Electricity generation companies (GenCos) in the country have raised the alarm over a crippling N3.7 trillion debt that is threatening their operations.
The Gencos under the aegis of the Association of Power Generation Companies, (APGC) decried that they 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.
A statement signed by the chairman of APGC, Col. Sani Bello (Rtd.), in a signed statement said the current Multi-Year Tariff Order ((MYTO) by NERC has further worsened their situation with payment of nine to 11 per cent of services rendered is paid for by its 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.”
The statement 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.
The GenCos therefore called on the federal government and key stakeholders to urgently address the issue of inadequate payment for electricity generated by them and consumed on the national grid, insisting that the liquidity challenge threatened the continued operation.
“GenCos are of the position that the liquidity challenge threatening the continued operation of their power generation plants must be addressed urgently, and sustainably too. Besides being owed huge debts, the GenCos also are operating under very harsh monetary and fiscal conditions, occasioned by the economic realities that face the country today.
“The flow of money within the power industry is one of the fundamental problems preventing Nigerians from enjoying continued and sustainable improvement in electricity supply.
“Expeditiously solving these issues would enable GenCos meet their critical needs which would, in turn, ensure that they sustainably generate power, to enable Nigerians have better access to reliable electricity supply.
GenCos would like to re-emphasise that this request requires urgent attention” the group stated.
Continuing, the group said “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.
“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 per cent 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.”
It said 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.
We’ve got the edge. Get real-time reports, breaking scoops, and exclusive angles delivered straight to your phone. Don’t settle for stale news. Join LEADERSHIP NEWS on WhatsApp for 24/7 updates →
Join Our WhatsApp Channel
