A Review of the Nigerian Energy Industry

Gencos lament poor support, warn of imminent blackout over N601bn debt

*Power transmission sub-station.

Oscarline Onwuemenyi
01 March 2017, Sweetcrude, Abuja – Investors in the generation companies (Gencos) have warned of an imminent blackout nationwide if the N601 billion debts owed them by consumers through the off-taker, the Nigerian Bulk Electricity Trading Plc (NBET) – a Federal Government’s owned public liability company.

Some of the investors spoke yesterday at the Nigeria Power Summit, part of the ongoing Nigeria Oil and Gas Conference (NOG) holding in Abuja, regretted the neglect of the power sector by different administrations in the country over the years.

The Managing Director and Chief Executive Officer of Mainstream Energy Solutions Limited, Mr. Lamu Audu, stated that only 20 percent of the cost of power produced across the supply value chain is being paid for.

He noted that foreign exchange (forex) challenge also remains a major bottleneck for power investors as a result fluctuating exchange rates, which was less than N200 to a dollar when the power assets were bought, and currently above N350.

He said: “Virtually all the spare parts used in the power sector are imported and we need foreign exchange to procure them. But, unfortunately, the fluctuating exchange rate has made planning difficult for investors.”

Another worrisome trend in the sector, according to Audu, is the issue of ageing transmission infrastructure, which most time leads to rejection of generated power by the Transmission Company of Nigeria (TCN).

“This is a major loss on the part of power generation companies. When the generated power is rejected, who bears the loss? I think government should be in a position to pay for this. And going forward, I think TCN should be privatised,” he advised.

Also the Managing Director of Sahara Power, Mr. Kola Adesina, lamented about the paucity of funds for power investors.

He noted that lack of fund remains a stumbling block to the growth of the sector, adding that power sector being a cycle feeds from four sources; gas, generation, transmission and distribution. He said when one leg of the cycle is stifled of fund, all other segments are affected from functioning at optimal level.

According to him, the inability of consumers to pay for power consumed ultimately affects payment to gas producers, Gencos and the transmission company.

He also noted that lack of adequate gas supply to the generating companies is also a major issue hindering the smooth operation of the sector, adding that constant attacks on gas infrastructure by agitators remains an issue that government must address for the sector to move forward.

Meanwhile, the Executive Secretary, Association of Power Generation Companies (APGC), Dr. Joy Ogaji, has called on the government’s ministries, departments and agencies (MDAs) to pay up their debts to the Power sector and also make it a point to make their future payments promptly. She said that it would help improve the sector’s liquidity.

“The government should ensure that there is payment guarantee, no more shortfalls in payment. It is imperative to state here that the investment on generation is at the instance of the off-taker, Nigerian Bulk Electricity Trading Plc, NBET, a Federal Government’s owned public liability company.

“Due to high market liquidity squeeze, Gencos including the thermal and hydro plants lack the necessary funding for their operations, acquiring spare parts and equipment and meeting other obligations for the power generation stations.

“Market payment statistics shows that on a monthly basis, generation companies’ invoices amount to about N35 billion to N40billion, out of which only about N7billion is paid. The implication is that the debt profile of the Gencos is about N30billion per month with no plans in place to clear these and put a sustainable solution for the sector.

“We have been given unfulfilled promises of ‘government is working out a solution’ without a timeline and fulfillment. We are all on life support and could be dead any moment from now, she said.”

In this article

Join the Conversation

Join the Conversation