Power firms get CBN loans to boost operations

Power firms get CBN loans to boost operations

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Barely two weeks after the first tranche of N18.2bn was disbursed to
five power firms by the Central Bank of Nigeria, another set of 10
power distribution and generation companies were on Wednesday
given a loan of N39.52bn to boost their operations.

The amount, given at an interest rate of 10 per cent, with a repayment
period of 10 years, is part of the N213bn Nigerian Electricity Market
Stabilisation Facility.

The fresh disbursement brings the total intervention made under the
stabilisation facility to N57.72bn.

Four power distribution and six generation companies had their chief
executive officers in attendance during the second batch of the
disbursement.

The Enugu Electricity Distribution Company received the highest
amount of N10.25bn, followed by Kano, Port Harcourt and Eko
Electricity Distribution Companies, with N7.64bn, N6.58bn and
N43.31m, respectively.

For the generation companies, Egbin received the highest amount of
N5.1bn, while Delta, Jebba, Shiroro, Geregu and Kanji Hydroelectric Plc
followed with N3.92bn, N2.38bn, N938.99m and N684.44m in that
order.

The disbursement of the loan is a follow- up to the Memorandum of
Understanding, which was signed last December by the CBN,
participating Deposit Money Banks and the Nigerian Electricity
Regulatory Commission.

The agreement is to prepare the banks to channel funds towards de-
risking the value chain in the electricity supply market.

Speaking at the loan disbursement ceremony in Abuja, the CBN
Governor, Mr. Godwin Emefiele, urged the firms to utilise the funds to
upgrade their infrastructure.

He listed some of the areas where the funds were to be invested to
include plant maintenance, upgrade of transmission and distribution
networks, acquisition of transformers and effective metering of
consumers.

“We are witnessing the disbursement of the NEMSF to some Discos
and Gencos. You will recall that on February 2, we disbursed the first
tranche to two Discos and three Gencos. At that session, N18.2bn was
disbursed and I am happy to inform you that we have moved on to the
second batch of disbursement and we will be disbursing N39.5bn,
which brings the total disbursement to over N50bn,” Emefiele said.

He added that with the conclusion of the second phase of the
disbursement, the central bank had taken a quantum leap toward the
disbursement of the entire N213bn.

He said the Gencos and Discos would not be the only beneficiaries of
the loan, but that gas suppliers in the electricity market would also
benefit from the fund.

Emefiele noted, “We want to unlock the potential of the power sector
and so this facility is meant to catalyse the power sector.

“The fund will be used to procure meters and certain spares that they
need to improve their business and power losses in the grid.”

The Chairman, Nigerian Electricity Regulatory Commission, Dr. Sam
Amadi, said the disbursement of the fund would lead to efficiency in
power generation and distribution.

He said it would also enable the power firms to speedily deliver on
their commitments, noting that with the provision of the loans,
Nigerians would begin to see improvement in power supply.

Meanwhile, the Bureau of Public Enterprises has explained that the
fund being advanced by the Federal Government to electricity
distribution and generation companies is a loan rather than a grant.

The Director-General, BPE, Mr. Benjamin Dikki, said this in a statement
made available in Abuja on Wednesday.

Dikki explained that from conception of the power sector reforms, it
was calculated that 40 to 60 per cent of the power being generated
was lost to technical faults and inefficiencies in transmission and
distribution occasioned by inadequate investment and poor
maintenance culture.

According to him, the losses that no private sector investor will bear
are to be made good by the government via subsidies over an initial
three-year period in order to give the private sector investors time to
make the necessary investments to improve the distribution network.

He added that due to revenue challenges, the government could not
meet the obligation; hence the decision that the Central Bank of
Nigeria should intervene and grant a loan to the power sector.

Dikki emphasised that the fund was a loan to the power market to
enable investors to improve infrastructure.

The BPE boss said the CBN, BPE and the NERC would monitor the
utilisation of the fund to ensure that improvement in the power
infrastructure was achieved within the next five years, adding that the
loan was repayable by the market over a period of 10 years.

He noted that the greatest challenge facing power generation in the
country was non-availability of gas, adding that previous
administrations did not make investment in gas infrastructure.

Dikki said, “In the years gone by, no appropriate attention was given to
the issue of gas supply to the power generation companies. No
previous government prioritised the piping of gas to the generation
companies, hence the situation we find ourselves now.

“It is, however, gladdening to note that the present administration is
doing everything possible to overcome the challenge. The Ministry of
Petroleum Resources, the Nigerian National Petroleum Corporation, the gas companies and other stakeholders are working hard to ensure that gas supply to the power generation companies is achieved.”