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Discos To Repay CBN N9.96bn Debt In Four Months

Iyke

Sept. 28, 2020

Electricity distribution companies in the country are expected to repay in four months N9.96bn of the debts owed to the Central Bank of Nigeria.
In September 2014, about a year after the privatisation of the power sector, the CBN introduced a N213bn intervention fund, called the Nigeria Electricity Market Stabilisation Facility.
The NEMSF, a loan facility with a 10-year repayment period, was meant to assist the generation companies and the Discos to settle legacy gas debts, execute agreed metering and maintenance programmes, and finance procurement of transformers and other equipment.
The Nigerian Electricity Regulatory Commission, in its Multi-Year Tariff Order 2020 for the Discos, gave the power firms minimum remittance thresholds with respect to the CBN loan.
Enugu Electricity Distribution Company is expected to repay N1.65bn from September to December; Benin Disco, N1.47bn; Abuja Disco, N1.45bn; Ibadan Disco, N1.25bn; and Kaduna Disco, N1.01bn.
Port Harcourt Disco is expected to repay N1bn; Jos Disco, N789m; Ikeja Disco, N526m; Kano Disco, N508m; and Eko Disco, N293m.
Yola Disco has the lowest payment obligation of N17m in the four-month period, according to NERC.
According to the commission, all the Discos are obligated to settle their market invoices in full as adjusted and netted off by applicable tariff shortfall approved by the commission.
It said the Discos would be liable to relevant penalties/sanctions for failure to meet the minimum remittance requirement in any payment cycle in accordance with the terms of its respective contracts with the Nigerian Bulk Electricity Trading and the Market Operator, an arm of the Transmission Company of Nigeria.
The Discos recently lamented the impact of the CBN loan on their financial transactions and remittance obligations.
According to the Association of Nigerian Electricity Distributors, the total amount of Discos’ portion of the CBN NEMSF is N49.9bn and a part of the cash was used as collateral for letter of credit guarantees to banks.
“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,” it said.
The Discos had early this month announced what they called ‘new service reflective tariff’, which took effect from September 1, with the tariffs being charged residential consumers receiving a minimum of 12 hours of power supply rising by over 70 per cent.
The amounts recoverable by the Discos through the allowed end-user tariffs range from 61 per cent to 90 per cent of the total revenue required, according to NERC.
The Federal Government would fund a tariff shortfall of N104.5bn that would be recorded by the Discos in the four-month period, the regulator said.
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