Over N200bn Debt Threatening Power Operations- GenCos

Dr. Joy Ogaji

Power generation Companies in Nigeria (GENCOs) said that over N200 billion debt owed them by customers may affect their operations if the government does not intervene immediately.

Dr. Joy Ogaji, the Executive Secretary, Association of Power Generation Companies (APGC) said the matter was getting to a point of crises.

Ogaji warned that cessation of operations was imminent as the the Nigerian Electricity Bulk Trader (NBET) is unable to commit to the terms of the power purchase agreements (PPAs) signed with them.

She said despite the GenCos’ willingness to deliver power in line with the terms of their PPAs, they were unable to do so because of the huge debt.

In her words: “In the run-up to the Nigerian power sector privatisation, the government promised to set up NBET to shield GenCos from the vagaries of the market, and venturing to invest in the power generation assets was predicated on the promise by the bulk trader to shield the GenCos from these problems irrespective of what happens in the downstream sector of the industry.

“The worsening market liquidity squeeze has culminated in a situation where the GenCos lack the necessary funding for their operations, acquiring spare parts and equipment for the power generation stations. Some GenCos have not been able to pay their workers for several months.

“Most of the GenCos are frustrated by NBET’s poor settlement of their invoices (less than 20 per cent). The inability of NBET to handle payments to the GenCos in accordance with the PPAs they have with the agency is strangling their operations.”

She said NBET that is supposed to help appears to be helpless, more in need of help than the GenCos.

Ogaji said NBET’s inability to help the GenCos resolve the chronic poor market liquidity challenge has affected  their operations.

She said “If the GenCos are to play their role in the power supply value chain, they must be saved the agony of the debt squeeze, which is threatening most of them to buckle under the weight.”

The executive secretary assured that the GenCos were ready to explore all dispute resolution mechanisms including litigation, to test the PPA they signed with NBET.

In the alternative, she said the association resolved that government should allow the GenCos to take advantage of the provisions of the EPSR Act 2005, which empowers eligible customers to bypass the wholesale electricity market and enter bilateral contracts with any willing eligible customer.

She said although the GenCos, at inception, were contractually obligated to ramp up electricity generation capacity by about 5,000 megawatts (Mw) over a five-year period, most of them have exceeded their targets. They were being faced with the issue of stranded capacity.

For instance, she said Ughelli Transcorp, which had 160 Mw generation capacity at takeover, reached the 450 Mw capacity by September 2016, while Egbin at takeover in November 2013, had average 300 Mw generation due to the dismal state of its six units.

Ogaji said Egbin plant has the capacity to generate an average of 1,100 Mw on availability of gas, saying when the overhaul of the remaining units is completed next year, the station would be operating at a minimum of 92 per cent of its capacity.

She said when the overhaul of the remaining units is completed next year, the station would be operating at a minimum of 92 per cent of its capacity.

The Nation

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