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Power Sector Policy Regime Disincentive To Investors – ANED

The Association of Nigerian Electricity Distributors (ANED) has identified the disenabling operating environment as a major constraint in attracting new investments into the nation’s power sector.

The association lamented that with nearly five years after the nation’s power sector was privatised, and billions of their investment were committed to the sector, it had been difficult for the electricity distribution companies (DisCos) to recoup their investments in the acquired assets.

The Chief Executive Officer of the association, which is the umbrella body for the distribution companies, Mr. Azu Obiaya, said that most of the core investors would be happy to sell off the assets they acquired rather than continuing in business.

He pointed out that contrary to the perception that new investors were waiting to buy stakes in the power distribution assets, Obiaya explained that there were no core investors jostling for a stake in the capital-intensive sector.

He clarified: “You may recall that at an investors’ press briefing, the chairman of Aura Energy, the investors in Jos DisCo indicated that he was prepared to sell Jos DisCo at a discount, given the current environment.

“And I think that you can essentially project that sentiment for all of the DISCO investors; that indeed the environment that would have made their investment worthwhile is not there. So, to the extent that it is not there, most of the DISCO investors would happily sell the assets to any interested parties to get back their money.

“If you are an investor, you are certainly not going to put in additional money if indeed you are in the negative. No rational investor operates like that; the ability to get your investment back as well as the return is why you are an investor. So, it is irrational for people to keep asking why the Disco investors are not putting in more money, when they cannot even recover the $1.4bn that they already put into the acquisition.

“Just as the banks are not prepared to lend money to the Discos for their capital investment, it is also illogical for any future investor to look at buying equity in the Discos that have negative equity. You cannot buy a share that is negatively determined. In other words, why would you want to go and buy a share that is not worth the money that you are paying for it? It doesn’t make sense”, the ANED boss added

He pointed out that before investors buy into any business, especially the power sector, they will want to be able to make a cash flow projection and the profit potential of the assets that they will like invest in.

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