Power generation companies (GENCOs) in Nigeria have raised the alarm over huge debt of about N1trillion owed them by the Nigerian Bulk Electricity Trading Plc (NBET), saying this may lead to possible shut down of their operations soon.
It was revealed that, while the debt being owed the power generation companies was N650 billion between November 2013 and December 2016, the said amount increased to N1trillion as at September this year.
This followed NBET’s inability to service the debt, a situation stakeholders said constitute a significant operational challenge to them.
The GENCOs warned that the implication of this is a possible shut down of operations as a result of threat from local financial institutions that provided facilities for them to buy the power assets when government privatised the sector.
Confirming the development to our correspondent, executive secretary of the Association of Power Generating Companies (APGC), Joy Ogaji, lamented that the challenge has caused serious operational difficulties for the companies.
Ogaji said, while the operators obtained funds from banks on high interest rate, the debt profile keeps growing because of the interest rate differentials.
She said, “We buy Gas from producers and we have to pay. The loan taken by the operators was in US dollars. So, if you check the interest and the current exchange rate at which we are to repay the loan, you can now see why it is on the increase every day”.
Ogaji also expressed dismay over NBET’s inability to settle the rising bills, adding that agreement entered between NBET and the GENCOs was for 100 per cent purchase of power and 100 per cent payment, which is now in default.
NBET, the Bulk Trader in the power industry, was incorporated on July 29, 2010 in line with the roadmap to power sector reform and in fulfillment of the requirements of Electric Power Sector Reform Act (EPSRA) 2005.
Its mandate as a trading licensee holding a bulk purchase and resale license is to “engage in the purchase and resale of electrical power and ancillary services from independent power producers and from the successor generation companies”.
NBET purchases electricity from the generating companies through Power Purchase Agreements (PPAs) and sells to the distribution companies through Vesting Contracts.
The Generating companies include the recently privatized PHCN successor companies, the Niger Delta Power Holding Companies (NIPPs), the already existing Independent Power Producers (IPPs) and the new IPPs.
Ogaji further complained that the N650 billion owed the GENCOs between 2013 and 2016 is no longer being discussed by NBET, adding that rather, it is concentrating energy on power purchased in 2017, in which it had obtained N701 billion loan from the Central Bank of Nigeria (CBN).
She said, “Unfortunately, after obtaining this loan, NBET only paid GENCOs for power purchased in January and February 2017, and this is just a fraction of a huge debt that is about a N1 trillion as at today.
“If you bring the N650 billion to what has so far accumulated then we will be in the region of N1 trillion. This is because our monthly invoice to NBET is N36 billion and we have this running from March up to September”.
She expressed worry that instead of NBET paying at 100 per cent based on agreement it pays in the region of between 20 per cent and 30 per cent during each payment period which is grossly inadequate to sustain their operations.
Journalists Sunday further gathered that NBET will have up to 10 years to repay the N701billion financial facility obtained from the CBN to guarantee payments for electricity generated by the GENCOs for the next two years.
In February 2017, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, presented a memo to the Federal Executive Council (FEC) for proposed policy interventions to revive the country’s troubled power sector.
It contains the policy measures which the government had outlined to reposition the sector, including the Power Sector Recovery Plan initiated in partnership with the World Bank, wherein the Bank is expected to commit up to $2.519 billion for measures aimed at resetting and reforming the sector.
Statutorily, NBET will within the transitional stage of the electricity market buy power from GENCOs and independent power plants and sell to electricity distribution companies (DISCOs), using legal instruments, including power purchase agreements (PPAs) and vesting contracts.
FG Moves To Check Hike In Electricity Tariff
Meanwhile, Vice President Yemi Osinbajo disclosed yesterday that the federal government has put in place policies to ensure electricity consumers have steady and efficient power supply without incessant hike in tariff.
He stated this during the commissioning of a multi-billion naira electricity metering plant at Onna local government area of the state as part of activities to mark Akwa Ibom at 30.
The vice president described the metering plant as the vista of a new dawn in Nigeria’s power sector, even as he encouraged private investors to show interest in electricity and metering distribution in the country.
Osinbajo said the electric meter manufacturing company in Akwa Ibom State will bring an end to consumer challenges in power billing system in the country.
He described Governor Udom Emmanuel as one of the cleverest persons he has ever come across, saying “I want to appreciate you for the innovation and creativity and for encouraging these investors”.
On the metering plant, he said, “We have identified that a lot of the distribution companies are unable to collect effectively their tariff from the consumers because they are unable to afford the cost of metering.
“In the first place we are going to have independent metering and agent. It is open now opened and anybody can take a batch of consumers on meter. This is important an innovation because it means there is no restriction on those who can actually meter our consumers”.
The vice president described the metering factory as an excellent innovation that will help address power supply in the country.
He maintained that with the metering factory in Akwa Ibom State, access to power would be made easy in the country.
“We are certainly looking for this company opening up this factory in different part of Nigeria. I think the country is opened up for this kind of enterprise.”