The federal government Tuesday took steps to fulfill its pledge of supports to new buyers of electricity generation companies (Genco)created from the unbundling of defunct state power utility company, the Power Holding Company of Nigeria (PHCN) with its decision to escrow about N50 billion in form of insurance for capacity growth in the generation assets.
This follows its earlier promise to provide such incentives to the new owners of the generation companies which had accordingly made payments for their assets on such basis through the Bureau of Public Enterprises (BPE) and Nigerian Bulk Electricity Trading Company (NBET) Plc, as the government thus signed an escrow agreement on power with three Nigerian banks in Abuja.
The N50 billion lifeline funds are to be drawn from proceeds from the sale of PHCN successor companies.
The three participating banks are United Bank for Africa (UBA), First Bank Plc and First City Monument Bank (FCMB) Plc which is the lead escrow agent that will take custody of the N50 billion lifeline funds which will be practically administered by the NBET.
The fund as learnt by THISDAY would serve as a buffer for improved power generation by the new investors, especially in the absence of the World Bank provided Partial Risk Guarantee (PRG) which seems to have so much procedure in accessing.
The Director-General of BPE, Benjamin Dikki, who spoke after the documents signing ceremony with participating parties however stated that such form of financial guarantee from the federal government should not be taken as just an endowment considering already established processes required for any generation company to benefit from it.
“This N50 billion is not a gift, because there are certain conditions that must be met before funds can be drawn from this escrow account. The market and systems operator have to confirm the quantum of power that was put in the national grid.
The market operator has to confirm that because of system defects and inefficiencies in the transmission network, certain amount of power was lost, so there has to be due process before any Genco can draw from this amount. It is not a gift because certain conditions have to be met.
“It is actually the generation companies that are left on the high end, and we need to guarantee that whatever power they generate will be paid for if not, they will lose their capital and not able to invest on expansion of their capacities,” Dikki said.