FG Saves N91bn from Payment of Defunct PHCN Debts

Emmanuel Addeh in Abuja

The federal government said it saved at least N91 billion from the payment of liabilities owed the defunct Power Holding Company of Nigeria (PHCN), after thorough negotiation with the creditors.

Nigeria Electricity Liability Management Company (NELMCO), which manages the debts, on behalf of the government, noted that with the adoption of strict management models, the amount was retained in the total N914 billion liability inherited by the company.

NELMCO is one of the successor companies created by the federal government to assume responsibility for all of the PHCN liabilities as well as the management of the non-core assets of the companies, prior to their disposition.

Among other functions, it administers the stranded debts and non-core assets of PHCN and sees to the settlement of the defunct company’s Power Purchase Agreement (PPA), debts obligations, legacy debts and any other liabilities.

The company’s Managing Director, Mr. Adebayo Fagbemi, gave the update at the presentation of a Self-Assessment Tool (SAT) report and a plaque to the management of NELMCO by the Bureau of Public Service Reforms (BPSR) in Abuja for ‘meeting most critical organisational goals’ set for the agency.

Giving the breakdown, Fagbemi said since NELMCO had no seed fund for its operation, it developed different models that would enhance due diligence for managing government’s liabilities, noting that the company invented the Triangular Verification Model (TVM) and saved N89 billion through ‘Distance Soliciting Window’ and another N1.8 billion which took the entire savings to N91 billion.

While disclosing that the outstanding liability now stands at about N400 billion, NELMCO noted that it was able to secure a discount of 30 per cent from every payment of N5 million debt to the government creditors.

Fagbemi said: “What I did say is that we developed a model, the Triangular Verification Model. As you are aware, we inherited the stranded debt of the entire defunct PHCN which amounted to almost 914 billion and that we put in place that model to enable us conduct due diligence on the inherited debt arising from that.

“This is because we don’t have sufficient funding. NELMCO started without any seed fund from the federal government. We had to develop that model as the best way of managing this liability on behalf of government.
“The agency is a special purpose vehicle, so we had to go to wear our thinking caps on how to manage these debts without requiring funding.

“From that model, we were able to save N89 billion naira for the federal government and through the distance soliciting window we saved another N1.8 billion and when you add that up we are talking of about almost N91 billion.”
Fagbemi revealed that the company has a forecast to wind down its operation by 2022.

But also speaking, the Permanent Secretary, Federal Ministry of Power, Mrs. Didi Walson-Jack said that though the expectation is that the company should shut down by 2022, the ministry would want it to operate beyond then.

She commended the NELMCO management for the strategy and performance that earned it a ‘gold level award’ from the Bureau of Public Service Reforms (BPSR).

In his remarks, the Director-General, BPSR, Dausuki Arabi said the award was presented to the company for meeting most of its organisational goals.

He said: “Following the validated assessment of NELMCO by BPSR, NELMCO performance was rated as consistently meeting expectations in all essential areas of responsibilities, at times exceeding expectations, and the quality of work is generally good. The most critical organisational goals were met.”

NELMCO’s liabilities are categorised into engineering, foreign loans, gas supply, tax, legacy debts, legal, local bank loans, PHCN headquarters, successor companies (Discos and Gencos) creditors and contingent liabilities.