Business Hilights
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Discos focusing on servicing loans not investing in metering, transformers, others—report

Fresh reason has emerged on why the country may not experience better services from Power Distribution Companies (Discos) any time soon.

Otherwise, the Federal Government’s Power Sector Recovery Programme (PSRP) report bumped on by our Energy Correspondent has shown that “Evidence seems to suggest that the Discos are focused on servicing their acquisition loans rather than investing in metering, transformers, etc. to enhance their operational efficiency and reduce system losses”.

“While the acquisition loans are in dollars, unlike the generation companies that have tariffs that are 100 per cent indexed to the US dollars, the Discos’ tariff is 100 per cent in naira, thus the devaluation of the naira has massively exposed the Disco shareholders’ balance sheet.”

The report noted that the Central Bank of Nigeria (CBN) can facilitate renegotiation of the shareholder loans outstanding and re-denomination of the loans from dollar to naira in line with the distribution firms’ revenue profiles.

The Federal Government’s Power Sector Recovery Programme report, noted that

Business Hilights recalls that a total of $1.42bn was invested by the investors to acquire 60 per cent stake in the Discos and majority of the fund were bank facilities secured with tough terms that are now suffocating the Discos.

Besides, the hard times of the Discos are further made worst by rising debts owed the companies by MDAs.

Other key discoveries of the report suggested that “Potential dilution of both the Federal Government and privately-held stakes will help bring some stability to the Discos’ balance sheet”.

According to the report, accumulated deficit in the power sector could be dissected into tariff shortfall and market shortfall and chances are that the observed tariff shortfall was due to changes in macro-economic variables, volumetric shock in energy supplied, and the costs of interest on non-financed shortfalls via retail tariff sculpting.

PSRP report averred that “This has resulted in a shortfall of N458bn due to Discos from customers”.