies.
This came as the Senate Committee on Power lambasted the Discos for being so inefficient since they took over the privatised assets over 10 years ago, and called for the overhaul of the power firms.
In his address, while playing host to the Senate Committee on Power, led by their Chairman, Senator Eyinnaya Abaribe, the Minister of Power, Adebayo Adelabu, stated that the Federal Government had commenced the restructuring of Nigeria’s 11 power distribution companies.
He also revealed that over 100 projects of the Transmission Company of Nigeria have not been completed since 2001, a period of about 23 years.
Adelabu said, “We are unbundling the Discos along state lines. Some of the Discos are too big for efficiency. They are too big for effectiveness. Ibadan Disco covers seven states. It is practically impossible for them to be efficient.
“So we are rearranging and restructuring the Discos along state lines so that each state government will know the responsible Disco for their states. Also, the federal and state governments should start exercising their rights in the operation and management of the Discos because we still own 40 per cent in the firms.
“But we have left it for the private sector operators for too long and they have messed it up. So the government must come back to take over its own right in the Discos. We are also planning to franchise the unserved communities under the Discos.”
The minister went ahead to state that “we will start seeing regulations about franchising. The fact you are Eko Disco doesn’t mean that you cannot have smaller Discos that are ready to invest in your unserved communities. So we are looking at franchising.”
Adelabu further revealed that the Oyo State Government had written to the Federal Government stating that it wants to exercise its rights in Ibadan Disco.
He said the Nigerian Electricity Regulatory Commission has been made to realise that it must sanction Discos that fail to perform, as the licences of some of the power firms might be withdrawn for non-performance.
“We are transforming the Discos and very soon you’ll see that a lot of tough decisions will be taken against these Discos because they are the last mile in the sector. If they don’t perform then the entire sector is not performing.
“So we have put pressure on NERC to make sure that it raises the bar on the activities of the Discos. If it has to withdraw licences for non-performance, why not? If it has to change the boards and managements, why not?
“And all the Discos that are still under AMCON (Asset Management Corporation of Nigeria) and some lenders (banks), within the next three months they must be sold to a technical power operator with a good reputation in utility management.
“We can no longer afford AMCON to run our Discos. We can no longer afford the banks to run our Discos. This is a technical industry and it must be run by technical experts,” the power minister stated.
Also commenting on the non-performance of Discos, a member of the committee, Senator Danjuma Goje said, “The Discos have not added anything significant to the power sector, but are just going about collecting money.
“The Discos are complete failures and should be overhauled. They have failed to live up to expectations and we have so many complaints about their poor performances.”
The Senate committee also authorised an investigative hearing on the electricity tariff hike and stated that this would be held on April 29, 2024, at the Senate.
The power minister told his guests that those who acquired the Discos when they were privatised, lacked the required expertise and financial capacity.
Adelabu said, “Our problem started from the privatisation era. Not that the privatisation has a problem in itself, but its implementation and execution have robbed the process of its laudable objectives.
“We believe that people who bought the power companies do not have the required expertise to run the utility firms. Secondly, they were not buoyant enough in terms of financial buoyancy to pay for the power plants.
“All of them used bank loans to pay for the assets. And we all know that the power business is a long-term business. It is not something you recoup your capital and make profit in a short time. So they were all under pressure to repay the bank loans that they used to acquire the power companies.
“This is why today a number of them have been taken over by their lenders, either AMCON or the banks, both local and international banks. They also promised to invest and enhance the distribution network, but they did not do this.”
The minister stated that the investors had promised to reduce the losses in the Discos, but stressed that up till now the losses had remained at about 40 per cent across the power value chain.
“So the Discos are not investing as expected,” Adelabu stated.
The minister told the lawmakers that over 100 power transmission projects have not been completed since 2001.
“Since 2001 till date we have over 100 uncompleted projects of the Transmission Company of Nigeria. So when we say the government has spent so much in the sector, it is true. But all the spendings have not translated to good impact on power users.
“This is because majority of these projects have not been completed, though some of them are 80 or 90 per cent completed. We have over 65 projects on power substations that are still ongoing since 2001, which is 23 years ago.
“We have about 62 lines projects across the country that were started and have not been completed. And these are being affected by exchange rate calculations, inflation, variations, etc. One thing about power projects is that if they are not completed 100 per cent, you cannot energize them,” Adelabu stated.
He said all the investments are just there lying in waste, “but we are saying that this year we must ensure that a significant number of these projects are completed so that Nigerians can enjoy the investments in the transmission company.”
On the metering gap in the power sector, the minister stated that a company received $200m in 2003 to provide three million meters but failed to do so.
“In 2003, the metering gap was less than four million meters and the Federal Government gave out $200m to a particular company to acquire three million smart meters for the industry. It was a revolving loan.
“But it is sad to let you know that this is 21 years after, no single meter was acquired by this company and the $200m which was N32bn at the time, nothing was got from the money until Mr President just gave us the approval to terminate this loan.
“He also asked us to implement the metering of the Nigerian Army formations to the tune of N12bn. You can imagine if we had acquire three million meters 21 years ago. Today the metering gap that we have is over eight million out of over 12 million customers of the power sector,” the minister stated.
