CEC Africa’s operations in Nigeria continue to face some of the harshest macroeconomic challenges in the energy company’s footprint across Africa.
“In Nigeria where the Group has operating companies, challenging conditions in the operating environment continue to affect profitability. Abuja Electricity Distribution Company Plc continues to face high losses, low collections and non-cost reflective tariffs”. This is according to a statement issued by the CECA board on 30 August 2018.
There does appear some light at the end of the tunnel. The Federal Government of Nigeria commenced Power Sector Recovery Program (PSRP) in March 2017 whose aim was to help improve the financial viability of the sector. In addition, the recovery program was hoped to reset the sector for the long term and ensure sustainability, according to the SENS Announcement.
CECA’s review and analysis of the policy paper on the PSRP indicates that there was sufficient recognition of the pitfalls in policy as well as the market that had resulted in the losses suffered by the distribution companies in the country’s power sector. Exploiting the nuances discovered would in turn lead to distribution companies actually making a profit in the sector.
The company believes that “short term results of the PSRP have already been evidenced in North South Power Company Limited which under the terms of a Payment Assurance Guarantee under the PSRP now has adequate cash flows to declare and pay a dividend for the year ended 31 December 2017”, as quoted in a statement attributed to the Board of Directors.
However, the company recorded subtitle performance improvements at half year 2018 compared to the previous year as a result of higher energy sales at Abuja Electricity Distribution Company Plc (AEDC) with revenue increasing by 19%. Other announcements in the SENS announcement on performance included:
- North South Power Company Limited contributing a profit of K11 million which was down 54% from 2017 mainly due to shut down of the plant caused by flooding in February and March this year. The situation has been managed and NSP is projected to be back on track by year end.
- The Group’s loss for the half year ended 30th June 2018 at K 1,022 million is higher by 26% due to higher finance costs. The finance costs are driven by the growth in payables at AEDC which on average pays about 30% of its monthly energy bill and the unpaid balance attracts interest.
With the 2018 full year results due, the company will be hoping that this time around their auditors give a favourable opinion on the going concern status of the entity. In their 2016 and 2017 Annual Reports which were filled on 10 January 2018 and 11 May 2018 respectively, their auditors, KPMG LLP – Klynveld Peat Marwick Goerdeler, gave an unqualified opinion expressing doubt that the company can continue as a going concern according to Bloomberg’s key developments around the company.
About CEC Africa
CEC Africa Investments Limited, an investment holding company, distributes and supplies power in Sub-Saharan Africa. Originally established by CEC Plc as an investment platform which CEC could challenge its investments in the power sector across Sub-Saharan Africa. CEC Africa was capitalized with USD100 million, being seed capital for its operations, and received a further injection of circa USD50 million through shareholder loans.
It invests in, develops, operates, and finances hydro, thermal, and transmission power and energy infrastructure projects. The company was founded in 2013 and is based in Ebène, the Republic of Mauritius according to Bloomberg.com.