….. Flay preferential disbursement of N701bn World Bank facility
Power Generation Companies in Nigeria (GENCOs) have filed a lawsuit against the federal government and some of its agents accusing the government of consistently defaulting in the payment of all electricity generated and sent to the national grid.
The GenCos described the action as a breach of its contractual obligation.
According to the GENCOs, due to the failure of Nigerian Bulk Electricity Trading Company (NBET) to paying them as at when due, they (GENCOs), have in turn been forced to default in meeting their obligations to their lenders, contractors, equipment manufacturers, service providers and other persons and entities engaged by them for the purpose of ensuring the smooth and effectual generation of power plants owned by its members.
Arguing that their corporate existence has come under severe threat, as a result of the debt owed them, the GENCOs put the total amount outstanding for electricity generated and supplied by them at N800bn. They however explained that together with capacity and interest payments due to them, the GENCOS are owed in excess of N1trillion.
In the suit filed at the Federal High Court, Abuja, the GENCOs alleged that the government also engaged in preferential treatment in favour of Azura Power West Africa Limited and Accugas Limited to the detriment of other stakeholders in the Nigerian Electricity Supply Industry and the Power Sector as a whole.
The GENCOs are claiming that the federal government and its agencies sued as defendants, have treated them, their investors and suppliers unfairly and in a discriminatory manner notwithstanding the fact that the GENCOs have been bending backwards to continue generating electricity for the national grid.
While describing their action as making huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to NBET, the GENCOs said that they are facing threat of going into extinction emanating from their huge indebtedness to banks and financiers that provided the foreign currency-denominated loans with which they acquired the power plants from the federal government during the privatization exercise.
The GENCOs are accusing NBET of consistently defaulting in making payment to them for all electricity generated and put on the national grid in breach of its contractual obligation, which required that the GENCOs be paid fully (100per cent) not later than 45 days of invoice submission, and upon delay in payment be paid with interest at the agreed rate.
As a way to addressing the huge mounting indebtedness of federal government and NBET to the GENCOs, the FG working with the Ministry of Power, Works and Housing, NBET, CBN and the GENCOs created as a temporary relief the N701bn Payment Assurance Facility under which the GENCOs were to be paid for all electricity generated and supplied from January 2017 to December 2018.
According to the suit, the N701bn Facility was meant to pay existing GENCOs as at the time the facility was put in place, as the target beneficiaries.
The GENCOs are insisting that they are getting very close to a point where their plants may be forced to shut down due to their inability to continue to generate power. They said the federal government deliberately entered into certain engagements with Azura Power and Accugas.
Under the new agreement, the GENCOs claimed that amongst other things, Azura Power and Accugas were given the preferential treatment of having a World Bank Partial Risk Guarantee supported by the Sovereign Guarantee of the FG securing all payments due from NBET to Azura for power generated by the new Independent Power Plant and to Accugas for gas supplied to the Calabar NIPP.
The GENCOs noted that at the inception of the privatization exercise, when the risk was so enormous and justified such a Partial Risk Guarantee being in place to protect investors, the FG refused to provide partial risk guarantee and sovereign national guarantee to them and their investors despite consistent requested for same. They argued that all of a sudden, the same Partial Risk Guarantees/Sovereign Guarantees which the FG denial them have been so graciously given to Azura and Accugas together with payments because the new companies are being treated as a first line charge.
The GENCOs have been asking questions as to what they call, continued discriminatory treatment of Nigerian investors, who took the risk of investing in the power sector at a time when nobody was sure of the evolution of the sector. They expressed worries that the FG became more concerned and committed to promptly paying Azura and Accugas 100 per cent of their respective invoices while the GENCOs generating about 80 per cent of the power being consumed in the country continue to be owed huge debts and get paid only 80 per cent of their invoices in an irregular and undeterminable manner.
The GENCOs claimed in their statement that the FG concluded steps to immediately pay Azura and Accugas for their first invoices (totaling USD8,140,000) from the N701bn facility meant for the GENCOs (target beneficiaries), which is not even sufficient to pay the GENCOs.
The GENCOs are represented in the suit by Mainstream Energy Solutions Limited (“Mainstream”), Transcorp Power Limited (“Transcorp Power”), Egbin Power Plc (“Egbin”) and Northsouth Power Company Limited (“Northsouth”) who are all Plaintiffs in the suit. While the defendants in the suit are the Federal Government of Nigeria (FG), Central Bank of Nigeria (CBN), Minister of Power, Works & Housing, Nigeria Bulk Electricity Trading Plc (NBET), Azura Power West Africa Limited (“Azura”) and Accugas Limited (“Accugas”).