The Nigerian Electricity Regulatory Commission (NERC) has taken regulatory action against Kaduna Electricity Distribution Company (Kaduna Electric) following a protracted case of underperformance and inability to meet its market obligations to the tune of N125.5 billion.
NERC, in a regulatory order jointly signed by the commission’s chairman, Sanusi Garba, and vice chair, Musiliu Oseni, also appointed a new management for the company after removing all its directors and dissolving the board.
The amount includes N93.41 billion market remittance shortfall, N25 billion minimum capital expenditure requirements and N11.46 billion operations expenditure requirements for year 2023.
In a nine-page order dated January 1, 2024 and made available to newsmen yesterday, NERC appointed Dr. Umar Abubakar Hashidu as the administrator of KAEDC further to section 75 of the Electricity Act (2023).
The commission also announced director general of the Bureau of Public Enterprises (BPE), Alex A. Okoh as chairman, Kabir Adamu, Sharfuddeen Zubair Mahmoud, John Ayodele and Rahila Thomas as special directors for KAEDC.
According to NERC, Kaduna Electric is currently experiencing severe liquidity challenges which has put its commercial viability and continuation as a market participant in doubt.
The commission also noted that KAEDC’s management team has been unable to develop and present a clear pathway towards capital injection, operational efficiency, and sustainability despite the various regulatory initiatives of the commission and other financial interventions of the government.
“Over the period 12 months covering January – December 2022, KAEDC accrued a total liability N51.93 billion to the Nigerian Bulk Electricity Trader (NBET) and the Market Operator (MO). This is exclusive of the sum of N41.49 billion historical outstanding debts for 2015-2021 owed to NBET.”
NERC said it conducted a detailed review of the performance of Kaduna Electric in January 2023, for the period January to December 2022, confirming that the company only achieved a combined average of 13.85 per cent of its minimum payment obligation to NBET and MO, and recorded an average monthly market shortfall (underpayment) of N4.33 billion.
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 N25.33 billion and allowed operating expense N11.46 billion.
The regulator added: “KAEDC has consistently failed to meet its obligations to the market in contravention of the EA and the terms and conditions of its electricity distribution licence issued by the Commission.”
It added 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 turn things around.
NERC said the company would be sold to investors with the highest and best price.
According to NERC, the newly appointed administrator, Dr. Umar Abubakar Hashidu, 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.
Also, the administrator shall work with a team of special directors that shall constitute non-executive directors of the board for governance purposes, NERC said.
Meanwhile, Hashidu has taken over the reins as the CEO of Kaduna Electric. He took over from Engr. Yusuf Usman Yahaya who resigned last week.
A statement issued by the head of Corporate Communication, Abdulazeez Abdullahi, earlier yesterday, said a brief handover ceremony presided over by the NERC Commissioner for Legal Licensing and Compliance, Dafe Okpaneye, was conducted at the company’s corporate headquarters in Kaduna, yesterday.
Commenting on the regulatory intervention, Adetayo Adegbemle, said that it is obvious that Kaduna Electric needs this fresh injection of ideas, and that Hashidu’s coming should prove very timely.
Adegbemle, an energy expert and convener of PowerUp Nigeria, said Kaduna Electric is in debt up to the tune of N90 billion, and the underwriters of the investment, Afrexim Bank and Fidelity, are already asking for their money back.
