One of the 2 major electricity distribution companies (DisCos), serving Nigeria’s commercial hub of Lagos returned to profitability for the year 2019, as it reported N147.6 billion in profits.
The surprising turnaround in the fortunes of the DisCo, which is its first profit since 2015, came largely on the back of higher revenue collections, lower operating costs, other income and finance costs that were written off.
Ikeja DisCo said it made N100.58 billion in revenues in 2019, which was up some 12.75 percent, compared to 2018 when it earned N89.2 billion in revenues.
Gross profits came in at N40.06 billion, compared to a loss of N28.714 billion in the earlier period (2018), as the DisCo managed to reduce operating costs by 48.66 percent to N60.5 billion in the period.
The energy firm also reported other income of N124.54 billion which it said was recovery of electricity Tariff shortfalls for the years 2015 – 2018.
“The tariff shortfall relates to the tariff differential for the years 2015 – 2018 as contained in the MYTO Minor Review Order released in August 2019,” the firm said in notes to its financial statements.
Ikeja DisCo appears to have converted some of the grants received by the Federal Government to profits , which it booked as tarrif differential income, MoneyCentral analysis shows.
The FG has bailed out the DiScos to the tune of over N2 trillion for the past 5 years.
A line item also suggested major finance costs were written off in the period, by transferring them off the balance sheet of the utility.
An accrued interest on National Bulk Electricity Trader (NBET) outstanding invoices of N78.006 billion was written off by the DisCo.
“The 2019 MYTO MR stated that all interest payable by DisCos on unpaid invoices issued by NBET and attributable to the tariff shortfall shall be transferred off the balance sheet of the utility. The accrued interest for other years has been written off in the financials,” Ikeja DisCo said.
This major write-off led to net finance cost gains of N44.45 billion for Ikeja Disco, which boosted profit before taxes to N159.2 billion.
Ikeja DisCo had trade receivables of N110 billion from energy customers in the period as it still struggles (like other DisCos) to get paid for power supplied.
The DisCo had 3,163 staff at the end of 2019.