The improvement in electricity supply in recent times may be short-lived. This has nothing to do with low generation output when the rains stop or the vandalised gas pipelines, which have not been fixed. Rather it is the huge debt burden weighing down the generation companies.
The Guardian learnt that First Bank of Nigeria Holdings Plc; Zenith Bank Plc; United Bank for Africa Plc (UBA); Guaranty Trust Bank Plc (GTBank); Access Bank Plc; Diamond Bank Plc; Fidelity Bank Plc; and Skye Bank Plc collectively gave out loans worth N402 billion to electricity plants.
According to the first quarter Statistical Bulletin of the Central Bank of Nigeria (CBN), credit to electricity and energy have been rising exponentially, of which independent power plants and power generation companies (Gencos) owed N340 billion in December 2015, N357 billion in February 2016, and N357 billion in March 2016.
Also owing are transmission and distribution companies (Discos) (N162 billion in December 2015, N162 billion in February and N162 billion in March 2016 respectively). As a result, the exposure of the banking sector to energy firms as at year-end, increased to N358 billion. Oil Producers’ Trade Section (OPTS), under the Lagos Chamber of Commerce and Industry (LCCI), said that the power sector invoice arrears, which were N40 billion in 2015, have now reached N100 billion.
It was learnt that the electricity firms were already facing difficulties in servicing the over N402 billion loans, which they collectively took to purchase the plants when they were privatised in 2013. This is because when the power generating companies took loans from local and international banks to acquire the electricity plants, the foreign exchange (forex) rate was about N157 to $1. They are now finding it difficult to pay back as the rate has risen to over N320 to $1.
For example, the Africa Finance Corporation (AFC) provided a $170 million debt financing facility, in conjunction with GTBank, to the Mainstream Energy Solutions Limited (MESL) consortium for the acquisition of the Kainji Power Plc.