. Says action is to protect FG’s 40% equity
The Bureau of Public Enterprises (BPE) has justified the restructuring and take-over of some electricity distribution companies (DISCOs) by banks, saying the move is to protect the Federal Government’s 40% stake in the companies.
Indeed, it insists that the poor performance of these DISCOs represents a clear and present threat to the power sector.
The Bureau said the clarification became imperative following insinuations and statements emanating from some of the DISCOs, which were restructured following their collaterised shares.
In a statement this morning signed by the Director-General, BPE, Alex Okoh, reiterates that the action is a contractual and commercial intervention between the core investors in these DISCOs and the lenders.
The statement reads: “…BPE which midwifed the sale of the power companies and the Nigerian Electricity Regulatory Commission (NERC), which is the regulator in the sector, were informed by Fidelity Bank Plc on Tuesday, 5th July, 2022, that a call on the collateralized shares of the Core Investors of Kano, Benin and Kaduna DISCOs had been activated by the lenders.
“The Lenders’ consortium includes AFREXIM Bank, Keystone Bank, Stanbic IBTC, as well as Fidelity Bank.
“It is important to note that the action is a contractual and commercial intervention and is between the Core Investors in these DISCOs and the lenders.
“BPE’s involvement is to protect the 40% shareholding of the Federal Government in the DISCOs,” adding that “It was on this basis that new boards reflecting this action were constituted,” as announced on Tuesday.
It is necessary to state categorically that the poor performance of these DISCOs represents a clear and present threat to the power sector as a whole, and no responsible government and shareholder would stand idly by and allow this situation to persist.
Orderly transition
Okoh also informed that as the agency representing the interest of the Federal Government in the DISCOs, BPE has already engaged with the Central Bank of Nigeria (the banking sector regulator) for an orderly transition.
This, he said, is “to ensure that the lenders do not hold the collateralized shares of the Core Investors in perpetuity given that they do not have the technical capacity, nor have they been duly authorised to operate an electricity distribution company.
“The lenders have also assured BPE and NERC that they would participate fully in all the ongoing market initiatives aimed at improving the sector (e.g. National Mass Metering Program).”
He said further: “It is envisaged that the majority interest in these DISCOs would be sold to competent private sector investors with the requisite technical and financial capacity to recapitalize and manage these entities efficiently.
“As an interim measure, NERC and BPE met on an Emergency Basis and activated the Business Continuity Process and appointed interim Managing Directors in the affected DISCOs,” also announced on Tuesday.
Against this backdrop, the Bureau frowned at some of the publications from the Core Investors of these DISCOs, describing them as “quite disingenuous,” especially as “Beyond the financial issues I have just discussed, the DISCOs affected happen to be the worst performing ones.”
It continued: “Ibadan is currently being managed by a so-called Receiver Manager as a sole administration. The Receiver Manager has absolutely no capacity to manage a utility and has not been authorised by the Regulator as a manager of a DISCO.
“Ibadan is the worst performing DISCO as per the Performance Assessment review conducted in December 2021. Ibadan DISCO has actually retrogressed in terms of their critical performance parameters as contracted in the Performance Agreement signed with the Bureau.
“In fact, the DISCO under the management of the Core Investor, Integrated Energy Distribution and Marketing Limited (IEDM), has performed worse than before it was privatized.
“The performance of Benin, Port Harcourt, Kano and Kaduna DISCOs have also been abysmal.
“It is necessary to state categorically that the poor performance of these DISCOs represents a clear and present threat to the power sector as a whole, and no responsible government and shareholder would stand idly by and allow this situation to persist.”
The Bureau however reassured Nigerians that notwithstanding the challenges in the sector, Government remains fully committed to ensuring optimal performance in the power sector and will not shy away from taking the necessary decisive action to achieve this.
