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Tony Elumelu Lauds FG On Power Sector Reform

…urges payment of over N3tr debts owed Gencos to avert power

…roots for complete sector privatization

Mr Tony Elumelu, the Chairman Board of Directors of Transnational Corporation Plc Monday, pleaded with the federal government to settle over N3 trillion debt owed Power Generating Companies (GenCos) to avert power sector collapse.

Elumelu made the plea in Abuja while, presiding over the 2023 Annual General Meeting ( AGM), and statement of account presentation of Transnational Corporation Plc as board Chairman. He commended President Bola Ahmed Tinubu on power sector reform; and urged him to complete power sector privatisation.

The Federal Government owes (GenCos) over N3 trillion in legacy debt. President Bola Tinubu approved the gradual payment of the debt owed to power generation and gas companies, according to a recent report by the Minister of Power, Adebayo Adelabu.

Speaking to the challenges in the power sector, Elumelu advocated complete privatisation of the power sector.

“The power sector is designed to function in a cycle that ensures liquidity flow and payment assurance, which in turn sustains the reliable flow of electricity from power generation companies (“GENCOs”) to end users.

“The distortion in the liquidity flow in the sector is huge and typified by the debt owed to GENCOS by Nigerian Bulk Electricity Trading Plc (“NBET”), currently in excess of N2 trillion”.

“We are owed N250 billion as of March 2024. Technically, the GENCOs are subsidizing the sector by continuing to generate power despite the huge debts owed to them.

“This, obviously, has impacted negatively on the ability of the GENCOs to pay their gas suppliers, thereby impacting the quantity and reliability of gas supply to the GENCOs, as well as investment in generation”, he said.

Elumelu welcomed government commitment towards paying the debt owed to the GENCOs and urged speedy implementation of actions necessary to translate the pronouncements into achievements.

He tasked the federal government with the speedy completion of power sector privatization.

“Only a partial privatization of the power sector has been since the privatization exercise commenced in 2012. As of today, TCN is owned 100% and DISCOs are owned 40% by the federal government, which also holds ownership interests in some GENCOs.

“To enable the sector to be efficiently run by the private sector. I recommend that the federal government should come out with a clear timeline for the full privatisation of the power sector, starting with the DISCOs and Transmission Company of Nigeria”, he said.

He identified the unavailability of reliable natural gas supply as one of the biggest challenges of GENCOs and by extension the power sector.
“The impact of gas-related challenges on the sector is significant, given that approximately 80% of power generated into the national grid is from gas-fired generation plants.

I recommend the following as solutions that would help address the gas challenge: incentives should be developed for GENCOs who are willing to explore gas production for power generation; a special domestic gas delivery obligation to the Nigerian power sector should be mandated for gas producers and effectively enforced; indexing of gas to power pricing in USD should be reconsidered.

“Where full pricing in NGN is considered not feasible, partial indexation in USD should be implemented. This will reduce volatility in electricity tariffs, especially as the sector moves towards cost-reflective tariffs”, he noted.

He wants the federal government to take decisive action to curb the stealing of energy and save the sector from setbacks.

“Stealing of energy has to be a big setback and frustrating factor for DISCOs, and by extension, the power sector. Besides the loss of revenue resulting directly from stolen electricity, DISCOs also suffer significant losses and damages due to the vandalization of their infrastructure in the course of energy or infrastructure theft. While I note the provisions of the Electricity Act 2023 regarding criminal punishment for energy theft.

I recommend the establishment of special courts with powers for summary proceedings to exclusively deal with cases of energy theft. There should also be a process of naming and shaming convicted energy thieves irrespective of their status in society”.

In 2023, Transcorp Group Plc grew its market capitalisation by 604% from N50 billion at the beginning of 2023 to N577 billion at the end of March 2024.

From the beginning of 2023 to the date, the Group’s combined market capitalisation on the Nigeian Exchange grew from N114 billion to over N4.4 trillion as of the end of Q1, 2024.

Transcorp’s gross earnings for the year grew by 47% from N134 billion reported in 2022 to N197 billion, while profit before tax increased by 94% from N30 billion in 2022 to N59 billion in 2023.

Total assets increased by 20% to N530 billion, driven by growth in operating revenue and cash flow. Shareholders’ funds grew by 21% from N155 billion to N187 billion, driven by retained profit for the period.

Total liabilities increased by 19%, from N288 billion to N343 billion, during the year. This success was driven by significant investment, which resulted in robust growth in our power businesses.

In the hospitality business, it achieved an impressive increase in average occupancy rate growth from 78% in 2022 to 81% in 2023, with an Average Daily Rate (ADR) of N139,000.

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