Photo caption: Power generating plant
If quick measures aren’t taken by the Federal Government as intervention, operations of Electricity Generation Companies (GenCos) in Nigeria may collapse under crippling debt of over N3.7 trillion, the utility companies said.
The GenCos under the aegis of the Association of Power Generation Companies, (APGC), decried that the companies are left to bear the brunt of the liquidity crises in the electricity sector, adding that failure to resolve the outstanding debts will lead to the collapse of electricity generation in the country.
APGC, in a statement by its Chairman, Col. Sani Bello (Rtd.) said the current Multi-Year Tariff Order ((MYTO) by the Nigerian Electricity Regulatory Commission (NERC) has further worsened their situation with payment of 9 to 11 per cent of services rendered by customers.
“GenCos are currently owed over N2 trillion for power they generated, put onto the national grid and consumed by end users. This is in addition to the over N1.7 trillion 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,” Bello said.
APGC said 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.
“Notwithstanding this and other severe difficulties the GenCos have battled with since takeover in 2013, they have kept to the terms of their contractual agreements by ramping up capacity which has largely suffered systemic constraints.
“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,” the APGC said.
The statement further said that the new order is an aberration and 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).
It therefore said to continue operations, the government needs to ensure a payment plan to settle all outstanding GenCos invoices, in line with their PPAs.
The association also called for the reprioritisation of payments under the waterfall arrangement to give full priority to a 100 per cent 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.
