FEC Okays N701b power purchase guarantee for GenCos

 

THE Federal Executive Council (FEC) has approved N701billion as Power Assurance Guarantee for the Nigeria Bulk Electricity Trading (NBET).  The approval was given at Wednesday’s meeting of the council presided over by acting President Yemi Osinbajo.

The facility will be made available by the Central Bank of Nigeria (CBN) to guarantee the payment for the evacuation of power produced by Generating Companies (GenCos) for the national grid.

Minister of Power, Works and Housing, Babatunde Fashola, made this known while briefing State House correspondents at the end of that meeting. He said the amount will be drawn on monthly basis to tackle liquidity challenges faced by GenCos.

While noting that part of the liquidity problem faced by GenCos was the inability to pay their gas suppliers, he said NBET would pay GenCos in arrears of electricity generated as a deliberate step to improve their confidence and that of intending investors into the sector.

He said: “Part of the challenges that were addressed in the memo that was presented to council to solve some of the liquidity problems, especially as it relates to MBET.

“EMBET as you know is the government’s own company. That is the Bulk ‎Trader Electricity who buys power from the GenCos. The liquidity problems that have characterized the market have affected EMBET’s ability to deliver on its PPP obligations through the gencos.

“So, going forward in order to strengthen EMBET, CBN is providing a payment assurance guarantee for any energy produced by any GenCos, so that the GenCos can pay their gas suppliers when they get paid, so that the hydros can continue to operate.

“What we seek to achieve here is to bring some stability to the production side of the power value chain and also give confidence to investors who want to come in, who are concerned about how to recover their money payment assurance and also people who are planning to invest in the gas sector which is being championed by the Ministry of Petroleum.

“So, the approval of council was to provide this guarantee for EMBET which is a 100 percent government owned company, to pay on a monthly basis its obligations for energy actually produced on to the grid to the gencos that are its customers.

Fashola further stated: “The reality is that we want more power and for that reason, we are expanding our transmission capacity regularly.

“I have been here to announce to you transmission projects that have been approved by council and over the last one year plus, the transmission capacity has grown to almost 7,000 from 5,000 and is continuing to grow with every project.

“So, is not the problem of taking power, ‎is actually a problem of getting power from generation? If you recall just about a few weeks ago, you were reporting that power supply had dropped to a little over 2,000mw. It’s back now at over 4,000mw.

“We have solved the transmission problem in Ikot Ekpene largely to evacuate over a thousand. But the gas suppliers were being owed, so they were not supplying gas for the power producers.

“As to the quantum of the guarantee, it is for two years, from January this year right through to December 2018. It is capped at a maximum of N‎701billion but it is to be drawn monthly. It is possible it may not reach that. But we are projected on the total cost that embet will likely to pay.

“And that is why it is for power generated onto the grid only. So, if the power generated does not meet that cost, we don’t pay for it. It is paid in arrears at the end of the month not in advance.”

Also speaking, Minister of Agriculture, Audu Ogbeh, said the FEC had approved the sum of N263 million for three research institutions to produce gum Arabic seedlings for Nigerian farmers and for export.

He said Nigeria earned as much as $43 million from export of gum Arabic last year, and that more money was expected to be earned

With increased production, especially as the commodity is in high demand in 17 other countries.