Power supply nationwide may soon be disrupted and the country thrown into total blackout as Electricity generating companies under the aegis of Association of Power Generation Companies (APGC) have raised alarm over impending collapse of their operations due to protracted debts of over N3. 7 Trillion owed to them.
The Power Generation Companies (“GenCos”) declared that they were constrained to draw the attention of the Federal Government (FG) and key stakeholders to the need to urgently address the issue of inadequate payment for electricity generated by them and consumed on the national grid, which is currently threatening the continued operation of their power generation plants.
According to them, “the GenCos are requesting that immediate and expedited action is taken to prevent national security challenges that may result from the failure of the GenCos to sustain steady generation of electricity of Nigerians.”
The APGC, raised these concerns in a statement endorsed by its Board Chairman, Col Sani Bello Rtd, released on Sunday.
They lamented that apart from other challenges confronting the Nigeria Electricity Supply Industry (NESI), “the crises from cash liquidity are on the top burner and has reduced GenCos ability to continue to perform their obligations, thereby threatening to completely undermine the Electricity value chain.”
Among other things, the Association declared that: “GenCos on their part as responsible investors, with patriotic zeal have made large scale investments and have continued to demonstrate absolute commitment by ramping capacities in line with their contract these over (10) years, amid system constraints, policies & regulations that are not investors friendly, increasing debts owed by the FGN without a clear financing plan, lack of firm contracts and a market devoid of guarantees but based on best endeavours, thereby hampering future planning and expansion.
“The power generated by GenCos have continued to be consumed in full without corresponding full payment, notwithstanding the commencement of the Partial Activation of Contracts in the NESI which took effect from July 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% 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.
“GenCos are currently owed over two trillion Naira for power they generated, put unto the national grid, and consumed by end users. This is in addition to the over 1.7trillion naira, funding gap created in the recent supplementary MYTO order 2024 without a designated fund to fill the gap. This huge debt outlay is now greatly inhibiting GenCos ability to meet their obligations to lenders, O&M operations, necessary maintenance, spare parts procurements, and employee-related obligations etc.”
To avert eminent collapse of the power sector and put GenCos in a position to continue generating power, they demanded they followings: 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 hundred percent payment of GenCos’ invoices as at when due and a clear financing plan to backstop the exposures in the NERC’s Supplementary Order to the MYTO and the DRO 2024.
Other demands include: Provision of payment security (guarantees) backed by World Bank/AFDB to guarantee full payment to GenCos, to enable them to meet their critical needs, improve generation to Nigeria and implement their respect growth and expansion plans; Ensuring greater transparency in the billing, collection, and remittance process of sector funds; Investors focused and economy growth friendly policies and regulations to incentivise investors; Liberalisation of the market (bilateral arrangement) to create market confidence and ensure the viability and credit worthiness of the power sector and Ensuring full effectiveness of all market agreements, firm monitoring, and enforcement of the rules by the regulator on all market participants
