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TCN moves to recapitalise Discos; Will debt-equity swap be a lifeline for Discos?

Epileptic power supply may persist till 2023 – DisCos

Indications emerged on Sunday that the Transmission Company of Nigeria (TCN) will press for the recapitalisation of power distribution companies (Discos) in the country this year. The campaign, according to the TCN, is intended to achieve a robust and sustainable power sector with a productive distribution segment playing a key role in the entire power value chain.

Usman Mohammed, the Managing Director of the TCN, who spoke at the Power Wheel interview of the company in Abuja on Sunday lamented that the Discos currently lack an effective distribution architecture, capable of delivering quality power services to Nigerians.

According to him, “we are working to see that all the projects that we have under the Transmission Rehabilitation and Expansion Programme will pick up and they will continue to be implemented in a sustainable manner.

“We are going to actually push for the recapitalisation of Discos in 2020. We believe that by doing that we are pushing the power sector to sustainable growth and development. The power sector has to attract investments.”

Mohammed affirmed that the sustainability and success of the power sector lied in its potential to attract investment. This, according to him, is achievable under a structure where each party is passionate about making the system work and the regulator works out a cost-reflective tariff that is in line with the demands of ECOWAS.

The TCN chief said the transmission sector of the power value chain would work at a fast rate without allowing it to be deterred by the slow pace of development in the distribution segment. He asserted that the TCN would pursue the expansion and transformation of the grid at the same time champion the recapitalisation of power distribution firms.

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He remarked that “if you look at the current situation that we are now, of course, transmission will continue to expand. We will not wait for the Discos. It takes a long time to build a transmission infrastructure than Discos’, which is easier. Therefore, we are looking at transmission as the enabler.

“Out of the 738 interfaces that we have with the Discos, only 421 have protection on their side, the remaining 317 do not have protection on the side of the Discos. This means faults in the houses of people can easily hit the TCN transformers and burn them.”

“So we need to recapitalise the Discos for them to have commensurate investments to fix their networks and provide meters so that they can reduce the Average Technical and Commercial losses in their system for electricity to work.”

Even though Mohammed did not give the specific details of how the recapitalisation move would be accomplished, there is the possibility that Discos will consider a debt to equity swap if the plan materialises.

This arrangement refers to a process whereby the debt burden of a company is structured in a way that the credit it has taken from a lender is converted to ownership. This way, the lender owns a stake in the firm, thereby reducing its debt-servicing obligation while placing the company on a sound financial footing.

Interestingly, a major impediment to the meaningful delivery of quality service by Discos to the populace is the fact that they are heavily indebted to many of the generating companies (Gencos) that supply gas used in the production of electricity for homes and businesses.

Similarly, recapitalisation will position the Discos to access more fund to finance massive purchase and distribution of prepaid meters to customers.

It is common knowledge that metering has been a nagging challenge for power distribution firms despite the persistent clamour for it by consumers and stakeholders as a means of tackling the problems posed by the outrageous estimated billing system. Securing fund to deliver meters to consumers will prove to be a mutually beneficial arrangement to both parties. It will not only give consumers the satisfaction of paying for what they consume but also enable Discos to work out cost-reflective tariff that the MD of the TCN is advocating.

Ronald Adamolekun

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About the author

Ronald Adamolekun

Ronald Adamolekun is a creative writer with a mixed bag of experience in fields as diverse as data journalism, financial reporting and editing.

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