- Say only 10% of invoice paid monthly
Power generation companies in Nigeria, GenCos, Sunday raise the alarm over the imminent collapse of their operations following a huge debt of N2 trillion and an estimated funding gap of N1.7 trillion contained the 2024 Multi-Year Tariff Order.
The companies said so far only about 10 percent of its monthly invoices for power supplied to the national grid are being paid.
The GenCos in a statement issued by their board Chairman, Col. Sani Bello (rtd), said the companies have continued to bear the full brunt of the liquidity challenges facing the Nigerian Electricity Market.
Bello noted that of all the crises facing the sector, cash liquidity is on the top burner and has reduced GenCos ability to continue to perform their obligations, thereby threatening to completely undermine the electricity value chain.
According to him, "Notwithstanding this and other severe difficulties the GenCos have battled with since takeover in 2013, they have kept to the terms of their contractual agreements by ramping up capacity which has largely suffered systemic constraints.
"GenCos on their part as responsible investors, with patriotic zeal have made large scale investments and have continued to demonstrate absolute commitment by ramping capacities in line with their contract these over 10 years, amid system constraints, policies & regulations that are not investors friendly, increasing debts owed by the FGN without a clear financing plan, lack of firm contracts and a market devoid of guarantees but based on best endeavours, thereby hampering future planning and expansion.
"The power generated by GenCos have continued to be consumed in full without corresponding full payment, notwithstanding the commencement of the Partial Activation of Contracts in the NESI which took effect from July 1, 2022, the minimum remittance order, bilateral market declaration, waterfall arrangement, the risks of inflation, forex volatility with no dedicated window to cushion the effect of the forex impact, the supplementary MYTO order which leaves about 90 percent of GenCos monthly invoices unmet without a bankable securitisation, or financing plan. This situation has dire consequences for the GenCos and by extension the entire power value chain.
"GenCos are currently owed over two trillion Naira for power they generated, put unto the national grid, and consumed by end users. This is in addition to the over 1.7 trillion naira, funding gap created in the recent supplementary MYTO order 2024 without a designated fund to fill the gap. This huge debt outlay is now greatly inhibiting GenCos ability to meet their obligations to lenders, O&M operations, necessary maintenance, spare parts procurements, and employee-related obligations etc.
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"The GenCos expectations of being settled through external support such as the World Bank PSRO has also been dampened due to other market participants' inability to meet their respective distribution linked indicators (DLIs), enshrined in the Power Sector Recovery Program (PSRP)".
The Minister of Power, Chief Adebayo Adelabu had last month disclosed that President Bola Tinubu had approved a payment plan for the debt owed to gas suppliers and the GenCos that would involve immediate cash payment and promissory notes.
But the GenCos appear not satisfied with this and demanded that the Federal Government should present a clear payment plan to cleat the debts.
They demanded "immediate implementation of payment plans to settle all outstanding GenCos invoices, in line with their PPAs; Reprioritization of payments under the waterfall arrangement to give full priority to a hundred percent payment of GenCos' invoices as at when due.
"A clear financing plan to backstop the exposures in the NERC's Supplementary Order to the MYTO and the DRO 2024. Provision of payment security (guarantees) backed by World Bank/AFDB to guarantee full payment to GenCos, to enable them to meet their critical needs, improve generation to Nigeria and implement their respective growth and expansion plans".
