Despite approval by the Federal Executive Council (FEC), for a N701-billion Central Bank of Nigeria (CBN) facility to ameliorate liquidity crisis in the power sector, funding challenges remain a big issue.
Unfortunately, more than a year after the approval, targets have not been met, and in particular electricity Generation Companies (GenCos) are still unable to pay their gas suppliers.
Even if the whole sum had been released, it would still not be enough to offset the outstanding N800billion required to settle the suppliers.
FEC had, in March last year, approved N701billion as Payment Assurance Guarantee, to help GenCos meet gas payment obligation.
The Minister of Power, Works and Housing, Babatunde Raji Fashola, had said the liquidity problems that characterised the market have affected the Nigeria Bulk Electricity Trading (NBET’s) ability to deliver on its Power Purchase Agreement (PPA) obligations to the GenCos, hence the approval of the assurance guarantee.
The GenCos told The Guardian that despite the intervention fund, they were still cash strapped and unable to pay gas suppliers.
Specifically, the GenCos said they had made huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to the NBET, and now faced liquidation threats, as a result of their huge indebtedness to banks and financiers.
They alleged that the Federal Government has not kept faith with the N701billion facility, as payment timelines are not clear, regular or consistent.
The Executive Secretary, Association of Power Generation Companies (APGC), Joy Ogaji, said NBET has consistently defaulted in paying for electricity generated in breach of its contractual obligation, which required that the GenCos be paid in full.
She said: “I think you need to investigate the N701billion because it is in shambles. The GenCos have business plans, which most of them have exceeded; they have worked on other expansion plans, which will be implemented as soon as the liquidity situation improves. “Raising funds for expansion and construction of new plants often presents a challenge. Slow execution of PPAs is another challenge that hinders Gencos from raising the required funding. Since power is the livewire of the nation, we are watching out for what plans the government will come up with to ameliorate the current quagmire in the electricity value chain. We want government to know that we are willing to work with it to arrive at an amicable solution.
“We are not able to repay the funds we took from the banks and the Central Bank of Nigeria (CBN) is telling banks not to release more money to the power sector because we are not viable/bankable. So, this is affecting us. We cannot expand capacity and we cannot develop new projects. The current situation does not allow the power generating companies to plan and increase capacity because the grid is not capable of taking power that is being generated.”
Fashola expressed dismay that GenCos investments are being threatened because they could not utilise their installed capacity.
He noted that under past administrations, GenCos and Gas suppliers were being underpaid by NBET because the DisCos were under-collecting or under-remitting payments such that GenCos were receiving only about 20 per cent of their invoices from power. He added that Government intervened and created the N701billion Payment Assurance Guarantee (PAG) to NBET to ensure that payment to GenCos improved.
Fashola blamed the liquidity crisis facing the Gencos on the inability of the distribution companies (Discos), to pay for electricity supplied to them. “The GenCos are short-paid because the DisCos under-remit in spite of high estimated billing to consumers.
“My directives seek to rectify these problems because I believe they can be rectified. Electricity consumers (which include Fashola), want better service; NBET wants its money; about N800billion, so it can pay GenCos,” he said.
Source: G Business