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Electricity revenue to hit N1.5trn as private investors lead charge

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The entry of the private sector into Nigeria’s electricity supply industry, which had over the years been characterised by inefficiencies in terms of revenue collection, will bring about significant increase in revenue of over N1.5 trillion yearly, an analysis of data seen by BusinessDay shows.

The increased revenues expected to be generated in the transitional electricity market by the new investors would be driven by the massive metering of many Nigerian households and businesses that are still unmetered, improved output and efficient service delivery, analysts said.

Industry analysts and stakeholders have said that the envisaged electricity revenues have the potential to dwarf revenues and profitability of the earlier deregulated telecommunications industry, making the power sector a goldmine for investors.

Eyo Ekpo, commissioner for marketing, competition and rates, Nigerian Electricity Regulatory Commission (NERC), said the country’s electricity market at the moment is doing N500 billion per annum, which translates to about N40 billion to N45 billion monthly.

NERC had recently stated that the nation’s electricity market would grow from its current value of N620 billion to over N1 trillion in 2016.

“What the electricity distribution companies are doing is to reduce loss level from 50 percent to about 10 to 15 percent in the next five years. As more energy comes on stream, they will continue to reduce the losses. Now, none of the Discos is efficiently collecting money to pay the people generating power,” Ekpo said.

“The potential of the emerging power sector is limitless. Nobody can tell you what the potential earning power of the market will be. Now, we are supplying about 4,000 megawatts (MW) in a market that needs 20 times that. That’s clearly below global benchmark.”

Diran Fawibe, chief executive officer, International Energy Services Limited, said, “One expects that the private investors will be more efficient in revenue collection as they will apply good business practices to what they will do, unlike when the assets were owned by government. The new investors are expected to be able to realise appreciable returns on their investments.”

Nigeria is currently finalising the privatisation of its state-owned power assets, which comprise 11 distribution companies (Discos), six generating companies (Gencos), and a transmission company.

The acquisition of the companies, which was recently concluded with the payment of the 75 percent balance of the bid prices on August 21, had already gulped over $2.5 billion from the investors.

Fawibe stated that NERC would push the new investors hard to ensure that they deliver improvement in output, quality of service, among other things. “We will ensure that Nigeria sees growth every year in power supply,” he said.

Nigeria, Africa’s second largest economy, with a population of 170 million, is estimated to need about 40,000 MW of electricity over the next decade, but currently has less than 5,000 MW of available capacity.

Half the population lacks access to the grid, while per capita consumption is 3 percent of that of South Africa, the largest economy in Africa.

“Without increasing power, and just by doubling efficiency, revenue generated could reach N44 billion a month next year, and as we gradually get close to 10,000 MW in three years, I see the number hitting N100 billion a month,” said one analyst.

Goddy Duru, chief executive officer of PowTech Nigeria Limited, said with discipline the Discos could realise up to 70 percent of the revenue they are currently making by the time they have all their customers metered.

Stakeholders in the industry said that a company like Eko Disco, which is the highest revenue earner among the Discos, can still increase its revenue level by 70 percent from its current level.

According to Reuben Okeke, director general of NAPTIN and former managing director of Ikeja Distribution Zone, by the time the private investors take over the control of the distribution companies, there would be great improvement in all units of the distribution networks, including revenue collection.

“The company that purchased Eko and Ikeja Discos, for instance, would be out to supervise the companies to such an extent that all leakages in the companies that existed when the government was in charge would be blocked. This would ultimately lead to increase in their revenue profiles. This would also apply to the other Discos that are under the control of the private owners. By the time they are able to reduce their ATC/C losses from 30 percent to 16 percent, their revenue profile would grow four times what they are getting now,” he said.

Analysts believe that after 2015, there may be a surge in electricity consumption from a steadily growing economy. Then, Nigeria may be seeking the generation of up to 20,000 MW.

Ekpo, while speaking about the huge potential in the electricity supply industry at BusinessDay Capital Market Conference held recently, noted that the electricity market would see huge growth in the coming years.

“Losses are now being reduced significantly by some of the Discos. About six of them are already showing potential in terms of revenue. Eko Distribution Company has reduced losses by 75 percent, followed by Ikeja Disco, 65 percent, and Abuja Disco, 60 percent,” he said.

He indicated that the ongoing privatisation of the nation’s power sector would help to meet the electricity needs of over 60 million Nigerians who do not have access to electricity.

Article Credit: Business Day Newspaper

Updated 5 Years ago

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Tags:     Electricity     revenue     tarrif     N1.5 trillion     private investors     phcn