Liquidity: Electricity sector generates N272.47bn in six months

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***NERC blames MDAs, others for rising debts
***DISCOs collection efficiency Q3’20

FG spends over N50bn monthly on electricity — Minister

FG spends over N50bn monthly on electricity — Minister

By Obas Esiedesa

Electricity market revenue grew by 10.55 per cent to N272.47 billion in the second half (July-December) 2020, compared to N246.46 billion generated in the corresponding period of 2019, according to the latest industry data obtained by Energy Vanguard.


The growth followed an intervention from the Presidency through the Central Bank of Nigeria, which imposed restriction on revenue collection bank accounts of Electricity Distribution Companies, DisCos.

The intervention meant that the bank accounts were locked, with cash allowed to come in but withdrawals by DisCos blocked.

Over the years, the DisCos have been accused by other industry operators of spending the industry’s revenue on their own operations to the detriment of others.

Data obtained from the Presidential Working Group on Power over the weekend showed that revenue for July 2020 rose by 1.75 per cent to N40.68 billion when compared to July 2019 figure of N39.99 billion.

Revenue also rose in August, 2020 by 5.31 per cent to N41.24 billion compared to N39.16 billion recorded in August 2019.

With the Presidential intervention in September 2020, market revenue jumped by 14.20 per cent to N45.84 billion when compared to N40.14 billion recorded in September 2019.

In October, however, due to the ENDSARS protests which hampered the operations of the DisCos, revenue dropped by 4.53 per cent to N43.76 on month by month basis but grew by 7.52 per cent when compared to N40.70 billion in October 2019.

Market revenue for November 2020, rose by 11.63 per cent to N47.98 billion compared to N42.98 billion recorded in November 2019.

In December 2020, the revenue grew by 21.77 per cent to N52.96 billion compared to N43.49 billion.

Poor performance

While data on individual DisCo performance in the past six months were not available, latest figures from the Nigeria Electricity Regulatory Commission, NERC, for the second quarter of 2020 showed that market liquidity continues to be hampered by poor remittances from the DisCos.

According to NERC report, during the second quarter of 2020, a total invoice of N222.51 billion was issued to the 11 DisCos for energy received from the Nigerian Bulk Electricity Trading Plc, NBET, and for service charge by Market Operator, MO, out of which a sum of N62.41 billion was settled, representing a remittance performance of 28.05 per cent.

This represents a 4.67 percentage points decline from the final settlement rate recorded in the first quarter of 2020.
Breakdown

A breakdown for each DisCo performance in the second quarter of 2020, showed that Kaduna DisCo remitted just 1.54 per cent and 26.94 per cent of invoices from NBET and MO respectively, while Kano DisCo remitted just 4.9 per cent and 77.37 per cent of NBET and MO invoices respectively.

The report also showed that Jos DisCo remittances were 6.00 per cent and 82.81 per cent of invoices from NBET and MO respectively while Port Harcourt DisCo met 6.56 per cent and 83.11 per cent of invoices from NBET and MO respectively.

For Yola DisCo, remittances were 9.99 per cent and 9.63 per cent of invoices from NBET and MO respectively while Enugu DisCo remitted 13.17 per cent and 99.49 per cent of invoices from NBET and MO respectively.

According to the report, Benin DisCo remitted 17.91 per cent, and 99.53 per cent of invoices from NBET and MO respectively while Ibadan DisCo recorded 19.57 per cent and 92.79 per cent remittances to NBET and MO respectively.

For Abuja DisCo, remittances were 29.74 per cent and 106.23 per cent for invoices from NBET and MO respectively while Ikeja DisCo recorded 30.21 per cent and 102.04 per cent of invoices from NBET and MO respectively.

Also, Eko DisCo remitted 34.22 per cent and 86.35 per cent of invoices from NBET and MO respectively.

Abuja and Ikeja DisCos were the only two companies to meet the required threshold for MO in the second quarter of 2020, the report added.

Inefficiencies

While inefficiencies by the DisCos were blamed for the poor financial performance of the market, NERC pointed at tariff shortfall and huge debts by government Ministries, Departments and Agencies, MDAs, for the market struggle with liquidity challenges.

Specifically, the Commission stated: “As stated in the previous quarterly reports, one of the contributory factors to high ATC&C losses, and hence poor liquidity is non-settlement of energy bills by MDAs across the three tiers of government (i.e. federal, state, and LG).

“This issue must be urgently addressed as part of the ongoing Federal Government’s efforts towards ensuring financial sustainability of NESI. On its part, to address low market remittance and the viability of the DisCos as going concerns, the Commission continued to review DisCos’ compliance to meeting the MRT for necessary regulatory intervention”.

Operators react

Speaking to Energy Vanguard, Mr Frank Whyte, Media Assistant, Association of Power Generation Companies, APGC, explained that while there was a slight improvement in payments to power generation companies, GenCos, more could be done.

Mr Whyte stated that the GenCos were not worried by the financial status of the market because “they have given assurance of payment so we are not worried. The only thing is that we want the payment to come immediately.”

In another interview with Energy Vanguard, General Manager, Corporate Communications, Abuja Electricity Distribution Company, AEDC, Mr Oyebode Fadipe, said the government’s intervention through the CBN was an incentive for the DisCos to work harder to achieve 100 per cent of revenue collection.

He dismissed the notion that the restriction on DisCos’ bank accounts was a problem, saying it is for the good of the sector.

According to him, “Rather than say that there is a negative effect, I think it is an incentive for DisCos to also maximize their revenue profile because the DisCos have some certain amount of energy that has been given to them. That energy has informed a lot of calculations for them to have their own margin for recovery, margins for OPEX and CAPEX, and margins to meet several other obligations.

“The revenue has its own layers of responsibilities. The first layer of responsibility will be to make sure that the market is sustained and how is that to be done? It is to make sure that when the DisCos collect revenue, other members of the value chain are taken care of, the GenCos and Transmission Company. In that arrangement, their own improvement is also accounted for.”

He added: “What it therefore means is that if a DisCo gets energy worth N1 billion and the DisCo is able to collect that N1 billion, it means you have collected 100 per cent of your energy.

“Then you make your remittance to the market and from that remittance, you also get your own revenue. All the calculations would have been done.”

Poor services

However, an investigation by Energy Vanguard showed that the consumers continue to suffer as the DisCos lack adequate resources, especially funds to provide facilities, including meters and transformers, required to deliver adequate and stable power to them.

Vanguard News Nigeria

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