Power crisis: Azura calls for $500m bailout for DISCOs

By Chris Ochayi

A power generating company, Azura Power West Africa has called for urgent market capitalisation of the electricity Distribution Companies, DISCOs to the tune of $500 million if any meaningful achievements could be recorded in the electricity value chain.

The company expressed concerns that the DISCOs as they currently are, lacked the capacity to make the necessary investments to recover costs effectively.

Speaking on Thursday in Abuja, at the 4th edition of the Power Correspondents Association of Nigeria, PICAN, workshop, the Managing Director of Azura Power West Africa, Mr Edu Okeke, argued that to enable meaningful progress in the sector, DISCOs must be adequately capitalized.

Okeke, while speaking further at the annual workshop themed: “Nigerian Power Sector: Ending the Talk, Moving to Action.”, noted that many of the DISCOs are struggling to pay their total bills to the entire value chain.

Okeke, who insisted that DISCOs must be adequately capitalized, added that many of them carry a heavy burden of debt and therefore need urgent reprieve.

According to him, no DISCO should operate without at least $250m in shareholder funds and called on the Federal Government to be decisive in addressing the issue.

Okeke, however, called on the government to remove the debts from the DISCOs’ books and to increase the capitalization to $500m.

According to Okeke, “For any investment in the power sector to be viable, investors must be assured of Cost recovery. There are only two ways to achieve this: either the Government pays or consumers do. I commend the Government’s recent decision to transfer costs to, consumers, starting with Band A.

“Ultimately, consumers will bear a fair share of the cost of the power they consume. However, this equation has a critical weak link — the Distribution Companies (DISCOs), who directly interface with consumers. As things stand, even with tariff adjustments, many DISCOs struggle to pay their total bills to the entire value chain.

‘This is largely due to their lack of capacity to make the necessary investments to recover costs effectively. To enable meaningful progress, DISCOs must be adequately capitalized.

“Unfortunately, most DISCOs have negative equity, leaving them with little to no financial stake. This situation must change. Ideally, no DISCO should operate without at least USD 250m in shareholder funds.

“Just as the Central Bank of Nigeria has raised capital requirements for banks to ensure their stability and capacity to serve, the Nigerian Electricity Regulatory Commission (NERC) should mandate similar capitalization standards for DISCOs.

“Many DISCOs also carry a heavy burden of debt, accumulated over time through a mix of operational challenges and systemic issues. To truly address this problem, the Government needs to come clean and take a decisive step.

“My recommendation is a two-pronged approach: to consider removing these debts from the DISCOs’ books and mandating them to increase their capital by at least USD 500 million each.

“This will require existing shareholders to dilute their holdings to attract new investors with real capital to invest in infrastructure-not just on paper, but in transformers, cables, and equipment to serve customers reliably”.

The Chairman of PCAN, Comrade Obas Esiedesa, in his address earlier, said the workshop was organised to chart a new course for the country’s power sector.

He said: “As journalists covering the power sector, we are concerned that the sector has seen more discussions than actual progress. Despite the constant dialogue, each step forward often seems to bring about setbacks.

“Our concerns are heightened by the fact that these issues persist despite the Service-Based Tariff and the increased tariffs for Band A customers.

“As journalists, we find the state of the sector disheartening, and I believe I speak for many when I say that we cannot be silent.

“Today’s workshop is a call to action. We are here to discuss meaningful ways to move forward, and I am glad to see so many industry leaders in attendance.”.