Over the years, issues around poor infrastructure, lack of sufficient funding, failure by the executive arm of government to pay for power, security have remained a recurring problem in the power sector. However, industry experts believe that Nigeria’s challenge in the power sector has nothing to do with situating the problem but everything to do with implementing solutions as identified over time.
They opined that despite the concerted efforts by successive government to tackle the power sector challenges, the problem appears to be more man-made than engineering or technical. In the views of energy experts as a first step towards resolving the financing challenges facing DISCOs operations, Core Investors, in line with their performance agreements, need to urgently capitalise DISCOs operations by the injection of “patient” capital by way of long-term debt or equity. They said Core Investors must inject significant patient capital to address the challenges mentioned above. Short-term debt or borrowings will not suffice and only serve to exacerbate the financing and operational challenges.
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Analysts further insist that underpinning any debt or equity capital raise is a sustainable and cost-reflective electricity tariff and a long-term tariff path. Without cost-reflective electricity tariffs, the electricity sector is not likely to attract and sustain much-needed investments. “The entire electricity sector is faced with huge revenue shortfalls. The implementation of cost-reflective tariffs, access to long-term debt capital and equity injection, will still not address the revenue shortfall to the system in the short term”, they said. Industry close watchers maintain that DISCOs are encouraged to adopt off-balance-sheet funding solutions to fund key capital items such as metering, network expansion and embedded generation. Off-balance sheet funding solutions include outsourcing meter financing and operations and vendor financing. DISCOs also need to start looking at franchising opportunities, particularly in rural areas or areas with high losses.
“The rationale for fixed charges must be understood by electricity customers. Regardless of energy flow, there are huge fixed costs to the sector, which must be recovered through fixed charges. Fixed charges also provide some level of guaranteed revenue to the sector” they added. Experts in the power sector pointed out that the executive arm of government has failed in some of its key promises and has not provided sufficient explanation to the Nigerian populace.
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According to them, “Government promised to ensure a substantial increase in the capacity of the grid such that enough electricity would be wheeled along the transmission network to ensure that the generation companies could send sufficient power whilst the DISCOs would receive enough power for distribution to generate sufficient electric power. ‘‘It was only recently that the grid expanded by about 40 per cent, the effect of which had been that the DISCOs could not receive sufficient power and consequently generate sufficient income to service the remaining parts of the electric power supply value chain’’. Industry analysts are worried that the government has failed to honour any of its commitments to investors as the issues of improvement in gas supply have not materialised.
KELECHI EWUZIE
