N86b debts threaten Nigeria’s electricity generation

The country’s power generation capacity may soon drop if the Federal Government delays in paying the N86 billion debts it owes Egbin Power Plc for electricity supplied.
Regarded as the single largest electricity generation plant in sub-Saharan Africa, Egbin Power indebtedness to banks has reached $325 million (N99.13 billion).

At 3,730MW as at Monday, the nation has been enjoying a relative improvement in power supply in the last two months and this may further reduced as Egbin continue to face financial hurdles.Egbin plant Chief Executive Officer Dallas Peavey Jr., said the company’s electricity generation had dropped to 425MW, as a result.Peavey made the disclosure at the weekend during the company’s scholarship award programme to schools within Ijede community in Lagos State.

“Normal generation in Egbin is about 1,320 megawatts. Currently, we are doing about 425MW, only 30 per cent of what we should be generating simply because of gas,” he said on the sidelines of the company’s 2016 scholarship award ceremony for students in Ijede Town, Ikorodu.

Peavey said, “The Transmission Company of Nigeria cannot take the full amount of power that we can generate. Right now, the biggest issue is gas.“On top of that, we are owed over N86 billion by the Federal Government; we have been producing but we haven’t been paid for almost six months. The last money that we got was about 16 per cent of the total bill for the power that we generated for the national grid.

“The amount is the money owed by government through the Nigerian Bulk Electricity Trading to produce power to the grid by generating companies.”Peavey said the company is currently grappling with economic woes occasioned by difficulties in accessing foreign exchange.

Peavey noted that at the time of the acquisition of the asset, the exchange rate was N150 to the dollar, bus had since doubled, which means the company would be paying almost double of what it owes the banks.He said that the huge debt profile was equally creating some bottleneck in the company’s planned capacity expansion initiative.

Having raised capital from banks, he said that the company is now faced with the harsh reality of paying back in time of economic downturn. He said that the huge debts have put the company in a cash liquidity crisis that had reduced its ability to pay for gas supplies, and hence threatens to completely undermine the electricity value chain and its ability to continue to serve customers.

Peavey lamented the persistent shortage of gas supply despite the huge investment the owners have made to boost the capacity of the power plant. He noted that Egbin plant has not been able to meet the required capacity because of gas, despite the increase in the company’s generation ability.

He said the company is considering other sources of power generation that would complement gas, such as Low Pour Fuel Oil, one of the products in the fractional distillation of crude oil.According to him, right now the major challenge confronting the plant is gas and the company does not know what the future has for the power station.

“No matter how much broad-minded you are and no matter the desire to serve your nation, if services are not paid for, the momentum to continue to serve will not be sustained.

“Industry operators are in dire need of funds, as most of the monies used in acquiring the power assets and other post-privatisation investments came from the banks.“But banks do not want to hear about any delays or the reasons for such delays. When the amount of the debt payment is due, they simply call for their money.”

Peavey said t the company is committed to its Corporate Social Responsibility to communities within its area of operation.Peavey said: “We put together the education scholarship programme to students in the communities to contribute part of our quota to their development.“It is part of our CSR, which takes care of over 25 pupils’ schools fees, textbooks and other required amenities for four years.’’