Six of Nigeria’s privatised electricity generation companies (Gencos) have warned Nigerians to brace up for a long-term loss of the electric power, insisting that it is extremely difficult to continue to generate electricity under the current economic condition.
The power companies, also signalled their intention to shut down operations in a matter of days, citing outstanding N145.475 billion debt owed to them, and government’s economic policies, which they claimed now negatively impact their operations.
The Gencos- Egbin; Trancorp Ugheli; Sapele; Geregu; Kainji/Jebba and Shiroro, said the amount owed them for the electricity they generated and supplied to the country’s electricity network over a period have not been paid, adding that the huge debt was hurting their businesses.
Collectively, the six Gencos account for about 3,091 megawatts (MW) of the 7856.52MW available generation capacity of the country. The balance of 4775MW could come from the other 10 power stations of the National Integrated Power Plants (NIPP).
However, the Gencos in a statement they sent to THISDAY, itemised their current operational challenges as well as their resolve to shut down.
They said contrary to widely held belief, they have been at the receiving end of the lapses and deficiencies in Nigeria’s power sector, as well as the current variations in the country’s economy.
According to the power companies, poor revenue remittances; inadequate gas supply; government’s economic policies and unfulfilled contractual terms by other sector operators and the government have collectively contributed to their operational woes, adding that they are currently vulnerable in the sector.
“The fact is that Gencos have been and do remain far more vulnerable than any other player in the electricity supply value chain. For whatever reason, very little has been put in place to give the Gencos a legitimate chance of survival based on the realities on ground.
“While the Gencos have been carrying the burden of ensuring that the power sector remains functional, and hoping that the obvious gaps, deficiencies and threat to their existence would be addressed, they are presently cringing under the excruciating pains of carrying this burden. Given that life is literally being snuffed out of the Gencos, they owe all stakeholders and the generality of Nigerians the duty to cry out,” said the statement.
It further stated: “Today, the Gencos are not talking about breaking even or making profit, which are legitimate expectations of any investor, rather they are crying out about their continued operations at a huge loss and the absence of critically required support.
“The combined effect of these would render the Gencos and their investors incapable of delivering power despite their willingness and readiness to so do. This is leading to a situation where total seizure of operations by Gencos is imminent.”
The Gencos, the statement added, “now have very limited options: to either shut down operations proactively or be compelled to do so by the current state of affairs in the power sector.”
Furthermore, the companies explained that much as they remain committed to deliver on their power generation commitments, if such issues as extant liquidity crisis and outstanding receivables; poor gas supply; cost reflective tariff; transmission challenges; and variations in the country’s fiscal terms are not addressed within the next few days, an elongated system collapse will be inevitable.
On liquidity and outstanding receivables, they said that “as from the pre-transitional stage of the electricity market till date, outstanding payments to the Gencos have consistently been on the increase.”
Officials in both the Nigerian Electricity Regulatory Commission (NERC) and Nigeria Bulk Electricity Trading Company Plc (NBET) confirmed this development to THISDAY.
The Gencos however claimed the intervention by the Central Bank of Nigeria (CBN) to bridge the gap between the receivables and actual receipts has been bogged down with bureaucracy typified by long drawn processes, which have ensured that after two years of the said intervention, not much impact has been made on the power sector.
“As at date, the Gencos have not received full disbursement of the intervention fund from CBN, and there is absolutely no clarity as to when remaining payment tranche will be completed. The non-payment of the stabilisation fund as at when it was approved two years ago has impacted on its value as at today,” the statement noted.
It said Egbin was owed N68.71 billion by the market; Transcorp – N28.29 billion; Shiroro – N9.66 billion; Geregu – N7.975 billion; Kainji/Jebba – N20.94 billion; and Sapele – N9.90 billion, as outstanding debts for energy supplied.
The statement explained that the declaration of a Transitional Electricity Market (TEM) in February 2015, and the expected relief it was expected to bring to Gencos, given the principle that thenceforth, transactions and relationship amongst all market participants should be guided by the terms and conditions of the various contracts entered into by such participants, have not materialised.
It said the the verified amounts invoiced by the Gencos in the TEM arrangement are required to be guaranteed and paid by the NBET, but that the trend of payments from NBET has been very poor, even up to June with an average remittance of 38 and 20.8 per cents for the gas and hydro plants respectively.
In fact, the statement disclosed that for the months of March and April 2016, no payment was made to the hydro power stations by the NBET. They said it was important for these payments to be made.
On shortage of gas, they claimed that since they took over the generation assets in 2013, availability of good quality gas has always being a major issue, and that the immediate past six months has been worst.
“All the issues surrounding gas infrastructure have resulted in a cumulative stranded capacity of circa 5,000 megawatts (MW) being recorded every day. The impact of this is better appreciated by the fact that the total power generation capacity as at today should have been close to 8,000MW as opposed to 2,800MW. The impact of this on the Nigerian economy cannot be overemphasised,” the statement noted.
It said on the impact of foreign exchange vis-à-vis the country’s economic policy on their operations that their purchasing power for needed spare parts have been eroded.
“When the Gencos acquired the power assets, the exchange rate of the Dollar to Naira was $1/N157. About three years down the line, the cost of the equipment needed to carry out repairs of turbines and associated auxiliaries remain the same on the international market but has increased by about 100 per cent in the last three years arising from the devaluation of the Naira.
“Given the fact that majority of parts and equipment procured by the Gencos are sourced from outside of the country, this has had significant impact on the Gencos purchasing power and inevitably on their ability to upgrade and maintain their various power plants.
“Furthermore, as at the time of paying for the power assets in 2013, some of the acquisition financing were sourced by the Gencos in dollars, to the knowledge of appropriate government and regulatory agencies. The cost of repaying those facilities has significantly increased by about 100 per cent in the last three years arising from the devaluation of the Naira as well. This has resulted in additional huge losses with suffocating effects on the Gencos,” it stated.
They thus requested for a special consideration on foreign exchange allocation to support the power sector.
On tariff and its current opposition, the statement explained: “The market rules recognise three critical factors that drive tariff: exchange rate; cost of inflation and gas prices. In recent times, these three drivers have significantly risen by over 100 per cent without commensurate increase in tariff.
“The Gencos position is that they cannot survive, thrive or meet their power generation obligations and expectations under the present state of things.”