UBA takeover of Abuja Electricity DisCo dampens hope of Nigerians on power sector

The takeover on Tuesday  of Abuja Electricity Distribution Company (AEDC) by  the United Bank for African (UBA )Plc has dampened hopes for improved distribution of electricity  in  the country.  AEDC has been enmeshed in crisis over a loan default by the majority shareholder/core investor, Kann Utility Company Limited, with the crisis taking a new dimension as its  lender,UBA appointed a receiver/manager for the troubled DisCo.

The utility company which emerged in 2013 , serves customers in its franchise areas covering Kogi, Nasarawa, Niger and the Federal Capital Territory (FCT). Giving insights into the crises rocking the DisCo, Chairman of Nigerian Electricity Regulatory Commission (NERC), Sanusi Garba, and the Director General of Bureau of Public Enterprises(BPE), Alex Okoh, were reportedly  said to have in a joint statement, explained that there has been an on-going dispute among competing factions of Kann, which eventually spilled over to a dispute with the lender (UBA) that provided the acquisition loan to Kann for the acquisition of majority shares during the privatisation exercise in 2013, over Kann’s inability to service its debt to the bank.

The question that arises from the crisis is this: is AEDC not making money?  For eight years it has operated  has it not been able to generate to enough  money to liquidate the loans it took from UBA? This is one of the serious issues that  should be looked into  by BPE and other stakeholders.  It is also not impossible that other DisCos  are having similar problem. This may help in ascertaining the reason the country has continued to experience power outage after the  reforms in the power sector.  

Privatised in 2013, the power sector (DisCos), aside from failing to perform, has been in serious financial mess, requiring perpetual intervention fund from the government. Aside from poor financial management, worsening epileptic power has been the order of the day, puncturing  the hopes reposed on the DisCos by Nigerians. When the DisCos emerged as  the sole distributors of electricity in the country following the unbundling of Power Holding Company of Nigeria (PHCN) in 2013, the excitement their emergence generated knew no bounds.  It was seen as the best thing to have happened in the nation’s electricity power distribution industry. No more epileptic power supply.  But this has yet to be as DisCos have yet to commit themselves  to the objective of ensuring uninterrupted power supply.

 The Federal Government unbundled the PHCN and handed over 18 utility firms to private investors. The government raked in $2.5 billion (about N916.575billion) from the transaction involving six Generation Companies (GenCos) and 12 Distribution Companies (DisCos). The private investors collected their share certificates from the then President Goodluck Jonathan on September 30, 2013 and took over the management of the assets from November 1 of that year.

According to the performance agreements, the privatised GenCos and their new owners were to have added 5,000 megawatts (MW) of electricity to the national grid after five years, which was 2018. Eight years on,  this has yet to be as the sector gravitates from one problem to other.

 During the week , the United Bank for Africa Plc announced the  takeover of  the majority stake in AEDC and has received the endorsement of the Federal Government, the Minister of Power, Abubakar Aliyu, announced on Wednesday.

Aliyu said the Deposit Money Bank had to take over the power firm due to the inability of the AEDC’s major investor (Kann Consortium) to effectively service the loans obtained from UBA when it acquired the Disco in 2013.

UBA had acted as the mandated lead arranger, underwriting $122million (about N20billionn then) for Kann Consortium’s acquisition of the AEDC.

Providing explanations on Wednesday on what led to the recent changes in the ownership structure and management at the AEDC, the power minister in a statement he signed said the takeover of the Disco by the bank had to happen.

He said, “The AEDC has, of recent, been facing significant operational challenges arising from a dispute between the core investors (KANN Consortium) as owners of 60 per cent equity in the AEDC and UBA as lenders for the acquisition for the majority shareholding in the public utility.

“The situation has currently deteriorated due to lack of access to intervention finances leading to a point whereby legitimate entitlements of the staff are being owed thus leading to service disruptions on December 6, 2021 within its franchise area.

“The Federal Ministry of Power has since taken the initiative to engage organised labour and electricity service has since been restored in the Federal Capital Territory and the states served by the AEDC.”

Aliyu added, “The UBA, as a lender, and in exercising its rights over the shares of KANN Consortium in the AEDC, has taken over the shares of the obligor in the AEDC. This takeover of the majority stake in the AEDC by UBA has consequently led to the reported changes in the management of the AEDC.”

He said the changes in shareholding in the AEDC and the appointment of an interim management for the Disco by the shareholders had been endorsed by the NERC and BPE (as co-shareholders in the AEDC). Also the NERC and BPE in a joint statement said “During the course of the intractable crisis, the AEDC not only struggled to meet its obligations to the market under the terms and conditions of its licence but was also unable to meet its obligations to key stakeholders in the organisation including staff, culminating in the industrial action by members of the Nigerian Union of Electricity Employees,” they stated.

The agencies added, “Eventually, this resulted in a total service disruption on December 6, 2021 for over 14 hours in the AEDC’s network area.”

The statement stated that Kann’s inability to service its acquisition loan and the ensuing dispute over the servicing of the loan from UBA made the lender to exercise its rights by appointing a receiver/manager over Kann.

It stated that stakeholders including the NERC, Central Bank of Nigeria (CBN)  and the BPE had on several times worked to broker an amicable resolution between the contending parties. The agencies said it became apparent that decisive steps were required to address the matter and the BPE agreed with the lender’s request to exercise its powers as receiver/manager over Kann.

This was by exercising its powers over the 60 per cent equity in the AEDC as a means to recovering the acquisition loan granted by the bank.

“The action to appoint an interim team to manage the AEDC was not done on the basis of a directive from the Federal Government as being falsely reported in the press but on the basis of legal processes arising from the failure of the core investor in the AEDC to meet its obligations to a lender,” the statement added.

It stated that the receiver/manager had agreed to the appointment of an interim management team in conjunction with the BPE as part of measures designed to address business failure events and ensure continuity of service to end-use customers in the service area.

“The Federal Government remains committed to the on-going initiatives on the recovery of the electricity sector but private investors should remain cognisant of their fiduciary responsibilities to their stakeholders especially in regulated utilities and should not act in a manner that jeopardises public interest,” it stated.

Last year, CBN directed Deposit Money Banks to take charge of the collection of electricity bill payments. A circular signed by Hassan Bello, director of banking supervision had linked the move to the recommendation of the Power Sector Coordination Working Group to improve payment discipline in the Nigerian Electricity Supply Industry (NESI).

Recall that the DisCos are responsible for the sector’s revenue collection. While there was clamour for an increase in tariff, the sector’s inability to improve on the collection and reduce losses, a basic part of DisCos Key Performance Indicators, as well as inability to make remittance to the Bulk Electricity Trading Company, almost grounded it.

The NERC had noted that revenue to Nigeria’s power sector has improved since late 2020, adding that consumers now pay over 78 per cent of their electricity bills to electricity distribution companies.

Power sector advocate and President, Nigeria Consumer Protection Network (NCPN), Kunle Olubiyo, noted various efforts by the CBN’s to introduced transparency in the market and ensured discipline in the power sector’s finances, thereby increasing the level of revenue into the market. He is worried that the efforts are not yielding the desired results.

“The decline in service is worrisome for end users. With more money coming into the sector, there should no longer be an excuse for the sector. No reason for metering for lack of metering,” Olubiyo said, adding that  customers still pay for metres and are, indeed, short-changed in other ways, as load shedding has not stopped.

“If more money is coming in, service should no long decline. We should no longer have wasted energy. Lack of improvement in service delivery will create a mismatch for the improvement coming, in terms of revenue increase,” he said.

TCN had previously been at loggerhead with DisCos over revenue payment, leading to the suspension of some of the utility companies. With this development , resolution of the country’s epileptic power situation appears to be far-fetched at the moment.

Members of the Organised Private Sector(OPS) who spoke to Vanguard, called for a review of the fixed charge, especially as the power situation had deteriorated in recent months, worse than the experience under the defunct Power Holding Company of Nigeria, PHCN.