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Chairman of Transcorp Group and United Bank for Africa, UBA, Mr Tony Elumelu, has said Nigeria’s power sector will soon collapse if urgent action was not taken.
Elumelu told CNBC Africa: “The agency of government that is responsible for making sure that this sector delivers on its potential is not doing well enough. We are owed a lot of money.
“Transcorp Power Holdings is owed almost N50 billion. When we put in the invoice for this month, we should be owed almost N54 billion 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 that Transcorp Power, as a key operator in the sector, is struggling. And if we are struggling, you can imagine what others are going through.”
He went on to ask the government to allow it generate its own gas, adding: “Where we are located, we are sitting on a lot of gas.”
According to Elumelu, 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 percent. 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 explained that 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.
“When we went to 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.
“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.
“In addition to that, you are 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,” he added.
