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Banks deny Egbin Power new credit line over N125bn debt

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Posted on September 14, 2017

The management of the nation’s biggest power station, Egbin Power Plc, has said that commercial banks are no longer willing to grant the company fresh credit lines over an estimated N125 billion ($352) debt owed it by the Federal Government.

This was even as its Managing Director and Chief Executive Officer (CEO) Mr. Dallas Peavey, lamented that half of its output is wasted because of inadequate transmission infrastructure.

According to him, with such huge debt, banks are now reluctant to give Egbin new loan facilities. “But we will continue to work with the banks, the Central Bank of Nigeria (CBN) and the Federal Government so that we can close that gap and lower that risk,” Peavey said.

But Yesufu Alonge, the head of power procurement at government-owned Nigerian Bulk Electricity Trading Plc, has faulted the claim of N125 billion made by Peavey. According to him, the delay  in payment was in part due to the fact that distribution companies owed the trading company some money, he said.

Peavey had last September, put its indebtedness to the banks at $325million (N99.13billion), while the Federal Government’s debt profile to the company stood at N86 billion

Egbin, located in Lagos, was acquired in 2013 by Kepco Energy Resource Limited in collaboration with its technical partner, Korea Electric Power Corporation, during the privatisation of the successor companies carved out of the defunct Power Holding Company of Nigeria.

According to Peavey, out of the roughly 1,300 megawatts currently generated by the facility’s six units, which is close to full capacity, about 700MW is lost since the grid is overwhelmed.

He, however, said Egbin was working with the Transmission Company of Nigeria (TCN) to improve things.

“We have major pieces of equipment that are almost impossible to find. We are working with General Electric and other US companies to help us provide those ones to perform the overhaul, and help us do the transmission evacuation.”

Peavey said Nigeria was currently distributing an average of 4,500MW of electricity.

That’s an improvement from 1,000MW in May 2016, when gas supply was disrupted, and from an average of 2,503MW recorded in the second quarter of this year, according to the National Bureau of Statistics(NBS).

But it is still far from the needs of the 180 million inhabitants who face daily blackout. South Africa distributes about 34,000MW during peak demand, for a population less than a third of Nigeria’s.

Sahara Group Plc, the Nigerian energy company that owns Egbin, said it has invested $400million in the plant since taking it over in 2013, after a partial sale of state-power companies to private investors.

In his submission, Partner, Bloomfield Law Practice, Mr. Ayodele Oni, said the N69.96 billion allocation to the power sector in the 2017 budget remained grossly inadequate considering the fact that the sector requires more funding to meet the target of an all-out electrification of the country.

Given a further breakdown of the 2017 budget, Oni said that the Transmission Company of Nigeria, (TCN), got the lion share of N40.2 billion, followed by the National Rural Electricity Agency with N16.137 billion. NERC was allocated N2 billion; NEMSA, N2.837 billion; NAPTIN, N2.465 billion; NELMCO, N2. 718 billion and NBET, N3.595 billion.

Oni was worried that as at last December, the revenue shortfall in the Nigerian power sector was N1 trillion, while the sector’s indebtedness to commercial banks was $12.52 billion.

‘‘In addition to the indebtedness of the sector, it is also important to note the inability of the Nigerian Bulk Electricity Trading Plc (NBET) to pay the power generation companies, which also led to the generation companies being unable to pay for the gas bought to generate power.

Other fundamental issues such as the rate of tariff set by the industry regulator (NERC), gas supply to power plants and the generating capacity of existing plants, quality of the transmission network occasioning losses, electricity theft, and vandalism should have been carefully considered by the Federal Government when passing the budget,’’ he said.

On the other hand, he explained that the capital expenditure provision for TCN under the Multi-Year Tariff Order (MYTO) – 2015 Financial Model (which indicates amounts that needed to be spent) was N418.504 billion but only N40.2 billion has been earmarked for transmission projects under the 2017 budget.

‘‘It is understandable that as the Federal Government has other pressing needs contending for resources , it would need to attract private investors into that segment of the market. However, one doubts the willingness of commercially minded investors to provide investments into the Nigerian power sector, especially when they have to contemplate regulatory restrictions on securing certain licences as well as having to charge cost-reflective tariffs.

He argued that from the above figures and also taking into consideration the recent intervention funds paid by the Federal Government, stakeholders are of the view that a larger figure should have been apportioned to power project, given the determination by the Federal Government to ensure that there is  regular power supply.

Source: http://sunnewsonline.com/banks-deny-egbin-power-new-credit-line-over-n125bn-debt/


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