Nigeria gives N213bn bailout to power sector

Nigeria gives N213bn bailout to power sector

Friday, September 19, 2014 10:02 pm

Nigeria’s Federal Government on Friday announced new measures to address financing problems in the power sector, including a N213 billion bailout facility to settle legacy gas debts.

The Minister of Petroleum Resources, Mrs Diezani Allison-Madueke, made the fact known at a joint press conference at the Presidential Villa, Abuja.

She was joined by the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, the Minister of Power, Prof. Chinedu Nebo, and the Chairman, Nigerian Electricity Regulatory Commission (NERC), Mr Sam Amadi.

A power facility in Nigeria: FG releases N213bn bail out fund

A power facility in Nigeria: FG releases N213bn bail out fund

Allison-Madueke said that the facility, which would be provided by the CBN in collaboration with deposit money banks, would also be used to address revenue shortfall in the power sector.

The minister noted that inadequate gas supply for power generation was one of the three major issues affecting the sector.

She said that up until Aug. 2, the controlled price of gas used by power plants was unattractive to most gas suppliers, which led to an overhang of debts for gas supplied to the sector.

The second problem confronting the sector, according to her, is the misalignment between electricity tariff and the true cost of running electricity businesses.

She said the situation led to a build-up of shortfalls in revenues along the electricity supply value chain.

“The third problem has been the ability of generation companies to reliably produce the electricity that is possible with reduced volumes of gas.

“With most of the operators having just acquired PHCN successor generation companies, they could hardly afford the reduced income due to the shortfall in revenues for reasons I have just set out.

“The newly privatised companies have borne the brunt of these and consequent revenue shortfalls in the sector, since handover last November.

“This is hampering much needed investment in the sector and has slowed down efforts to improve electricity supply,” she said.

As part of the new measures to address those challenges, Allison-Madueke said that NERC would publish a reset Multi-Year Tariff Order (MYTO 2.1).

She said the new tariff order would take into account the CBN facility, current levels of energy output, the new baseline gas price and other variables that more closely reflect the true cost of running electricity businesses.

“The electricity market, which now consists of mainly private operators, will repay this facility with a first-line charge on their revenues over a 10-year period.

“There will be a moratorium on repayment of the credit facility from the banks by distribution companies, until electricity supply across the country improves.

“This will ensure that the cost of electricity for ordinary consumers continues to be at affordable levels.”

According to her, the credit facility will be disbursed through commercial banks and a special purpose vehicle to be managed by a dedicated fund manager.

She explained that this structure would ensure that the funds were repaid in full within the time frame of the reset tariff order.

Allison-Madueke, however, noted that there would be strict conditions for entities involved in the power sector to access the intervention facility.

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