An power sector expert, Mr Edu Okeke, on Thursday, advocated a market capitalisation of 500 million dollars for the 11 Electricity Distribution Companies (DisCos).
Okeke is also the Managing Director of Azura Power West Africa, a Power Generating Company (GenCo).
He made the suggestion in Abuja at the 4th edition of the Power Correspondents Association of Nigeria (PCAN) annual workshop.
The theme of the workshop was, “Nigerian Power Sector: Ending the Talk, Moving to Action”.
Okeke said that the 500 million dollars capitalisation would require existing shareholders to dilute their holdings to attract new investors with real capital.
He said that such investors would be able to invest in infrastructure, not just in paper, but in transformers, cables, and equipment to serve customers reliably.
He said that many DisCos were struggling to pay their total bills to the entire value chain due to to lack of capacity to make the necessary investments to recover costs effectively.
Okeke said that DisCos must be adequately capitalised, adding that many of them carried a heavy burden of debt.
According to him, no DisCo should operate without at least 250 million dollars in shareholder funds.
He called on the Federal Government to be decisive in addressing the issue.
”This situation must change. Ideally, no DisCo should operate without at least 250 million dollars in shareholder funds.
”The Central Bank of Nigeria (CBN) has raised capital requirements for banks to ensure their stability and capacity to serve.
”The Nigerian Electricity Regulatory Commission (NERC) should mandate similar capitalisation standards for DisCos,”he said.
Okeke called on the government to remove the debts from the DisCos’ books and to increase the capitalization to 500 million dollars.
“For any investment in the power sector to be viable, investors must be assured of cost recovery.
“There are only two ways to achieve this: either the government pays or consumers do,”he said.
Okeke commended the government’s recent decision to transfer costs to consumers, starting with Band A.
“Ultimately, consumers will bear a fair share of the cost of the power they consume.
”However, this equation has a critical weak link, the DisCos, which directly interface with consumers.
”As things stand, even with tariff adjustments, many DisCos struggle to pay their total bills to the entire value chain, ”he said.
Okeke said that most DisCos had negative equity, leaving them with little to no financial stake.
”Many DisCos also carry a heavy burden of debt accumulated over time through a mix of operational challenges and systemic issues.
“To truly address this problem, the government needs to come clean and take a decisive step ” he said.
Earlier, the Chairman of PCAN, Mr Obas Esiedesa, said that the workshop was organised to chart a new course for the country’s power sector.
Esiedesa said journalists covering the power sector were concerned that the sector had seen more discussions than actual progress.
“In spite of the constant dialogue, each step forward often seems to bring about setbacks.
“Our concerns are heightened by the fact that these issues persist despite the Service-Based Tariff and the increased tariffs for Band A customers.
“As journalists, we find the state of the sector disheartening, and I believe that I speak for many when I say that we can not be silent, ”he said.
Esiedesa described the workshop as a call to action.
“We are here to discuss meaningful ways to move forward, and I am glad to see so many industry leaders in attendance,” he said.
