Abuja — Power Generation Companies (Gencos) operating in the country have called on the federal government to pay the accumulated N3.7 trillion owed them for their services.
A statement signed by the Board Chair of the Association of Power Generation Companies (APGC), Col. Sani Bello (rtd), said members' operations were being constrained by the huge debts.
The group therefore called on the federal government to urgently address the issue of inadequate payment for electricity generated by them and consumed on the national grid.
Bello stated that the power generators had continued to bear the brunt of the liquidity crisis in the Nigerian Electric Supply Industry (NESI), a development that had hobbled their ability to continue to perform their obligations.
However, the Minister of Power, Adebayo Adelabu, has in the last few weeks reiterated that government had concluded arrangements to begin gradual payment, having been approved by President Bola Tinubu.
Bello stated that notwithstanding this and other severe difficulties, the Gencos had battled with since takeover in 2013, they had kept to the terms of their contractual agreements by ramping up capacity which has largely suffered systemic constraints.
The power generated by Gencos, he said, 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 and the minimum remittance order, bilateral market declaration as well as waterfall arrangement.
Added to those, the association said, are: 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 per cent of Gencos monthly invoices unmet without a bankable securitisation, or financing plan.
The situation, it stressed, has dire consequences for the Gencos and by extension the entire power value chain.
"Gencos are currently owed over N2 trillion for power they generated, put unto the national grid, and consumed by end users. This is in addition to the over N1.7 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, necessary maintenance, spare parts procurements, and employee-related obligations etc.
"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).
"Access to forex is another problem given that major operation and maintenance needs in the generation subsector are dollarized, the importance of a specialised window or stable dollar allocation option for the Gencos cannot be overemphasised.
"Gencos are of the position that there is need for a coordinated approach by all stakeholders in the NESI to address the liquidity issue realistically and sustainably in the power sector so that Nigerians can have access to reliable electricity supply.
"In the light of the severity of the issues highlighted above, the Gencos are requesting that immediate and expedited action is taken to prevent national security challenges that may result from the failure of the Gencos to sustain steady generation of electricity of Nigerians," the organisation said.
The Gencos added that their liquidity challenges are further worsened by the various policies introduced such as the payment waterfall in the NESI, which deprioritises payment to Gencos.
The implication of this, they stressed, is that they only get paid a portion of their invoices, about 9 per cent to 11 per cent from whatever amount is left.
This, they said, is an aberration as it is a clear departure from existing terms of the Power Purchase Agreement (PPA) guiding the contractual relationship between them and the Nigeria Bulk Electricity Trading Plc (NBET).
"Gencos should be accorded the utmost priority when it comes to payment to enable them to have the capacity to continue to produce the electricity which is the product around which the entire power value chain is built.
"In view of the foregoing, we hereby demand the following to urgently put Gencos in a position to continue generating power: Immediate implementation of payment plans to settle all outstanding Gencos invoices, in line with their PPAs.
"Reprioritisation of payments under the waterfall arrangement to give full priority to 100 per cent payment of Gencos' invoices as at when due," the group said.
It further called for 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 respect growth and expansion plans.
Besides, the power generators noted that there was the need to ensure greater transparency in the billing, collection, and remittance process of sector funds as well as investors-focused and economy growth friendly policies and regulations to incentivise investors.
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Furthermore, they called for the liberalisation of the market (bilateral arrangement) to create market confidence and ensure the viability and credit worthiness of the power sector and ensuring full effectiveness of all market agreements, firm monitoring, and enforcement of the rules by the regulator on all market participants.
The group added: "Gencos are of the position that the liquidity challenge threatening the continued operation of their power generation plants must be addressed urgently, and sustainably too.
"Besides being owed huge debts, the Gencos also are operating under very harsh monetary and fiscal conditions, occasioned by the economic realities that face the country today.
"The flow of money within the power industry is one of the fundamental problems preventing Nigerians from enjoying continued and sustainable improvement in electricity supply.
"Expeditiously solving these issues would enable Gencos meet their critical needs which would, in turn, ensure that they sustainably generate power, to enable Nigerians have better access to reliable electricity supply. GenCos will like to re-emphasise that this request requires urgent attention."
