The Managing Director of Niger-Delta Power Holding Company, NDPHC, Mr. Chiedo Ugbo noted that, the N701 billion intervention funding granted to the Power Generation Companies (GENCOs), by the Federal Government early last year saved the power sector from an imminent collapse.
Mr. Ugbo recalled that before the release of the intervention funds, GENCOs were generating power to the grid without getting commensurate revenues accrued to them from the Electricity Distribution Companies, (DISCOs). In an attempt to savage the situation, the Federal Government launched a N701 billion intervention fund aimed at supporting power generation companies to meet their payment obligations to gas and equipment suppliers, banks and other partners.
The NDPHC boss, who spoke in Abuja, lamented that:
“GENCOs will generate power to the grid, maybe the maximum we have ever received from the market is about 30 per cent of our invoice and that challenge is there. The challenges we have in the privatization is as a result of this generation revenue, those coming to buy the power plant when they look at the cash flow, they feel that something is not right. Some of them will put $100 million and some of them around $500 million; you don’t make that kind of investment without knowing where the money is going to come from.”
Prior to now the power sector had a backlog of gas constraints, which was already hindering the supply of gas to the GENCOs. The Government in-turn initiated the counterpart funding as a rescue plan for power generation. Mr Ugbo speaking on this said;
“But the government is a very responsive government and everybody acknowledged that there is problem in the sector. Generation had its faults but there were also serious market problem. So the government came up with the N701billion intervention early this year to ensure that at least, we are able to pay for our gas because with 30 per cent, it couldn’t have been able to pay the gas supply and then maintain our power plant. The average cost, gas alone will take about 50 per cent of your invoice and now you are generating 30 per cent, there is no way you could pay for the gas. If you are able to pay for the gas, you won’t have money to do the operation and maintenance of the power plant.’’
speaking on how effective the funding has been, He noted that;
The President Muhammadu Buhari government through the minister, approved the N701billion, so after analysing what the sector is supposed to pay for gas, they pay every month, the advanced cost, they check what our advance cost is in the invoice and they pay our gas suppliers. That means when they do that, it cost us like 50 per cent, so we will be getting roughly around 80 per cent of our invoice paid now. So generation companies technically get 80 per cent of their invoices paid now, so that is why you see that generation companies can cope now, we can have money now to do our other projects. Government is doing that for two years from January 2017 to December 2018 because the government is carrying out the power sector recovery plan which they are doing with the World Bank.