From Isaac Anumihe, Abuja
Generation companies (GenCos), yesterday, gave an indication of a nationwide blackout following a debt of over N2 trillion owed them by the sector.
This is in addition to the over N1.7 trillion funding gap created in the recent supplementary Multi-Year Tariff Order (MYTO) 2024
without a designated fund to fill the gap.
To this effect, GenCos are demanding immediate settlement of the debts to prevent national security challenges that may result from the failure of the GenCos to sustain steady
generation of electricity for Nigerians.
In a statement, the board chairman of GenCos, Colonel Sani Bello (rtd) said that GenCos liquidity challenges further worsened by the various policies introduced
such as the payment waterfall in the Nigeria Electricity Supply Industry (NESI) which deprioritizes payment to GenCos.
“The implication of this, is that GenCos only get paid a portion of their invoices (9 per cent,
11 per cent) from whatever amount is left. This is an aberration. It is a clear departure from existing terms of the Power Purchase Agreement (PPA) guiding the
contractual relationship between GenCos and the Nigeria Bulk Electricity Trading
Plc (NBET), by which NBET as buyer has contracted to purchase the available
capacity as agreed under the PPA. GenCos should be accorded the utmost priority when it comes to payment to enable them have the capacity to continue to produce the electricity which is the product around which the entire
power value chain is built.
“In view of the foregoing, we hereby demand the following to urgently put GenCos in a position to continue generating power:
“Immediate implementation of payment plans to settle all outstanding GenCos
invoices, in line with their PPAs.
Reprioritization of payments under the waterfall arrangement to give full priority to a 100 per cent payment of GenCos’ invoices as at when due.
“A cear financing plan to backstop the exposures in the Nigerian Electricity Regulatory Commission’s (NERC’s) Supplementary
Order to the MYTO and the domestic relations order (DRO) 2024.
“Provision of payment security (guarantees) backed by Word Bank/AFDB to guarantee full payment to GenCos to enable them meet their critical needs, improve generation to Nigerians and implement their respect growth and
expansion plans.
“Ensuring greater transparency in the billing, collection and remittance process of sector funds” he said.
GenCos also demanded that there should be investors-focused and economy-growth friendly policies and regulations to incentivise investors and there should be the
liberalisation of the market (bilateral arrangement) to create market confidence and ensure the viability and credit worthiness of the power sector” he said .
The government should ensure a full effectiveness of all market agreements, firm monitoring,and
enforcement of the rules by the regulator on a market participants.
“GenCos are of the position that the liquidity challenge threatening the continued operation of their power generation plants must be addressed urgently, and
sustainably too. Besides being owed huge debts, the GenCos also are operating under very harsh monetary and fiscal conditions, occasioned by the economic
realities that face the country today.
“The flow of money within the power industry is one of the fundamental problems
preventing Nigerians from enjoying continued and sustainable improvement in electricity supply” the chairman, said
GenCos equally craved for a co-ordinated approach by all stakeholders in the Nigerian Electricity Supply (NES) to address the liquidity issue realistically and sustainably in
the power sector so that Nigerians can have access to reliable electricity supply.
According to the chairman, the power generated by GenCos are being consumed without corresponding payments by the sector
“The power generated by GenCos have continued to be consumed in full without a
corresponding full payment, notwithstanding the commencement of the Partial
Activation of Contracts in the NESI which took effect from Juy 1, 2022, the minimum
remittance order, bilateral market declaration, waterfall arrangement, the risks of
inflation, forex volatility with no dedicated window to cushion the effect of the
forex impact, the supplementary MYTO order which leaves about 90 per cent of GenCos
monthly invoices unmet without a bankable securitisation, or financing plan. This
situation has dire consequences for the GenCos and by extension the entire power value chain” Bello said.