Kaduna electricity distribution company faces overhaul as debt woes escalate
In a sweeping move, the Nigerian Electricity Regulatory Commission (NERC) announced the dissolution of the Board of Directors of Kaduna Electricity Distribution Company (KAEDC) on Monday, citing the company’s inability to settle a staggering ₦110 billion debt owed to the Nigerian Electricity Supply Industry (NESI). The decision, outlined in a document jointly signed by NERC Chairman Sanusi Garba and Vice Chairman Musiliu Oseni, comes as KAEDC grapples with financial turmoil, raising concerns about its viability and impact on the electricity sector.
The dissolution is a culmination of KAEDC’s failure to repay the significant debt incurred, leading to a takeover by its funders after core investors struggled to repay borrowed funds used to acquire the company during privatization in 2013. The repercussions of this financial crisis extend beyond the company’s balance sheet, prompting the resignation of Managing Director Yusuf Yahaya on Saturday.
Debt woes and receivership
KAEDC’s financial struggles are underscored by its indebtedness to the Nigerian Bulk Electricity Trading (NBET) and Transmission Company of Nigeria (TCN’s) Market Operator (MO), amounting to ₦110 billion from 2015 to the present, as revealed in the NERC document. The inability to secure new ownership within a specified timeframe prompted the receivership, led by Afrexim Bank, to request an extension beyond the initial 30 days given in July 2023.
According to the document, Afrexim Bank sought four to six months to finalize the divestment process. However, the company faltered in providing the required bank guarantees to secure KAEDC’s market obligation. This failure triggered a domino effect, jeopardizing the jobs of KAEDC’s board of directors.
“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 Electricity Act (EA),” the document stated.
Appointment of administrator and special directors
In response to the dissolution, Mr. Umar Hashidu has been appointed as the administrator of KAEDC, taking on the role of the de facto Chief Executive Officer. He will assume responsibilities for the day-to-day affairs of the utility until the finalization of the sale of the undertaking to a new core investor.
The administrator will collaborate with a team of special directors, appointed for governance purposes. The newly appointed special directors for KAEDC include Alex Okoh as Chairman, along with Kabir Adamu, Sharfuddeen Mahmoud, John Ayodele, and Rahila Thomas.
“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,” the document affirmed.
Immediate measures and ongoing oversight
NERC’s intervention aims to stabilize KAEDC’s operations, address its financial challenges, and ensure a smooth transition to new ownership. The appointment of an administrator and special directors underscores the urgency of the situation, emphasizing the need for swift action to protect the interests of all stakeholders.
As the process unfolds, the commission will continue to closely monitor the proceedings, with the expectation that the sale of the undertaking will adhere to the highest standards of transparency and efficiency.
Industry impact and future outlook
The dissolution of KAEDC’s board sends ripples through the electricity distribution sector, raising questions about the financial health of other distribution companies and the broader implications for Nigeria’s power sector. The move reflects the regulatory authorities’ commitment to maintaining financial discipline and accountability within the industry.
As the dust settles on KAEDC’s debt crisis, the attention will shift to the potential impact on electricity consumers, the stability of the national grid, and the strategies the government and regulatory bodies will employ to prevent similar crises in the future.
Paradigm shift in Nigeria’s energy landscape
NERC’s decisive action to dissolve the KAEDC board marks a paradigm shift in Nigeria’s energy landscape, signaling a commitment to address financial irregularities and ensure the sustainability of the electricity sector. The move serves as a stern warning to other distribution companies to uphold financial responsibility and transparency in their operations.
The appointment of an administrator and special directors reflects a meticulous approach to navigate the complexities of the situation, emphasizing the importance of competent leadership to steer KAEDC through this challenging period.
As the industry recalibrates in the aftermath of this significant development, stakeholders, investors, and the public will closely observe the unfolding events, hoping for a robust and resilient electricity sector that can power Nigeria’s growth and development in the years to come.
