DisCos require $7.7b to fix assets, says Nnaji

No Comments » June 18th, 2017 posted by // Categories: Energy Development Project



DisCos require $7.7b to fix assets, says Nnaji

• Urges govt to relinquish its 40% stake

The 11 electricity distribution companies (DisCos) need to invest additional  $7.7billion to upgrade their assets to provide the services required of them,  the former Minister of Power, Prof Barth Nnaji, has said.

Nnaji, also Chairman, Geometric Power Limited, said each investor would need at least $700 million, saying they require investment to the tune of seven times the cost of the purchase of the assets.

The former minister, who was the keynote speaker at the Natural Gas Business Forum organised by the Nigerian Gas Association (NGA) in Lagos at the weekend, advised the Federal Government to surrender its 40 per cent equity holding in the DisCos, a measure he said, will make the power sector efficient.

In his words: “I think the intention of the privatisation is to take the generation and distribution arms of the power sector out of government’s hands. But it is intended that those who have taken the assets should be able to invest in the assets, as the government on its part should have the will to ensure what it promised distribution companies will get done so that the distribution should hold them accountable to the agreement so made.

“The agreement is that the government will give you these assets for a specific value, not a bided value but you should reduce losses – average technical, collection, and commercial losses, to a certain number that you bided for. But to do that requires a lot of cash to invest in the network, as well as the commercial aspect of the business, such as metering. If this is not being done, that’s a problem.

“On the side of government, there must be a cost-reflective tariff in place. This means that the cost associated with the business is what is paid. The business of power is what government has to be sensitive about. Nigerians pay low value in comparison to other parts of Africa in terms of power. We have to decide as a country whether we want power or darkness.

“But I say the cost of darkness is infinite while the cost of power is finite, and we should have the will to do something about cost-reflective tariff, otherwise, nobody will come here to invest and it’s not just mere talk’’.

Nnaji warned that people will only come here to invest when there is cost-reflective tariff in place. “Cost-reflective tariff is what distribution companies want from government and hold on to, as a reason. After that the DisCos have to be held to deliver.”

On the government’s 40 per cent stake in DisCos, Nnaji said: “The Federal Government should liquidate its position and very soon too. Government was supposed to use it (its stakes) to ensure that the distribution companies would perform, but in a case where you now have government people being on the board, board members will not be able to take decision you imagine will happen. It is not just correct for them to operate like that.  Government needs to quit along the line.’’


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