Benjamin Dikki, director general, Bureau of Public Enterprises (BPE), has faulted claims by some financial analysts that commercial bank’s involvement in the ongoing national public sector power privatisation could lead to another round of ‘banking meltdown’.
Dikki argued that the fears were misplaced as the Successor Companies did not borrow directly from the banks for their own books.
Furthermore, no assets of SCSs were pledged as collateral. It should be noted that it was the acquiring companies or SPV’s that borrowed based on their cash flows and accounts.
Nigeria CommunicationsWeek gathered that the SPA signed also requires that the consent of the BPE is obtained before the Core Investors can borrow.
Speaking at a stakeholders’ conference in Abuja last week, Dikki stated that “The banks lent to the Core Investors based on their capability to pay. The investors are supposed to have made adequate provisions to take care of their obligations to their financiers from the outset. They knew that they were not going to make profit immediately on takeover of the SCS. Their financiers also were aware of this.”
During the presentation entitled: “Reform of the power sector in Latin American countries in the 1990s,” Pedro Antmann, of the Africa Energy Team at the World Bank, reminded the investors that their primary focus should be to provide adequate and efficient power supply to Nigerian consumers.
He said that there were unusually challenges at the initial stages of the privatisation exercise but that with determination and the right strategy, it would be surmounted.
Antmann urged the investors not to aim at making profit now but to endeavour to develop infrastructure and to meet the cost of supply.
The World Bank official advised the Nigerian Electricity Regulatory Commission (NERC) to make a provision in its rules to adjust tariffs in times of low generation and shortage of gas supply.
Antman, drawing from experiences in other countries, said these challenges are normal at the early stages. Urging Investors not to focus on short term gains, but invest in infrastructure that will guarantee sustained future profits.
Financial experts have expressed worry on the possibility of Nigerian banks losing about N1 trillion they invested in the acquisition of the privatized assets of the Power Holding Company of Nigeria (PHCN) Successor Companies (SCs).
The banks expressed fears that they may be unable to recoup their investment following the myriad of problems facing the sector.
Dr. Alex Otti, group managing director/chief executive officer, Diamond Bank Plc had at a power investors’ forum in Abuja, said that as at 2013, the banking industry had invested well over N750 billion in the power sector and that they were ready to do more.
Consequently, the banks called for an increase in electricity tariff and in the price of gas, saying it would boost the revenue profile of the power companies and their ability to repay their debts.
Some of the chief executives of banks, who spoke at the just concluded Seventh Lagos Economic Summit, tagged Ehingbeti 2014, complained of the revenue profile of the recently privatized power companies, saying it is not meeting the expectation of investors.