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Power plants require $4.78bn as forex challenges cripple generation

By Kingsley Jeremiah, Abuja
17 March 2022   |   4:03 am
Worsening foreign exchange crisis in Nigeria and ramping down of power generating machines, which have reportedly downed about 14 power plants, has pushed maintenance cost of electricity generation companies (GenCos) to about $4.78 billion.

Power plants require $4.78bn as forex challenges cripple generation
Worsening foreign exchange crisis in Nigeria and ramping down of power generating machines, which have reportedly downed about 14 power plants, has pushed maintenance cost of electricity generation companies (GenCos) to about $4.78 billion.

While Nigeria’s exchange rate has risen by about 300 per cent from the rate in 2013 when the power sector was privatised, the Association of Power Generation Companies (GenCos) noted that unless the companies have special windows to access foreign exchange at official price, yearly maintenance of equipment and other dollar denominated obligations may continue to threaten electricity supply in the country.

A document made available to The Guardian showed that the 28 plants in the country would require $36 million for Hot Gas Path Inspection (HGPI) per plant, about $96 million would be needed for Major Inspection/Overhaul Quinquennial, $15 million is expected on General Spare Parts and Consumable, while Operations and Maintenance Fee would cost $24M per plant.

Executive Secretary of APGC, Joy Ogaji said hydro turbines’ frequent inspection and overhaul cost and yearly insurance of plants are all dominated in dollars.

Ogaji noted that the Long-term Service Agreement (LTSA) with Original Equipment Manufacturers (OEMs), Gas Supply Agreement and Gas Transportation Agreement with Gas Suppliers as well as Hydros yearly concession fee payment with BPE remained in dollars.

According to her, keeping up with the obligations in the face of poor payment of the GenCos invoices is now very difficult.

But the Nigerian Bulk Electricity Trading Company (NBET) insisted that over 80 to 95 per cent of invoices of the generation companies have been cleared in the last four years.

Nigeria’s electricity generation capacity is currently down to record low of about 2,000 megawatts, plunging the country into near darkness, as 14 power plants are inactive.

GenCos directly blamed lack of payment of their invoices in the past year and continued ramping down of machines due to epileptic grid.

The Head, Corporate Communications, NBET, Henrietta Ighomrore insisted that the GenCos were paid as at when due, adding that only five power generation companies with active Gas Purchase Agreement were paid for unused capacity.

“To put in context, NBET makes payment to GENCOS as and when due, and has never defaulted on any payment cycle till date. The percentage payment made to GenCos has continually been on the increase, with the N701.9 billion PAF payment which ensured a minimum of 80 per cent of Gencos invoices for year 2018 and 2019, as well as the second PAf of N600 billion that ensured an average of 95 per cent payment of Gencos invoices for 2020. Also with the current Power Sector Recovery Operation (PSRO) programme that caters for Tariff shortfall, GENCOS have continued to receive over 90 per cent payment of their generating invoices for the 2021 payment cycle,” Ighomrore said.

According to her, market settlement is done based on the Final Settlement Statement (FSS) issued by the Market Operator, noting that once the FSS is issued to market participants, the Gencos send their invoices to NBET, and NBET has a period of 15-20 working days to settle Gencos invoices.

She added that it was also within the period that Discos made their market remittance to NBET, adding that the settlement cycle is seamless, and all parties were well acquainted with their respective due dates.

“In fact, in some cases, we make early payments to Gencos before the 15 working days circle.

“On the issue of capacity payments, the contract documents are very clear on how it is treated. All Gencos get paid for the associated capacity on energy delivered to the national grid. Only Gencos with active PPAs get full capacity payment based on their active gas contracts. You are well aware that active gas contracts are associated with the take and pay obligations that come with more financial exposure and responsibilities. Nonetheless, the regulator (NERC) has set in motion the process for partial activation of contracts in the sector, which was what necessitated the scheduled capacity test by NBET to various thermal plants around the country,” Ighomrore stated.