The Power Generation Companies (GenCos) operating in Nigeria, have warned that the unpaid over N4 trillion debts owed the companies may lead to imminent shutdown if noting is done to urgently address the issue.
GenCos Board of Trustee Chairman, Col. Sani Bello Rtd. announced this in a statement signed on Monday.
He lamented that besides being owed huge debts, the GenCos also are operating under very harsh monetary and fiscal conditions, occasioned by the economic realities that are currently facing the country.
Explaining that the flow of money within the power industry was one of the fundamental problems preventing Nigerians from enjoying continued and sustainable improvement in electricity supply.
The statement highlighted that “the 2024 collection rate has dropped below 30%, and 2025 is not any better severely affecting GenCos’ ability to meet financial obligations.
“High corporate income tax, concession fees, royalty charges, and new FRC compliance obligations are further straining GenCos’ revenue.
“GenCos are currently owed about ₦4 trillion (₦2 trillion for 2024 and ₦1.9 trillion in legacy debts). No possible solutions, including cash payments, financial instruments, and debt swaps is in sight.
“The 2025 government budget allocates only ₦900 billion, raising concerns about its adequacy to cover arrears and future payments.”
It noted 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 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 securitization, or financing plan. This situation has dire consequences for the GenCos and by extension the entire power value chain.
“GenCos liquidity challenges is further worsened by the various policies introduced such as the payment waterfall in the NESI, which deprioritizes payment to GenCos as service providers such as MO/NISO, NERC and NBET /leaders all receive 100% payment of their market invoices starting from May 2019. As a result of this, no one is under pressure to ensure GenCos invoices are fully settled.
“The implication of this, is that GenCos only get paid a portion of their invoices (9%, 11%) from whatever amount is left.
“This 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 said in the statement.
The companies as responsible investors, they have made large-scale investments and have continued to demonstrate absolute commitment by ramping capacities in line with their contract 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 without securitization but based on best endeavors, thereby hampering future planning.
They added that “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 been largely constrained systemically.
“Against the backdrop of the many challenges facing the power sector in Nigeria, 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.
“The GenCos expectations of being settled through external support such as the World Bank PSRO has also been dampened due to other market participants’ inability to meet their respective distribution linked indicators (DLIs), enshrined in the Power Sector Recovery Program (PSRP).
“Access to forex is another problem given that major operation and maintenance needs in the generation subsector are dollarized, the importance of a specialised window or stable dollar allocation option for the GenCos cannot be overemphasized,” they said.
GenCos are of the position that there is need for a coordinated approach by all stakeholders in the NESI to address the liquidity issue realistically and sustainably in the power sector so that Nigerians can have access to reliable electricity supply.
“In the light of the severity of the issues highlighted above, 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 statement said.
On the foregoing, the DisCos are demanding the following to urgently put them in a position to continue generating power for transmission and distribution to Nigerians:
“a. Immediate implementation of payment plans to settle all outstanding GenCos invoices. b. Reprioritization of payments under the waterfall arrangement to give full priority to a hundred percent payment of GenCos’ invoices as at when due. c. A clear financing plan to backstop the exposures in the NERC’s Supplementary Order to the MYTO and the DRO 2024. d. 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. e. 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. g. Firm monitoring and implementation of the h. Liberalisation of the market (bilateral arrangement) to create market confidence and ensure the viability and credit worthiness of the power sector. i. Ensuring full effectiveness of all market agreements, firm monitoring, and enforcement of the rules by the regulator on all market participants.”
