•CBN, NBET, huge debts, forex, vandalism blamed
for woes
for woes
•NBET: We've paid N186bn
•CBN: GENCOs haven't met conditions for
disbursment
By Omoh Gabriel, Michael Eboh & Gabriel Ewepu
Nigerian Bulk Electricity Trading Plc, NBET weekend
said it has paid N186.7billion to Electricity
Generating Companies GENCOs saying it is only
owing them about N156 billion.
Reacting to the alarm raised by GENCOs that their
continued existence is being threatened by huge
unpaid debt by various stakeholders and that they
are currently running their operations at a huge loss;
and are barely struggling to survive, General
Manager/Head, Power Procurement and Power
Contracts, Nigerian Bulk Electricity Trading Plc,
NBET, Longe Yesufu Alonge, said the company has
made payment of N186, 556, 636, 647 from
February 2015 to April 2016, while the outstanding
payment to the GENCOs from February 2015to April
2016 is N155, 768, 549, 056.
He said that “the payment performance of NBET
from February 2015 to April 2016 is 54.50 percent
not the average of 40 per cent being claimed by the
GENCOs. He also said that NBET has paid the sum
of N21billion from its capitalisation to reduce the
debt it owes the GENCOs. He explained that the
company has not paid the outstanding due to the
challenges in the power sector.
Reacting to the same issue, an official of the
Central Bank of Nigeria, who does not want his
name in print, said that the power intervention fund
has terms and conditions attached to it. He said
that any GENCOs which meets the terms and
conditions of the facility have due access to draw
from the fund. He said that some of the GENCOs
think that the fund is a national cake to be shared.
He said that the last draw down from the fund
some of the GENCOs did not benefit because they
failed to meet the necessary conditions. He equally
said that some of the GENCOs just wanted free
funds which is not possible anywhere.
The Power Generating Companies weekend said
that unless something urgent is done in the next
couple of months, Nigeria should be prepared for a
total electricity blackout. They said that they are
currently running their operations at a huge loss and
are barely struggling to survive.
The GENCOs, in a report, blamed their woes on the
huge debt, valued at about N140 billion, owed them
by some government agencies and some other
companies; the declining value of the naira against
major international currencies; insecurity and
vandalism of gas and power assets in the Niger
Delta; shortage in gas supply; low tariffs and
absence of critical infrastructure to support power
generation.
They said that the combined effect of these would
render the GENCOs and their investors incapable of
delivering power despite their willingness and
readiness to so do. They disclosed that this is
leading to a situation where total seizure of
operations by GENCOs is imminent.
“The GENCOs 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. “Much as the GENCOs remain
committed to deliver on their power generation
commitments, if the issues listed below are not
resolved within the next few days, an elongated
system collapse will be inevitable,” the GENCOs
warned.
However from the document sighted by Financial
Vanguard, the lingering epileptic power supply in
the country is as a result of cumulative stranded
capacity from the GENCOs, which they record daily.
According to the GENCOs' document, “Several
efforts have been made to mitigate these stranded
capacities to the barest minimum, but thus far all
efforts have been in vain, as the capacity tends to
increase rather than decrease. Out of the 7,856.52
MW, available capacity in the country, only
2,804MW, can be generated, as about 4,991 MW,
have been recorded as stranded capacity."
A breakdown of the power generating situation
showed that Egbin, which is the country’s largest
power station, can only deliver about 201MW, out
of the 880MW available capacity, the remaining
679 MW is recorded as stranded capacity.
Transcorp Power Limited, a subsidiary of
Transnational Corporation of Nigeria Plc, owners
and operator of Ughelli Power Plant in Warri, Delta
State, have a stranded capacity of 249MW, out of
the 450 MW available capacity.
The data also revealed that Shiroro Power Station, a
hydroelectric power plant located at Kaduna River in
Niger State, is the only company that has no
stranded capacity rather out of the 450 MW,
available capacity, the company generate 412 MW,
the remaining can be attributed to generation loss.
Geregu and Sapele on the other hand are said to
have a generating capacity of, 0 MW and 65 MW
as well as 276MW and 55 MW stranded capacity
respectively. Kainji/Jebba, it said both Hydro Power
Plants in Niger state, with an available capacity of
836 MW, have a stranded capacity of 170 MW.
While others have generating capacities of 1,190
MW, and stranded capacities of 3,562 MW.
Furthermore, the GENCOs said, they are not talking
about breaking even or making profit, which is a
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.
They said despite their commitment, as seen by
their substantial capital investments towards
capacity enhancement and continued operations
under the suffocating operating environment, they
have continued to be stretched. “As if the intention
is to know how far the GENCOs could go before
shutting down operations, the response is very
simple: Shut down is imminent,” they said.
The GENCOs claimed they have been at the
receiving end of the lapses and deficiencies in the
Nigerian Power Sector, as well as the seemingly
insurmountable challenges of operating within the
sector." According to them, they have been and do
remain far more vulnerable than any other player in
the electricity supply value chain, adding that 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,” they
said.
The GENCOs accused the Central Bank of Nigeria
of being complicit in their woes, stating that the
much welcomed intervention by the Central Bank of
Nigeria (CBN) to bridge the gap, between the
receivables and actual receipts, had 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 today, the GENCOs claimed they 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.
They lamented that the non-payment of the
stabilisation fund as at when it was approved two
years ago has impacted on its value as at today.
In the area of gas shortage, the GENCOs lamented
the non-availability of gas, to power their plants,
stating that the rising cases of pipeline vandalism
and insecurity around gas producing and
transportation assets have further diminished the
supply of gas to generation plants, thereby crippling
the system.
The GENCOs said, “Since the takeover of the power
generation assets by GENCOs, availability of good
quality gas has always been a major issue.
However, in the past six months, the situation has
taken a turn for the worse. The rising cases of
pipeline vandalism and insecurity around gas
producing and transportation assets have further
diminished the supply of gas to generation plants,
thereby crippling the system.
“All the issues surrounding gas infrastructure have
resulted in a cumulative stranded capacity of 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.
Commenting on the impact of declining value of
the naira on their fortunes, the electricity generating
companies said, “When the GENCOs acquired the
power assets, the exchange rate of the United
States Dollar to Nigerian 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 is however important that there is special
consideration for foreign exchange allocation to
support the power sector.” On the issue of tariifs
and inadequate infrastructure, the GENCOs said,
“The market rules recognize 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.
“This has ensured that cost-reflective tariffs, which
are clearly provided for in the Electricity Power
Sector Reform Act, has not been achieved till date.
For the GENCOs, the closest the market has got to
this, is the current tariff under the Multi-Year Tariff
Order (MYTO) 2015, which, though not fully cost-
reflective, was a welcomed development towards
enhancing the capacity of GENCOs to discharge
their obligations.
“The GENCOs' position is that they cannot survive,
thrive or meet their power generation obligations
and expectations under the present state of things.
It is important that all stakeholders should note
this. It is critical that these issues be addressed
immediately. This should be of utmost concern to
all market participants.
“The GENCOs also use this opportunity to send an
SOS in respect of transmission infrastructure
particularly as it relates to the safety of our
operations and equipment. There is a need to
significantly invest in the transmission sector in
order to ensure an equal level growth across the
industry. As it stands now, the generating sector
has already witnessed a mishap due to inadequate
transmission infrastructure which has cost damage
to generating equipment valued at billions of
Naira.”
"To this end, the GENCOs expressed optimism that
the situation can only be saved if solutions are
immediately implemented to address the issues
highlighted above.
According to the GENCOs, while they remain
committed to the Nigerian project, this
commitment can only be meaningful when the
critical factors necessary for the continued
existence and thriving of the GENCOs and the
power sector are addressed and fixed, noting,
however, that it is extremely urgent that this is done
now."
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