Electricity: Most DisCos are technically insolvent— NERC
LAGOS — The Federal Government yesterday admitted that most of the electricity Distribution Companies, DisCos, in Nigeria are technically insolvent and unable to pay for invoices sent to them from the electricity market and invest in network expansion projects.
Speaking at the 8th Africa Energy Market Place 2024 in Abuja, Chairman of the Nigerian Electricity Regulatory Commission, NERC, Engr. Sanusi Garba, said the poor financial state of the DisCos makes it difficult for them to raise the needed capital to invest.
Garba pointed out that the challenges facing the sector were a culmination of past inactions and missteps by those saddled with the responsibilities of managing the sector, both at policy and operational levels.
According to him, “Today when you look at distribution companies, they are clearly and technically insolvent, and you also want them to raise capital in terms of debt or equity. It’s a herculean task.
“I also want to mention that implementing the power sector reform requires powerful political will to implement decisions that impact the wider public.”
On his part, the Minister of Power, Chief Adebayo Adelabu, said the government is working to get the distribution companies solvent and effective by unbundling their operations along state boundaries.
Adelabu insisted that the areas covered by the current DisCos are too large for them to deliver effective services to consumers.
Speaking on how the government will tackle the N1.3 trillion owed to power generation companies and the $1.3 billion debt to gas companies, the minister disclosed that President Bola Tinubu has approved a plan to liquidate the debts.
He said: “Mr. President has approved the submission made by the Minister of State Petroleum (Gas) to defray outstanding debts owed to gas supply companies by power generation companies.‘’
The payments are in two parts, the legacy debts and the current debts. For the current debt, approval has been given to pay about N130 billion from the gas stabilization fund which the Federal Ministry of Finance will pay.
“The payment of the legacy debt will be made from future royalties in exchange for incomes in the gas sub-sector which is quite satisfactory to the gas suppliers. This will allow the companies to enter into firm contracts with power generation companies.
“This we have successfully done and it is being signed off by both parties now. The majority has signed off and we are engaging to ensure that we have 100 per cent sign-off.
“The debt will be paid in two ways, immediate cash injection and through a guaranteed debt instrument, preferably a promissory note. This assures the companies that in the next three to five years, the government is ready to defray these debts.”
On its part, the African Development Bank, AfDB, said it had so far spent over $450 million to support various power sector projects and programmes with another $1 billion planned to support the power sector reform effort by the government.
