Nigeria’s Bureau of Public Enterprises (BPE) has set out plans to resell 60% stakes in a number of power distribution companies, known as discos.
Fidelity Bank told BPE and the Nigerian Electricity Regulatory Commission (NERC) on July 5 that three companies it had provided loans to were insolvent. The three are Kaduna Electric, Kano Electricity Distribution Co. and Benin Electricity Distribution Co.
Songhai Advisory noted that this brings the number of insolvencies to five, with a sixth – Port Harcourt Electricity Distribution Co. – on the brink.
BPE has a 40% stake in the companies. It is seeking buyers for the remaining 60%. The government agency said it was working with the Central Bank of Nigeria (CBN) to ensure Fidelity did not continue to hold the distribution companies’ shares.
BPE said other lenders involved in supporting these companies were Afreximbank, Keystone Bank and Stanbic IBTC.
The plan is to sell off the stakes to “competent private sector investors”. These investors will provide technical and financial capacity to re-capitalise and manage the companies.
A statement signed by BPE director general Alex Okoh highlighted the importance of technical capacity. The manager of the Ibadan disco, which is also in receivership, “has no capacity to manage a utility”, Okoh said.
“Ibadan is the worst performing disco as per the Performance Assessment review conducted in December 2021,” the executive said. The company has “performed worse than before it was privatised”, he said.
Okoh also described the management of Benin, Port Harcourt, Kano and Kaduna as “abysmal”. The government cannot stand idly by and allow this to continue, he said.
BPE is in the process of restructuring the Port Harcourt disco’s management and board. The aim, it said, is to try and avoid insolvency. The government will provide emergency funds, BPE said, to support the process.
Around two thirds of Nigerian power consumers are not metered, bills go unpaid and theft is rife, said Songhai. The original wave of disco privatisation saw “entities backed by oligarchs” acquire projects.
Songhai went on to warn investors of a higher level of political risk. Should a sale go ahead before the February 2023 presidential election there is the risk of a new government reversing the deal.
The BPE is also in the process of privatising five power plants. Okoh, speaking last week at an investor conference, named 16 pre-qualified bidders for the Geregu, Omotosho, Olorunsogo, Calabar and Benin-Ihovbor facilities.
Potential buyers are Mota-Engil Nig, Amperion Power, Sifax Energy, Pacific Energy, Globeleq Africa, Geoplex Drillteq, Asfalizo Acquisition, Launderhill PJB, Lauderhill Tata, Unicorn Power Genco, Connaught Energy Services, ENL Consortium, Ardova, Central Electric and Utilities, North South Power Consortium and Quantum Megawatt Consortium.