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Electricity: GenCos can’t meet obligations, may halt operations over N3.7trn ‘legacy debts’ ─APGC Board Chair

*Col. Sani Bello (Rtd.), Chairman of Board of Electricity Generation Companies, in Nigeria, discloses the inadequate payment for power generated and consumed on the national grid is ‘greatly inhibiting GenCos’ ability to meet their obligations’ to lenders, necessary maintenance, spare parts procurements and employee-related commitments, among others in the economy

Gbenga Kayode | ConsumerConnect

Power Generation Companies (GenCos) have escalated their concerns to the Federal Government, and other key industry stakeholders to urgently address the issue of inadequate payment for electricity generated by the power providers, and Nigerian consumers utilised on the national grid totalling N3.7 trillion to avoid imminent shutdown.

Sequel to the sector’s increasing indebtedness to the GenCos that produce electricity, the companies have indicated that they may shut down as the current debt profile constitutes a threat to further electricity production in the West African country.

Chief Adebayo Adelabu, Honourable Minister for Power

Col. Sani Bello (Rtd.), Chairman of the Board of the Association of Power Generation Companies (APGC), who disclosed this development in a recent statement, emphasised the inadequate payment is currently threatening the continued operations of the power generation plants located across the Nigeria.

Electricity generation is described as the process of generating electric power from sources of primary energy. For utilities in the electric power industry, it is the stage prior to its delivery (transmission, distribution, etc.) to end users or consumers, or its storage, using, for example, the pumped-storage method.

Nigeria attains over 5,000MW of electricity despite ‘legacy debts’: Chief Adelabu, Power Minister

ConsumerConnect reports this emerging grim situation in the power sector of the economy may upset the Federal Government’s plan to increase electricity generation capacity from the recent 5,000 Megawatts (MW) to 6,000 MW by the end of this year.

Chief Adebayo Adelabu, Honourable Minister for Power, during the ministerial presentations on the achievements of the President Bola Ahmed Tinubu’s administration first anniversary, christened ‘Ministerial Sectoral Update’, at the National Press Centre, in Abuja, FCT, had expressed delight at the relatively substantial ramping up of electricity supply throughout the value chain, meaning that for the first time in three years, Nigeria attained over 5,000MW of power as of May 3, 2024.

Adelabu had affirmed “precisely on May 3, 2024, we generated, transmitted, and distributed 5,003.45MW of power.

“This is expected to further rise to 6000MW by the end of this year.”

The Minister also assured electricity consumers that in the coming months, the power generation output would be increased to 6,000MW from an average of about 4,000MW.

In acknowledging the huge debts in the power sector, he said: “Beyond paying the ‘legacy debts’, we’re moving around 4,000MW, 4,500MW, and it is no longer acceptable.

“So, what we are looking at is to have an agreement to ramp up to a minimum of 6,000MW within the next three to six months.”

He assured Nigerians: “I believe we still have the infrastructure to generate between 6,000MW and 6,500MW.

“In terms of the generating companies, I have no doubt in my mind that the existing capacity can give us 6,500mw once there is stability in the supply of gas.”

On power generated and supplementary MYTO order 2024

However, Col. Bello (Rtd.), Board Chairman of the Association of Power GenCos, who is also Chairman, Board of Directors of Mainstream Energy Solutions Limited, stated: “GenCos are currently owed over N2trn for the power they had generated, put onto the national grid, and consumed by end users.

“This is in addition to the over N1.7tn funding gap created in the recent supplementary MYTO order 2024 without a designated fund to fill the gap.”

The statement also noted: “This huge debt outlay is now greatly inhibiting GenCos’ ability to meet their obligations to lenders, necessary maintenance, spare parts procurements, employee-related commitments, etc.

“The GenCos’ expectations of being settled through external support, such as the World Bank, Power Sector Recovery Programme have also been dampened due to other market participants’ inability to meet their respective distribution linked indicators enshrined in the PSRP.”

The power providers further complained of their access to Foreign Exchange (Forex), which they noted has constituted another problem, in that major operations and maintenance needs in the generation subsector are dollarised.

According to them, the importance of a specialised window for the GenCos, or stable Dollar allocation option for them cannot be overemphasised.

Col. Bello stated: “GenCos are of the position that there is a need for a coordinated approach by all stakeholders in the NESI (Nigeria Electricity Supply Industry) to address the liquidity issue realistically and sustainably in the power sector so that Nigerians can have access to reliable electricity supply.

Implication of sustainable power generation on national security challenges

The GenCos further stated: “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 for Nigerians.

“GenCos liquidity challenges are further worsened by the various policies introduced, such as the payment waterfall in the NESI, which deprioritises payment to GenCos.

The power generation firms indicated the implication of this is that GenCos only get paid a portion of their invoices (nine percent, 11 percent) from whatever amount is left.”

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