A Review of the Nigerian Energy Industry

NELMCO saves govt billions from verification of N462bn PHCN liabilities

29 July 2015, Abuja – Working with the Ministry of Power, Office of the Accountant General of the Federation and Debt Management Office (DMO), the Nigeria Electricity Liability Management Company (NELMCO) Limited may have effectively verified the factual status of an outstanding N462,754,646,902.96 billion worth of liabilities incurred by defunct Power Holding Company of Nigeria (PHCN).

NUEE.PHCNNELMCO, THISDAY gathered on Tuesday in Abuja, has within the limits of its powers determined from a three-week long verification exercise, the true position of sundry stranded liabilities of PHCN with a view to settling them.

As initiated by the new Managing Director of NELMCO, Fagbemi Adebayo, it was gathered that the verification exercise might have revealed damning underhand dealings in the management of PHCN’s legacy liabilities.

It is also expected to save the government billions of naira that could have been frittered away in settlement of sham PHCN liabilities.

The report of the verification exercise, which captured PHCN’s liabilities into categories of Power Purchase Agreement (PPA) creditors, legacy debts, engineering creditors, distribution and generation companies liabilities, amongst others, is however due for final consideration by the board of NELMCO. An aggregated copy of presentations made during the exercise was obtained from NELMCO.

From the objectives of the verification exercise which include, determining if there is a legal contract in place between PHCN and its contractors by a review of work orders, local contracts and contract agreements, as well as review of approved advice or certificate of job completion, NELMCO’s eventual settlements of the verified liabilities will be done in clearly defined strategies, starting with lesser sums.

NELMCO was incorporated by the government in line with its Electric Power Sector Reform Act (EPSR) 2005, to manage PHCN’s stranded liabilities vehicle for Nigeria’s smooth transition into a liberalised and productive power sector. The agency had however managed its mandate albeit controversially in the past.

Meanwhile, the Nigerian Electricity Regulatory Commission (NERC) has in a related development disclosed its intention to purge the power sector of some of its inactive generation licences.

NERC’s decision to revoke up to 40 power generation licences follows its recent completion of an audit exercise on the status of holders of these licences.
The commission in a statement from its head of public affairs, Dr. Usman Arabi, asked the 40 power generation licensees to justify within 30 days and 12 months why their licenses should not be cancelled.

It noted that its decision was sequel to discovery by the audit that the affected firms could not meet in varying degrees the terms and conditions for their licences.

NERC said 63 generation and distribution companies are in operations and have no issue with it, but that 40 other firms will have to justify their continued ownership of their licenses or get it withdrawn within the next 30 days to 12 months.

In category two of these licensees are those that have ceased operations, they are CET Power Projects promoted by West African Portland Cement Company, Ewekoro, Ogun State and Contour Global Solutions of Nigeria Bottling Company of Apapa, Lagos State.
It explained that it would immediately start the process of cancellation of these licences in line with clause 17 of the EPSRA 2005 which listed five conditions for cancellation of licenses.

“Thirteen other power generation firms in category three are not in operations but have substantially satisfied their milestones. These are Ethiope Energy; Supertek Nigeria; Mabon Energy; Bresson AS; Hudson Power; Knox J & L; Tower Power, Abeokuta; Zuma Energy Nigeria transferred to Itobe Coal 1, 2, 3 and 4 firms
Others in this category are MBH Power; Delta Electric Power; Wedotebary Nigeria; Century Power Generation and Supertek Electric.

Those in this category will be required to satisfy their outstanding milestones and start construction within the next 12 months, failure which the commission will commence the process for withdrawal of their licenses in line with clause 18 of the NERC application for licenses (Generation, Transmission, System Operations, Distribution and Trading) regulations, 2009,” NERC said.

NERC also said five power generation firms that are not in operations and have not substantially satisfied their milestones are ICS Power; Anita Energy; Ibafo Power Station; Minaj Holdings and Gateway Electricity and were given 30 days to convince it against withdrawal of their licenses.

It further stated that 19 electricity generation firms that are not in operation and are not submitting quarterly reports to it will have just 30 days to provide justification for their licenses or get it revoked.

“Licensee listed in categories two are hereby notified of the intention of the commission to commence the process for the cancellation of their licences on the grounds that the licensees have ceased operations.

“Those in categories four and five were notified of the intention of the commission to commence the process for the withdrawal of their licenses on the grounds that these companies have failed to commission their licensed generating power station within three years from the date of their licenses.

“Licensees in categories two would only be notified of the Commission’s intention to cancel their licenses, while those in categories four and five have 30 days moratorium to convince the commission against the withdrawal of their licences. Firms in category three have 12 months moratorium to start construction,” the commission added.

– This Day

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