Investors in the Nigeria’s power industry have picked holes in the planned N701 billion power intervention fund by the Federal Government.
They declared that the fund had the potential to worsen revenue shortfalls rocking the industry. Executive Director, Research and Advocacy for the umbrella body of investors in the power distribution, Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, revealed this in a chat with newsmen in Lagos.
He maintained that even though the fund would solve N300 billion energy supply liabilities, rehabilitate and replace faulty or old turbines and pay for the supply of gas for the thermal generating plants, it was a partial solution to the liquidity challenges of the sector. He specifically noted that the fund “holds the potential for exacerbating the revenue shortfalls that the market is currently suffering from.”
Acknowledging that the fund approval was a welcome development, Oduntan said “however, as commendable as this intervention is, we believe that it is a partial solution to the liquidity challenges of the sector.
” Oduntan went on: “More so, as it holds the potential for exacerbating the revenue shortfalls that the market is currently suffering from. While an increase in electricity supply is the desired objective of everyone, such an increase without the requisite full recovery of cost via the appropriate pricing of power, means a resultant worsening of the market revenue gap.”
Besides, he noted that considering that the approved intervention was not expected to be a subsidy to the market, the assumption was that the proposed funding would eventually be recovered from the customers of Electricity Distribution Companies (DIsCos).For such recovery to occur, he said that the Transmission Company of Nigeria (TCN) needed to have the required capacity to wheel the additional power being generated.
He said: “Funding the transmission network is therefore imperative, for the proposed FGN intervention to work.” Increased generation without commensurate wheeling capacity arising from a stable and robust transmission grid will result in stranded capacity and significant lost revenues. “Such investments will not happen unless the DisCos make the projected annual revenue requirements, which enables access to finance for the required capital expenditure (Capex). Access to such financing is predicated on appropriate pricing of the retail tariff.
“The growing working capital debt on the DisCos’ books, less any amounts to be paid under the intervention, will also continue to impede DisCos’ ability to fund retail distribution Capex requirements.”
Source: NEW TELEGRAPH
