Tony Elumelu, chairman of Transcorp Group and United Bank for
Africa (UBA), says Nigeria’s power sector is a walking corpse, and it may
collapse soon if no urgent action is taken.
“The agency of government that
has responsibiity for making sure that this sector delivers on its potential is
not doing well enough. We are owed a lot of money,” Elumelu told CNBC Africa.
“Transcorp Power Holdings is owed almost N50
billion. When we put
in the invoice for this month, we should be owed almost N54 or N55 billion. How
do you survive in business like this? How? Other GenCos I know are actually
dying.
“We are struggling because of our diversified resource base, what
of others? Something urgent and drastic must be done. It is as urgent as
yesterday.
“The truth is Transcorp power, as a key operator in the sector, is
struggling. And if we are struggling, you can imagine what others are going
through.”
Elumelu went on to ask the government to allow it generate its own
gas, adding that “where we are located, we are sitting on a lot of gas”.
He said the government started owing Transcorp when a dollar was
N168, but may now pay back (in naira) when the dollar goes for 300 to N500, a massive
depletion of value to shareholders.
“Now you put in an invoice and you get paid 15-20%. And they
started owing us when the naira was N168 to the dollar. Today, it’s N300
officially and N500 on the black market to the dollar so imagine the depletion,
the erosion of value to shareholders of Transcorp.
“Is that going to encourage more investment in the sector? How? We
are all living on borrowed time.”
He said Transcorp was negotiating with GE to bring in turbines
worth $500 million, but had to shelve the plan because the company could
not secure the necessary foreign exchange for the deal.
REVIEW OF TARIFF IS DUE
“When we went to the invest in the power sector, price of the
tariff was predicated on three factors, exchange rate, gas, and rate of
inflation. The rate of inflation has moved from single digits to double
digits,” Elumelu added.
“The dollar is now worth over N300, and there are problems with
gas supply. Today, all three factors have changed but they are still paying us
the same.
“On top of that, you’re owing us, and we all understand the time
value of money. Transcorp power, you owe us about N50 billion. If you pay
that money today, it would have more value.
“You’ve been owing us for years, and when we issue invoice, you
would pay us about 20 percent of our invoice, so how do you survive in that
market. So, indeed, the power sector is a walking corpse. It is a matter of
time.”
Elumelu called on the government to prioritise the sector to save
it from imminent collapse.
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