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Issues In The News

CBN Signs N213bn Agreement with Power Sector Players

  • Settles N36.9bn legacy debts

The Central Bank of Nigeria (CBN) and key players in the power sector, including gas suppliers, electricity distribution and generation companies, among others, on Tuesday signed a N213 billion definitive agreement to begin the implementation of the CBN-Nigeria Electricity Market Stabilisation Facility (NEMSF).

This is expected to be followed by disbursement of funds and monitoring of the implementation of the agreements.

Speaking at the ceremony in Abuja, the CBN Governor, Mr. Godwin Emefiele, said the intervention would reset the economics of the power sector and address liquidity challenges occasioned by legacy debts and revenue shortfall in the sector.

He said all parties have had to make compromises in order to make progress in the interest of the country.

Emefiele however stated that in order to resolve the sectors liquidity challenge, the CBN was providing the facility aimed at settling legacy debts and shortfalls in revenue during the interim period and to also guarantee the take-off of the Transitional Electricity Market (TEM).

He disclosed that FBN Capital had been appointed by the CBN as transaction advisor for the intervention, while Meristem securities and Detail Solicitors and Stream Sowers & Kohn (SSK) have been appointed as fund managers and legal team respectively.

He said the facilities would be administered through deposit money banks, while a special purpose vehicle that complies with Section 31 of CBN Act 2007 would serve as an intermediary between the banks and the electricity market players.

“NERC shall reset the Multi-Year Tariff Order (MYTO) to ensure that it provides for the loan repayment including the costs of setting up and operating the Nigerian Electricity Market Stabilisation Facility (NEMSF),” Emefiele said.

He added that other players in the value chain must commit to gas supply at higher volumes, while Gencos and Discos would commit to utilising the funds for equipment acquisition, refurbishment and upgrade.

The intervention fund is however expected to be repaid over a period of 10 years at a 10 per cent interest rate per annum; it will be used to settle the N36.9 billion legacy debt owed gas suppliers by the defunct Power Holding Company of Nigeria (PHCN) and cover shortfalls in the Nigerian electricity market. These shortfalls are majorly occasioned by technical losses recorded in the sector.

On her part, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said the sum of N36.9 billion in legacy debts to the power sector had all been settled through the CBN-led intervention scheme.
She said the outcome of the negotiations had ensure that “all claims are hereby settled,” adding that going forward, appropriate security measure had been put in place to ensure that gas supply to the power sector is paid for.

Alison-Madueke in her remarks at the meeting, disclosed that undisputed legacy debt owed gas suppliers over the years are now being settled through the CBN led intervention fund.

She added that the intervention would set a new page in the Nigerian domestic gas market.

“Let me add that today’s intervention is also complimented by a reciprocal commitment by the gas suppliers. A medium term gas supply from the various gas suppliers is being made today. Today’s commitment will bring to the grid an additional 2.5 billion cubic feet per day of gas over the period from now till 2017,” Alison-Madueke said.

The Minister of Power, Prof. Chinedu Nebo, said the agreement represented an unprecedented synergy among the players adding that the sector had now come of age.

The apex bank is collaborating with the Ministry of Petroleum Resource, Ministry of Power and the Nigerian Electricity Regulatory Commission (NERC) to intervene in the Nigerian Electricity Supply Industry (NESI) to help resolve its liquids challenges through a stabilisation fund aimed at settling certain outstanding debts as well as guarantee the take-off of the Transitional Electricity Market (TEM).

Among other things, the CBN stabilisation fund which is to be disbursed through the deposit money banks would be given at 10 per cent interest rate per annum with a tenor not more than 10 years.

On the other hand, under the agreement, gas suppliers are to commit to assured gas supply at higher volumes while both distribution and generation firms would ensure that funds are utilised for equipment and infrastructure acquisition, refurbishment or upgrade.

Parties which participated in the signing included Chevron, Shell Petroleum, Pan-Ocean and Seplat, as well as electricity generation and distribution companies among others.

THISDAYLIVE

About TransformationWatch

TransformationWatch is an online news site founded by Henry Omoregie It is focused on keeping tabs on the Transformation Agenda set out by the Nigerian leadership in the Local, State and Federal Governments. My mission is to observe, analyze and report milestones or slowdowns in promised service delivery in all the facets of governance in Nigeria (2011 and beyond). Readership is open to all Nigerians and friends of Nigeria alike, regardless of Tribe, Religion or Political divide. We are all in this together

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