Institute condemns suspension of N309b power sector bond
Chairman of the Nigerian Institutite of Electrical & Electronics Engineers (NIEEE), Michael Akan, said electricity companies urgently need funds to improve and sustain operations in the country.
According to him, if funds are not injected into the sector, it may collapse, saying it portends dire consequences for the country.
Akan stressed the need to hasten the investigation of the electricity privatisation process, as the issues at stake required urgent attention. “It is not enough for government to apply sanctions to players who might have defaulted in their performance agreement, but government must create enable environment for the players to operate and operate successfully.
“We are in a dire situation and much more we have found ourselves between the devil and the deep blue sea. When government handed over the management of the power infrastructure to private operators through its privatisation programme, it overestimated the management capability of the successor companies. However flawed the processes of transfer of these critical assets might have being, the current situation has exposed our lack of ability to operate the complex interdependent structure prevalent in the sector.
“Firstly, I have to say that the operations in the power sector are opaque and lack transparency and integrity. The successor distribution companies in the last two years have failed to hold yearly general meeting to disclose their performance to shareholders or make there audited financial statements public. Federal Government last year arranged a bailout to the tune of N213 billion through the Nigerian Electricity Sector Intervention Fund; we are yet to get report on how that fund was managed,” he added.
Akan noted that investment in generation, transmission and distribution in the power sector has not translated to the desired improvement and expectations in service delivery rather the consumers have continued to witness increment in tariff.
He stated: “I want to quickly say that a motion sponsored by Senator Mustapha Bukar insisting that the Federal Government proposed sale of bonds worth N309 billion be suspended and the Senate subsequent order to its joint committees on Power and Privatisation to investigate the post-privatisation performance of all the players in the sector is in order. However, the players urgently need funds not only to improve on its operations but also to sustain it. The situation in the power sector is not a strait jacket thing that one can allude to a single factor to arrive at a solution.
“If funds are not injected into the sector, it may collapse and we cannot imagine the consequences. I feel the duration for such an investigation should not be prolonged, as issues at stake need urgent attention. It is not enough for government to apply sanctions to players who might have defaulted in their performance agreement but government must create enabling environment for the players to operate and operate successfully.
“Again distribution companies must meter every consumer. They must develop and deploy innovative systems that will check energy theft. Quite a number of consumers don’t pay for energy or pay appropriate bill for what they consumed. Consumers paying for what they consume is the starting point, as it will enable service providers to meet their obligations.”
He argued that continuous provision of bailout without appropriate monitoring mechanism and sanctions in place may not address the situation.
“Looking at the entire system, our transmission infrastructure should be strengthened to free about 10,000MW generating capacity being held. As at today, our transmission infrastructure cannot support more than 5,000MW. Our distribution network should be improved upon for robust delivery and consumers should pay for what they consume,” he said.
The outgoing President of Independent Shareholders Association of Nigeria, Sir Sunny Nwosu, said raising bond for power would have been successful, despite the liquidity constraint in the market and economy.
He said: “When you talk of bonds, it has a guaranteed interest rate and because of the guaranteed interest rate, whether they make profit or not, the interest is guaranteed. They have to pay even where they default in a year, it will have accumulated effect and the interest will be there for you.
“Some investors prefer a fixed interest rate to dividend risk. In dividend, a company can only pay when there is profit, but in bonds there is an agreed interest rate, so some prefer going for the bonds because they can estimate how much will come in yearly basis. There are a lot of people that pull resources together to go into bond, they do not even border going into ordinary shares,” he added.