Adewale Sanyaolu
Unless urgent steps are taken by the Federal Government to address lingering issues in the power sector, an imminent collapse of the entire value chain looms.
First to give an indication on the dangers that lie ahead for the sector are 13 generation companies (Gencos) which recently, dragged the Federal Government to court over N1 trillion debt. They equally accused the Federal Government of unfair practices, refusal to pay for power generated and allegation of favouritism towards two companies in gas supply.
The Gencos alleged that the Federal Government was giving preferential treatment to Azura Power West Africa Limited and Accugas Limited (Seven Energy) through the Partial Sovereign Guarantee (PSG) with the World Bank in the settlement of liabilities.
They are equally lamenting a 92 per cent shortfall in the payment for electricity supplied to the Distribution Companies (Discos) through their contracting agent, Nigerian Bulk Electricity Trading (NBET) Plc.
And to compound the woes of the Gencos, five Discos failed to make remittance to NBET for Decemeber 2017 invoices. The offending Gencos include Ikeja, Yola, Kano, Kaduna and Jos.
While still grappling with these challenges, the Federal Government, recently announced plans to resell the Yola Disco and Afam Power Plant.
What led to the litigation?
The Gencos had accused the Federal Government of giving preferential treatment to Azura Power West Africa Limited and Accugas Limited to the detriment of the Nigerian Electricity Supply Industry (NESI) and the power sector as a whole.
In a suit filed by the 13 Gencos, the defendants are the Federal Government, the Central Bank of Nigeria (CBN), Minister of Power, Works and Housing, NBET, Azura and Accugas. The Gencos, represented by Mainstream Energy Solutions Limited (Mainstream), Transcorp Power Limited (Transcorp Power), Egbin Power Plc (Egbin) and Northsouth Power Company Limited (Northsouth), are arguing that the defendants have continuously meted out unfair treatment to them, their investors and suppliers.
Specifically, the Gencos stated that they had made huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to NBET and are facing the threat of business failure as a result of their huge indebtedness to banks and financiers, which provided the foreign currency-denominated acquisition loans with which the power plants were acquired from the Federal Government.
They alleged that NBET has consistently defaulted in paying them for electricity generated and put on the national grid in breach of its contractual obligation, which required that the Gencos be paid in full (100 per cent) not later than 45 days of invoice submission and upon delay in payment, be paid with interest at the agreed rate.
The Gencos noted that failure to pay them has caused them to default in meeting their obligations to their lenders, O&M contractors, equipment manufacturers, service providers and other persons and entities.
The Gencos put the total amount owed them for electricity supplied at approximately N800 billion, adding that when interest is added, it amounted to over N1 trillion. They stated that the N701 billion Payment Assurance Facility could have enabled government to pay for all electricity generated and supplied from January 2017 to December 2018.
Gencos warn against collapse
Executive Secretary of Association of Power Generation Companies (APGC), Dr. Joy Ogaji, warned that Nigeria may soon be thrown into nationwide darkness as power generation companies have received warning letters for termination of gas supplies over mounting debt.
The precarious situation of the Gencos was, however, compounded by the 92 per cent payment shortfall made to it by NBET Plc for its December 2017 electricity market payments released last week.
Ogaji had told Daily Sun in a recent interview that the 92 per cent payment shortfall for Genco invoices (December) was grossly inadequate for its operation.
According to the December 2017 electricity market payments released by NBET, the 25 Genco invoices for December 2017 amounts to N54,242,749,563.22 while payment made was N4,476,404,925.21.
But Ogaji warned against the consequences of the illiquidity among Gencos, saying the situation is gloomy while the future is bleak because the situation has not in any way improved over time.
She lamented that the sector is in a conundrum because there is available capacity of about 7,000 mega watts (mw), but the inability of the transmission network to accommodate such remained a source of concern to the Gencos.
On the endless shortfall in payments to Gencos, APGC boss disclosed that Gencos don’t have an agreement with Discos but with the Federal Government represented by NBET.
She noted that irrespective of whatever shortfall in payments remitted to NBET from Discos, the responsibility still lies on NBET to ensure that accurate payments are made to Gencos as and when due.
And in doing this, she canvassed that NBET should ensure that mechanisms are put in place to ensure that Discos pay for invoices issued them 100 per cent as to avoid this quagmire that has put the country under ransom.
5 Discos fail N16.2bn December payment
Five Discos failed to pay completely for over N16.2 billion invoices sent to them by Gencos for electricity delivered in December 2017. NBET report also showed that two other Discos made late payments after the due date while four others remitted at varying percentages of their energy invoice figures.
The Nigerian Electricity Regulatory Commission (NERC) had at the various power sector meeting warned that it will implement sanctions against the Discos for the poor remittances that were getting out of hand.
The breakdown indicates that five defaulting Discos that could not raise any figure in the month were Ikeja Disco with a N4.5 billion invoice; Jos Disco had N2.7 billion debt; Kaduna Disco was to pay N3.8 billion; Kano Disco had N3.5 billion and Yola Disco had N1.7 billion debt, which were not paid.
NBET explains underpayment
NBET in an explanatory note stated that the payments made to Gencos were as a result of receipts from Discos. It stated further that it received late payment (after the due date) for December 2017 cycle from Abuja, Benin, Enugu and Port Harcourt Discos, adding that the Discos paid NBET N4.47 billion for the December invoices of N50.21 billion, which represents 8.91 per cent.