The Nigerian Electricity Regulatory Commission (NERC) has announced the dissolution of the board of Kaduna Electricity Distribution Company plc (KAEDC) over its failure to offset a debt of N110 billion owed the Nigerian Bulk Electricity Trading Plc (NBET) and the Market Operator (MO).
The final sack of the KAEDC board is coming about nine months after the electricity sector regulator notified the company of its intention to “cancel its licence” after 60 days, at the time, over its growing liabilities.
NERC stated that after a performance review, the Disco only achieved a combined average of 13.85 per cent of its minimum payment obligation to NBET and the MO and recorded an average monthly market shortfall of N4.33 billion.
“As at October 1, 2023, KAEDC owed NBET and MO over N110 billion and stands in the risk of direct receivership if the utility’s continued participation in the electricity market as presently constituted at management, board and shareholder level is allowed to continue without urgent regulatory intervention,” it stated.
With the order which took effect from January 1, 2024, NERC disclosed that Dr. Umar Hashidu has now been appointed as the administrator of the company further to section 75 of the Electricity Act (EA).
The new administrator, it said, shall be the de facto chief executive officer of KAEDC and shall be responsible for the management of the day-to-day affairs of the utility pending the finalisation of the sale of the undertaking to a new core investor.
According to the NERC order signed by its Chairman, Sanusi Garba, the newly appointed administrator shall work with a team of special directors that shall constitute non-executive directors of the board for governance purposes.
It listed the Director General of the Bureau of Public Enterprises (BPE), Alex Okoh as Chairman, while Kabir Adamu, Sharfuddeen Mahmoud, John Ayodele and Rahila Thomas are to serve as members.
“The executive management team that shall work with the administrator shall be constituted by the commission and announced in due course. The commission shall administer the sale of the undertaking in accordance with the provisions of the EA on the basis of the highest and best price offered for the undertaking,” NERC added.
The power sector regulator also chronicled how the company failed several times to up its game despite several pledges to that effect.
In January 2023, the commission said it conducted a detailed review of the performance of the Disco for the period January to December 2022, confirming that KAEDC only achieved an abysmally low payment obligation.
The commission further noted that the evaluated level of underperformance indicated that the company had been unable to recover the additional liquidity required by KAEDC to optimally function as a utility as provided in its approved revenue requirement.
“Based on the commission’s approved revenue requirement for KAEDC, the utility under-recovered its revenues to the tune of N88.75 billion, being the sum of its market shortfall, capital investment allowance of N25.33 billion and allowed operating expense of N11 .6 billion.
“The analysis indicates that KAEDC is currently experiencing challenges and its commercial viability and continuation is in doubt. KAEDC’s management has not been able to develop a clear pathway toward recapitalisation, improvement of operational efficiency, sustainability of the utility; and they were unable to present a credible plan that would yield the desired results,” it added.
KAEDCO’s core investors include: Africa Export Import Bank, Fidelity Bank Plc and BPE.
NERC stated that the commission resolved to extend the earlier licence cancellation notice issued on May 15, 2023 for a final period of 30-days with effect from July 20, 2023, noting that further to the issuance of the final extension that there had been neither any change in KAEDC’s financial standing nor improvements in its payment obligation to the market.
It stated that the management, board and shareholders of KAEDC had been granted ample opportunities to address the utility’s failing performance at meetings with the commission and they had been unable to cure the utility’s failure.
“All directors of KAEDC are hereby removed from office and the board of directors stands dissolved in the exercise of powers vested in the commission by section 75 of the EA,” NERC ordered.
In the meantime, Hashidu has taken over the reins as the new head of Kaduna Electric, succeeding Yusuf Yahaya who exited last week.
A statement issued by the Head of Corporate Communication, Abdulazeez Abdullahi, on Monday, said a brief handover ceremony presided over by the NERC Commissioner for Legal Licensing and Compliance, Mr. Dafe Akpeneye, was conducted at the company’s corporate headquarters in Kaduna.
Meanwhile, the Transmission Company of Nigeria (TCN) through its market operator has formally served a suspension notice on the Ajoakuta Steel Company Limited (ASCL) due to what it described as non-compliance with provisions of the market rules.
“As of the November 2023 billing cycle, ASCL had accumulated a total outstanding debt of N33,071,002,129.49, comprising N30,849,749,981.01 for energy and capacity delivered by NBET and N2,221,252,148.48 owed to service providers,” a public notice signed by the MO, Dr Edmund Eje, stated.
It also served a formal suspension notice on APL Electric Limited-Aba which it said had accumulated a total outstanding debt of N10,951,460,668.62.
Despite a ministerial intervention by the minister of power, who temporarily halted enforcement actions, TCN stated that defaults remained unresolved.
Emmanuel Addeh in Abuja
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