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Privatised Electricity Distribution Companies: A Bankable Prospect? A Presentation at the Bankers ’ Committee/BPE Technica...
Table of Contents <ul><li>Background </li></ul><ul><li>Value of MYTO </li></ul><ul><li>2010 – 2011 MYTO Major Review </li>...
Background Tariff Structure Framework Investor Return Benchmark Returns 1 2 3 4 5 <ul><li>EPSRA requires NERC to establish...
Value of  MYTO Key Investment Tool Cash Flow Forecast and Return <ul><li>MYTO is the NESI financial model  </li></ul><ul><...
2010 – 2011 MYTO Major Review <ul><li>The MYTO allows for minor and major reviews </li></ul><ul><li>The 2013 major review ...
Industry Cost and Revenue Requirement
MYTO – Incentive based Regulation <ul><li>MYTO uses budget caps to incentivise efficiency </li></ul><ul><li>Licensees are ...
Loses Projection in MYTO
Privatisation <ul><li>BPE ’s process of transferring assets to private sector management and funding is driven by clear st...
Conclusion Discos Regulation Tariffs Investment 1 2 3 4 Discos collect all the revenue generated within the industry  Succ...
Eyo O. Ekpo Market Competition and Rates, NERC Mobile: (+234) (0) 803 400 5858 E-mail: eekpo@nercng.org THANK YOU Website:...
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Privatised electricity distribution companies a bankable prospect by eyo ekpo

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Privatised electricity distribution companies a bankable prospect by eyo ekpo

  1. 1. Privatised Electricity Distribution Companies: A Bankable Prospect? A Presentation at the Bankers ’ Committee/BPE Technical Workshop on Nigerian Power Sector Reform Eyo O. Ekpo Commissioner, Market Competition & Rates, NERC Abuja, 25th May 2011
  2. 2. Table of Contents <ul><li>Background </li></ul><ul><li>Value of MYTO </li></ul><ul><li>2010 – 2011 MYTO Major Review </li></ul><ul><li>Return on Investment </li></ul><ul><li>MYTO – Incentive Based Regulation </li></ul><ul><li>Privatisation </li></ul><ul><li>Way forward </li></ul>
  3. 3. Background Tariff Structure Framework Investor Return Benchmark Returns 1 2 3 4 5 <ul><li>EPSRA requires NERC to establish cost-reflective tariffs </li></ul><ul><li>NERC has adopted a MYTO framework </li></ul><ul><li>MYTO balances investor return with consumer welfare </li></ul><ul><li>MYTO ’ s benchmarks for calculating revenue requirements focus on the EFFICIENT OPERATOR </li></ul><ul><li>Via MYTO, all licensees recover depreciation, achieve a fair ROI and recover efficient O & M costs </li></ul>
  4. 4. Value of MYTO Key Investment Tool Cash Flow Forecast and Return <ul><li>MYTO is the NESI financial model </li></ul><ul><li>Enables any capital provider to take an investment decision </li></ul><ul><li>Available cash flow (based on the tariffs) – MYTO calculates the total revenue requirement for the industry and derives average tariffs therefrom </li></ul><ul><li>Attractive ROI – A utility is entitled to earn an above average return on its investments used to provide service to its customer </li></ul>
  5. 5. 2010 – 2011 MYTO Major Review <ul><li>The MYTO allows for minor and major reviews </li></ul><ul><li>The 2013 major review brought forward to in view of economic realities and policy considerations </li></ul><ul><li>The Commission has issued the Major Review Consultation Paper </li></ul><ul><li>Full MYTO model by end June and new Order by 31st July </li></ul><ul><li>MYTO 2 takes effect from 1 st January 2012 </li></ul><ul><li>FG tariff subsidy continues to mid-2014 </li></ul><ul><li>PCAF for distributing lifeline tariffs will be set up </li></ul>
  6. 6. Industry Cost and Revenue Requirement
  7. 7. MYTO – Incentive based Regulation <ul><li>MYTO uses budget caps to incentivise efficiency </li></ul><ul><li>Licensees are pushed to incur costs below budget and thereby earn rewards for better performance through the tariff, thus improving their bankability </li></ul><ul><li>A clear example of this is with the projections for losses in the MYTO model </li></ul>
  8. 8. Loses Projection in MYTO
  9. 9. Privatisation <ul><li>BPE ’s process of transferring assets to private sector management and funding is driven by clear strategic objectives, that is: </li></ul><ul><ul><li>Increase generation output and efficiency </li></ul></ul><ul><ul><li>Reduce loss levels in distribution </li></ul></ul><ul><ul><li>Retain ownership of TCN but introduce world-class management and access to independent private sector-led funding </li></ul></ul><ul><li>BPE has received 331 EoIs for all SCs; at least 40% will pre-qualify </li></ul><ul><li>Successful Disco privatisation is key to growth and all Disco bidders will require sound financial guarantees/backing, mostly domestic </li></ul><ul><li>Neither privatisation nor medium term M & A, divestiture and other activity can occur without full commitment from banks </li></ul>
  10. 10. Conclusion Discos Regulation Tariffs Investment 1 2 3 4 Discos collect all the revenue generated within the industry Successful privatisation and competent, nuanced regulation, especially of TCN and Discos, will bring about the ultimate goal of a responsive, competitive and bankable market NERC realises that sensible tariffs are the single most important element in creating such a market and driving sustained investment into it NERC is determined that MYTO will incentivise investment and will secure stakeholder buy-in across the board
  11. 11. Eyo O. Ekpo Market Competition and Rates, NERC Mobile: (+234) (0) 803 400 5858 E-mail: eekpo@nercng.org THANK YOU Website: www.nercng.org

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