Bailing out power firms

citing the need to assure a smooth and sustainable take off by the successor firms to the Power Holding Company of Nigeria (PHCN).  According to the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, the fund would loans on liberalised terms to the firms to offset constraints associated with the debts they inherited and the regimentation […]

citing the need to assure a smooth and sustainable take off by the successor firms to the Power Holding Company of Nigeria (PHCN).  According to the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, the fund would loans on liberalised terms to the firms to offset constraints associated with the debts they inherited and the regimentation of electricity tariff in the country.
The government argued that consumers pay subsidized bills for power, hence the need to guarantee the firms a buffer against possible revenue losses. Besides, the firms inherited bad debts especially with respect to gas supply arising from past operations of their predecessor agencies, the defunct National Electric Power Authority (NEPA), and the Power Holding Company of Nigeria (PHCN).
The government does not characterise the facility as a bailout for the firms on the grounds that they are still young and therefore would require ‘critical support’ to stabilize. Yet, this is all about a bailout facility.
Against the backdrop of dwindling power supply since the firms’ takeover of the sector and eventual take off, the prospects of such a facility at this time raise questions regarding its timing and justification. This is so even as the government has rightly identified improved power supply as a critical game changer for the Nigerian economy, which deserves support. Yet the need for discretion in deploying such public largesse to private sector beneficiaries of the fortunes of reforms in the sector is paramount.
 The advent of the power companies was supposed to be in compliance with the prescriptions of the Power Sector Road Map of the Goodluck Jonathan administration, which laid out the framework for the reforms in the sector. The road map essentially aims at reforming the nation’s power sector from its traditional vertically integrated structure, with preponderant government ownership and control, to a horizontal framework that provides scope for profitable and sustainable participation by the private sector. Its prescriptions took into account the status of the infrastructure and operational conditions of the sector among other factors, before unbundling the nation’s power monopoly for the firms to acquire.
The firms on the other hand acquired the various assets and liabilities of the PHCN through an open bidding process from which they were adjudged to have been the most competitive to take over and run the sector. The offer of a largesse as envisaged is therefore premature and suggests a process of spoon feeding them undeservedly, less than a year after their licensing and formal take off in November 2013.
Although the proposed fund is intended to be administered through deposit banks, which are expected to make disbursements to the firms as loans with relaxed conditions, including low interest rate and long payback period, the  need for caution draws from the history of the country with respect to policy inconsistency. This consideration can better be appreciated by the fact that the entire power sector reform process needs dedicated legislative grounding to guard against any future deviation from its prescriptions. This lacuna needs to be urgently addressed by the government.
Besides, the firms need to be encouraged to engage in the nation’s capital market, not only to deepen and expand their scope, but also attract other Nigerians beyond the core owners, to share in the benefits and challenges offered by the reform regime in the nation’s power sector.
 Not only does the extant law provide for that, it is perhaps the only way to make the DISCOs and GENCOs (generation and distribution companies) truly Nigerian owned.