Stakeholders lament N1trn debt to power sector

Stakeholders in the power sector have decried the huge debt of over N1trillion to the sector.

Speaking at the recently concluded National Conference organised by the Association of Energy Correspondents of Nigeria (NAEC), former Group Executive Director, Nigerian National Petroleum Corporation (NNPC), Mr David Ige, stated that there is need for prompt settlement of debt for the power sector to operate optimally across the entire value chain.

According to him, “We all are agreed that we have major crisis in energy sector. Particularly in power and gas sector. At the moment, the liquidity challenge is that about N1 trillion is being owed as debt across the entire value chain from gas all the way to distribution.

“Apparently, this threatens all the value chain from gas to power. After the power sector reform, privatisation process began and all the distribution companies were privatised and the generation companies except the transmission company of Nigeria.

“Some key institutions were also introduced like the Nigerian Bulk Energy Trader (NBET) to manage issues that have to do with payment guarantees. If you look at the structure of the reforms, you will say it was done properly.”

Furthermore, he reiterated that “as we move on, we begin to see the challenges inherent in power market which culminated in this massive debt that is beginning to cripple the market operations.”

He stated that natural gas has been identified to have been affected by the liquidity challenge in power sector.

“It may interest you to know that in the country today, our installed capacity for gas production is about two billion standard cubit feet (scuf) per day. If all this capacity is flowing, all these problems associated with power generation would have reduced significantly.

“From January 2016 till date, we have had an average production of 1.4bscuf of gas per day and in fact on a steady scale, it is 1.2bscuf per day. That means about 800 million scuf per day of installed capacity is not getting to the market, talk less of other challenges in the sector.

“We need to address these fundamental issues of not utilising the installed capacity to produce gas. About 300 billion scuf that’s stranded is due to power sector not taking the gas,” he said.

On his part, the Managing Director of Nigeria Delta Power Holding Company of Nigeria (NDPHC), Mr Chinedu Ugbo said that NDPHC was specifically established as an intervention body to improve supply across all the value chain and Ugbo, who was represented by Dr Stephen Ogaji, Head, Fuel & Gas/PPP, Special Project, NDPHC, stated that “We are basically an intervention body.

Our mandate is to build 10 power plants on a fast track basis. Build a lot of transmission projects which will enable the power to get to the end-users and build lots of distribution infrastructure.

“Eventually, the power plants will be sold, the transmission projects handed over to the transmission company of Nigeria at an agreed cost and the distribution projects handed over to the distribution companies also at an agreed cost.

“At the moment, we have concluded eight of these power plants. We have about 3500 megawatts (MW) out of the 4700MW completed. What we can do today is over 2500MW because we are constrained.”

On the effect of liquidity challenge facing the power sector, he posited that “Since 2011 when we started with the first power plant, we have provided invoices of about N322 billion of energy generated out of which only 50 per cent has been received.

“The market is owing us about 50 per cent of the market value and thiscomes to about N158billion. This is huge.”

In terms of how receipts have been made, he said market has been makingsome money from 2011 and it peaks in 2014 when “we realised 25 per cent.

After then, it moves south. Last year however, we realised just 26 per centof our invoice and that is a big challenge to us. If your revenue is 26 percent and your card cost is about 60 per cent, how do you balance that? Youhave to owe banks.”

He commended the Federal Government for its timely intervention in thepower sector. He said that “Government’s intervention in the powere sectorhas been encouraging. As you all know, there was N250billion from thecentral bank of Nigeria  (CBN), N701billion to guarantee power purchasewhich is taking effect from January 2017, and recently N39billion given tothe distribution companies to help them to procure and install meters.”