- Banks Shun Energy Financing Over N3tr Exposure
Deposit Money Banks’ (DMBs) commitment of over- N3trillion in the energy sub-sector is discouraging the financial institutions from further financing of energy and power projects.
Energy Market and Rates Consultants Country Director, Mrs. Rahila Thomas, said this while enumerating the challenges confronting the power sector in Lagos, adding that, the huge exposure of banks to the power sector has made it difficult for operators to access funds.
She said revenues generated from the sector were substantially lower than expected as a result of factors such as inbuilt deficit in revenue due to tariff sculpting, low generation, low revenue collection due to unwillingness of power consumers to pay, high differential in exchange rate now compared to when the sector was privatised, and gas supply deficit, among others. These factors, Thomas said are responsible for the liquidity crisis confronting the power sector.
She noted that the sculpting of tariff under the multi-year tariff order (MYTO) methodology requires the distribution companies (DisCos) to operate in such a way to enable them recover their losses in future years, adding that with the overstretch space for recovery, customers don’t pay for consumption.
On low generation, she noted that the performance agreement the investors signed with government on takeover of the power firms, and with which they went to bank to seek loans, was that power generation would be increased to between 5,000megawatts (Mw) and 7,500Mw by last year, but average generation has remained at 3,000Mw.
She said at the time of takeover, exchange rate was N197 to a dollar but today it is over N350. Therefore, the cost of buying equipment and gas to power the plants have increased while price of power has not changed appropriately.
She said all the agreements the investors entered with the government on handover of the power firms, the government has not fulfilled any, adding that the companies have been operating at a loss for the past two and half years.
Thomas also said if the government had fulfilled its own part of the agreement, the generation plants have over 10,000Mw output capacity.
According to her, the privatised power stations (successor companies) have capacity to generate 5,155Mw, while the power plants built under the National Integrated Power Project (NIPP) can generate 3,926Mw, and on-grid independent power plants (IPPs) such as Ibom Power, AES, Agip’s Okpai power plant and Shell’s Afam V1 can generate 1248Mw. There is also 244Mw capacity from off-grid IPPs such as Rivers Trans Amadi and Aba Power, power plants that can generate 1,635Mw are in the works, she added.