‘Failed investors’ may sell power distribution assets back to FG at N736 billion

In a bid to revamp the country’s power sector, the Federal Government (FG) is considering repossessing no fewer than 10 electricity distribution firms. The acquisition, if successful, will cost the Federal Government about N736 billion. 

 There are indications that the Federal Government could reacquire the distribution assets from core investors, as the Ministry of Power, Works and Housing, in a document, described the co-owners of the distribution companies in Nigeria as ‘failed investors.’ 

 While considering this option, the ministry said, “To do so within the provisions of the Share Sale Agreement will require a sum in the region of $2.4 billion (736 billion), some of which will be paid as compensation to the failed investors. This is not a desirable outcome. It is noteworthy that the government is yet to pay the investor in Yola DisCo for its negotiated return to government.” 

 What this means: Should the Federal Government resolve to acquire the assets from core investors, the power sector of the country will be owned and managed the way it used to be some years ago before the industry was partially privatised. This simply means that the Federal Government will now be in control of power distribution. 

 What you should know: Following the privatisation of Nigeria’s power sector by the administration of former President Goodluck Jonathan, distribution firms carved out of the defunct Power Holding Company of Nigeria (PHCN), were on Friday, November 1, 2013, handed over to private investors in a bid to facilitate investment growth in the power sector. 

Despite this, the power sector has been experiencing serious challenges over power supply and investment growth. The Bureau of Public Enterprises (BPE) in 2018, made known that the five-year performance agreement with the core investors in the DisCos, with the exception of Kaduna DisCo, became effective on Thursday, January 1, 2015, and the fifth anniversary for final performance review would, therefore, be Tuesday, December 31, 2019. 

 The Ministry of Power, Works and Housing revealed that the need to recapitalise the DisCos is urgent, as the DisCos are ‘technically insolvent’. It, however, described the inability of the DisCos to improve customer service and meet operational costs as a direct consequence of their inability to raise capital. 

Source: Nairametrics

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