Forex scarcity hinders Egbin power generation

The Chief Executive Officer, Egbin Power Plc., Mr Dallas Peavey, said on Sunday that accessing Foreign Exchange (Forex) remained a major challenge to importing equipment for the company’s operations.

Peavey made the assertion in an interview with the News Agency of Nigeria (NAN) in Lagos against the backdrop of the company’s inability to expand its plant for further electricity generation.

According to him, the power plant cannot continue to import equipment and effect rehabilitation because of forex challenges.

“The years since the electricity companies were acquired are fraught with difficulties as we faced several hurdles in importation of electrical equipment.

“We are still not free from difficulties as access to forex remains a huge challenge.

“Most of the equipment used on the 37-year-old plant are not manufactured in Nigeria or Korea. We have to go to Japan because the machines are made there.

“Scarcity of dollars has grossly contributed to the poor development of the plant because sourcing for dollars remains a mirage,’’ he said.

Peavey said that the electricity firms were already facing difficulties in servicing the over N402 billion loans which they collectively took to purchase the plants when they were privatised in 2013.

He said that currently, Egbin Power was indebted to banks to about 320 million dollars.

He said that the money was borrowed to rehabilitate the plant and purchase equipment to put the plant in good shape to generate at capacity level.

The Egbin boss said that when the power generating companies took loans from local and international banks to acquire the electricity plants, the foreign exchange rate was about N157 to one dollar.

He said that currently, it was difficult to pay back as the rate had risen to over N320 to one dollar.

He appealed to Federal Government to assist power generating companies toward accessing low exchange rate as high rates impacted negatively on their operations.

According to him, with the high forex rate, the cost of yearly maintenance has also doubled.

“What this means is that we will be paying two times that amount for maintenance alone.

“Our plant is largely run with offshore equipment, spares and tools and these spares can only be procured in dollars.

“Invariably, there is a need for a special allocation if we are to get the entire mix right.

“Otherwise, the tariff structure will not be affordable to be able to assist in the industrialisation vision of the President Muhammadu Buhari’s administration,’’ Peavey said.

He noted that the huge debts owed generation companies have put them in a cash liquidity crisis that had reduced their ability to pay for gas supplies.

He added that the development was threatening to completely undermine the electricity value chain and ability to continue to serve customers.

He urged the Nigeria Bulk Electricity Traders (NBET) to make all collections from consumers more visible and accessible to all stakeholders in the energy business.

Peavey lamented that they had been at the receiving end of the deficiencies in the Nigerian power sector, as well as the seemingly insurmountable challenges of operating in the sector.

“The fact is that Electricity Generating Companies (GENCOs) have been and remain far more vulnerable than any other player in the electricity supply value chain.

“For whatever reason, very little has been put in place to give the GENCOs a legitimate chance of survival based on the realities on ground.

“While the GENCOs have been carrying the burden of ensuring that the power sector remains functional, and hoping that the obvious gaps, deficiencies and threat to their existence will be addressed.

“We are currently cringing under the excruciating pains of carrying this burden,’’ he lamented.

Peavey explained that since takeover of the power generation assets, availability of good quality gas had always been a major issue.

He said that the situation had taken a turn for the worse in the last six months due to the rising cases of pipeline vandalism and insecurity around gas producing and transportation assets.

The development, he noted, had further diminished the supply of gas to generation plants, thereby crippling the system.

Peavey said that there was a need for the government to significantly invest in the transmission sector to ensure an equal level growth across the industry.

He also said that the generating sector was already witnessing some crises due to inadequate transmission infrastructure.