N140bn debt: Gencos threaten shutdown

Electricity Generating Companies (Gencos) operating in the country have threatened to shut down their operations over N140bn debt owed them by the government.

The companies, in a statement made available to the Nigerian Tribune, stated that “As from the pre-transitional stage of the electricity market till date, the outstanding payments being carried by the Gencos in their books have consistently been on the increase.

“The much welcomed intervention  by the Central Bank of Nigeria (CBN) to bridge the gap (between the receivables and actual receipts) has 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 date, the Gencos 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. The non-payment of the stabilization fund as at when it was approved two years ago has impacted on its value as at today.”

While lamenting the effect of gas supply shortage on their operations, the Gencos said since they took over the power generation assets, they had always had issues with the availability of good quality gas. They, however, noted that in the last 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.”

They added, “All the issues surrounding gas infrastructure have resulted in a cumulative stranded capacity of circa 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 overemphasized. A snapshot of the generation profile of the country as at Wednesday, 20th July, 2016 is as shown below.”

On the effect of the foreign exchange volatility on their operation, they 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.”

The Gencos, while lamenting that they had not been able to break even let alone make profit, said they would be left with no other option than to shut down if factors militating against their operations were not immediately attended to by the appropriate government agencies.