Power generation companies in Nigeria, known as GenCos, raised the alarm yesterday over the looming collapse of their operations.
They cited a massive debt of N2 trillion and an estimated funding gap of N1.7 trillion outlined in the 2024 Multi-Year Tariff Order as the cause for concern.
The companies said so far, only about 10 per cent of its monthly invoices for power supplied to the national grid were being paid.
The GenCos in a statement issued by their board Chairman, Col. Sani Bello, retd, 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 was on the top burner and had reduced GenCos’ ability to continue to perform their obligations, thereby threatening to completely undermine the electricity value chain.
He said: “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 per cent 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 N2trillion for power they generated, put unto the national grid, and consumed by end users. This is in addition to the over N1.7 trillion 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.
“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”.
