GenCos Lament Over N2.7trn Debts, Call For Urgent Payment

By Sunday Etuka, Abuja

The Power Generation Companies (GenCos), have called on the Federal Government to urgently clear the outstanding debts owed the companies, as the lack of payment is hampering their operations.

This is coming barely two weeks after the Minister of Power, Chief Adebayo Adelabu disclosed that President Bola Tinubu has given approval for the settlement of N130billion current debts, and the protracted N1.3 trillion legal debts in the sector.

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However, the Chairman of the Board of the generation companies, Col. Sani Bello Rtd., who disclosed the development in a statement issued on Sunday, lamented that the GenCos are currently being owed over two trillion Naira for power they generated, put unto the national grid, and consumed by the end users.

He explained that this is in addition to the over N1.7trillion, funding gap created in the recent supplementary Multi-Year Tariff Order (MYTO) 2024 issued by the Nigerian Electricity Regulatory Commission (NERC) without a designated fund to fill the gap.

Col. Bello averred that “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 Nigerian Electricity Supply Industry (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”, he noted.

He disclosed that the huge debt outlay is now greatly inhibiting the GenCos’ ability to meet their obligations to lenders, O&M operations, necessary maintenance, spare parts procurements, and employee-related obligations etc.

While noting that the crises from cash liquidity has reduced GenCos’ ability to continue to perform their obligations, thereby threatening to completely undermine the Electricity value chain, the GenCos called for a coordinated approach by all stakeholders in the NESI to address the liquidity issue realistically and sustainably so that Nigerians could have access to reliable electricity supply.

He noted that the liquidity challenges is further worsened by the various policies introduced such as the payment of waterfall in the NESI, which deprioritizes payment to GenCos, adding that the implication of this, is that GenCos only get paid a portion of their invoices (9%, 11%) from whatever amount is left.

This, he said, “is an aberration as 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 to have the capacity to continue to produce the electricity which is the product around which the entire power value chain is built”, he said.

The Board Chairman said, in order to urgently put the GenCos in a position to continue to generate power, there is need for the following:

“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.

“A clear financing plan to backstop the exposures in the NERC’s Supplementary Order to the MYTO and the DRO 2024.

“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. f. 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.

While stating that the flow of money within the power industry is one of the fundamental problem preventing Nigerians from enjoying continued and sustainable improvement in electricity supply, the GenCos noted that expeditious solution to the issue would enable GenCos meet their critical needs which would, in turn, ensure sustainable power supply to Nigerians.

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