Nationwide blackout looms as GenCos threaten shutdown over N2trn debt

The Power Generation Companies (GenCos), have appealed to the Federal Government to settle electricity debts owned them for electricity generation to enable them remain in business.

Retired Col. Sani Bello, the Board Chairman, Power Generation Companies, said this in a statement in Abuja on Sunday.

Bello said: ”GenCos are constrained to issue this release to draw the attention of the Federal Government and key stakeholders to the need to urgently address the issue of inadequate payment for electricity generated by them.

”And consumed on the national grid, which is currently threatening the continued operation of their power generation plants.

”GenCos are currently owed more than two trillion naira for power they generated, put unto the national grid, and consumed by end users.

”This is in addition to the more than 1.7 trillion naira funding gap created in the recent supplementary Multi Year Tariff Order (MYTO) 2024 without a designated fund to fill the gap,” he said.

According to him, this huge debt is now greatly inhibiting GenCos ability to meet their obligations to lenders, Operations and Maintenance (O&M) spare parts procurements, and employee-related obligations.

”In the light of the severity of the issues highlighted above, the GenCos are requesting that immediate and expedited action is taken to prevent national security challenges.

”That may result from the failure of the GenCos to sustain steady generation of electricity of Nigerians,” he said.

Bello said that GenCos liquidity challenges were further worsened by the various policies introduced such as the payment waterfall in the Nigeria Electricity Supply Industry (NESI), which deprioritises payment to them.

”The implication of this is that GenCos only get paid a portion of their invoices of nine or 11 per cent from whatever amount is left.

”This is an aberration as it is a clear departure from existing terms of the Power Purchase Agreement (PPA)
guiding the contractual relationship between GenCos and the Nigeria Buk Electricity Trading (NBET).

”Which NBET as buyer has contracted to purchase the available capacity as agreed under the PPA?

Bello said that the GenCos expectations of being settled through external support such as the World Bank Poverty Reduction Supports Operation (PSRO) had also been dampened.

He said that this was due to other market participants’ inability to meet their respective distribution-linked indicators (DLIs), enshrined in the Power Sector Recovery Programme (PSRP).

He said that access to forex was another problem given that major operation and maintenance needs in the generation subsector were dollarised.

According to him, the importance of a specialised window or stable dollar allocation for GenCos cannot be overemphasised.

”GenCos are of the position that there is a need for a coordinated approach by all stakeholders in the NESi to address the liquidity issue realistically and sustainably in the power sector.

”So that Nigerians can have access to reliable electricity supply,” he said.