Discos Want CBN’s N50bn Stabilization Loans Restructured for Longer Duration
…Investors claim they injected $4.4bn after unbundling
Electricity distributors in Nigeria, DisCos, have jointly called on the federal government to restructure the loans advanced to them by banks for the acquisition of the assets.
The core investors in the DisCos also want the Central Bank of Nigeria Nigerian (CBN) facilitated Nigerian Electricity Market Stabilisation Fund (NEMSF) disbursed to them to be restructured for longer duration.
The Discos also drew the attention of the federal government to the need for longer terms for government interventions and access to cheaper funding.
A year after the nation’s power distribution and generation companies were privatized in 2013, and the investors were perceived to be wobbling with capacities; the CBN introduced a N213 billion intervention fund, a loan facility with a 10-year repayment period.
The NEMSF was meant to assist the GenCos and DisCos to settle legacy gas debts, execute agreed metering and maintenance programmes, and finance procurement of transformers and other equipment, in adding to other major commitments affecting their capacities.
The total amount of DisCos’ portion of the CBN NEMSF stood at N49.9 billion, even as theey claimed that a part of that cash was used as collateral for letter of credit guarantees to banks.
In a position paper presented to the federal government last Tuesday, the DisCos said, “The NEMSF loan currently encumbers DisCos’ balance sheets and is worsened by the difference in aggregate technical, commercial and collection loss as used in the tariff model versus reality.”
They argued that while other stakeholders in the Nigerian electricity supply industry are paid obligations due to them directly while monies due to the DisCos were put on their books as loans.
According to them, it is a first-line charge on DisCos’ collections, while the situation impacts on the distribution companies’ financial transactions and remittance obligations.
Highlighting the way forward for the sector, they suggested that, “Acquisition debt to be refinanced by the Bank of Industry and extended on a longer-term basis (10 years), with a single-digit interest rate and a moratorium of two years to allow the market to stabilise.”
They recalled that core investors injected about $2.4 billion (debt and equity) in exchange for stakes in the unbundled companies. They said the Nigerian commercial banks were encouraged to support the transactions and they provided debt finance to the tune of $2 billion. The Discos also called for an alignment of the Multi-Year Tariff Order ATC&C losses with the current reality.
“Historical tariff shortfalls and debts owed by ministries, departments and agencies of government as at December 2019 should be taken out of Discos’ books,” the Discos said. Adding that lighter balance sheets would enable them to be creditworthy. Chibisi Ohakah, Abuja