Gencos express concern on gas supply as suppliers demand upfront payment

Power Generation Companies (Gencos) have expressed concern on the capacity to meet up with gas supply needed to enhance power generation, as gas suppliers demand upfront payment before making available gas for power generation. Against this background, it is difficult for Gencos on the back of arrears of debt owed them.

The Gencos, in a statement issued weekend, note that the unavailability of gas has greatly hindered power generation in thermal Power Plants, as gas cost constitutes over 60 per cent of wholesale electricity tariffs in Nigeria, adding that if this goes on in the gas sector it has huge implications for the Nigerian electricity supply industry.

“The Association of Power Generation Companies is reiterating the commitment and readiness of Gencos to improve power generation from its Thermal and Renewable, Hydro Power Plants sources across the country. However, there is a shortage of gas supply for thermal generation companies as the thermal power from gas and steam turbines accounts for about 80 per cent of Nigeria’s power generation.

“In recognition of the importance of the services provided by the power sector, President Muhammadu Buhari directed that commercial establishments such as Power Generation Companies (Gencos), Transmission, and Distribution companies be exempted from the restriction placed on human and vehicular movements in Lagos, Abuja and Ogun states.

“Against this background, Gencos are working together to ensure the sustainability of adequate power generation during the COVID-19 global health crisis. This is evidenced in the increase in power generation which has averaged 4,024mw since the index case was recorded on the 27th of February.

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“However, the gas suppliers have demanded an upfront payment (pre-payment) before they make gas available and the Gencos cannot afford to meet this request given the liquidity issues in the Nigeria electricity supply industry”.

The statement further reveals that the Gencos are altering their business practices and developing strategies for dealing with the COVID-19 pandemic, as demonstrated by the establishment of telework protocols to ensure that non-essential, non-critical employees work from home while implementing its continuation of services plan to ensure operations and service delivery continue as usual to prevent even more economic disruption.

“Gencos have a strong track record of preparing for numerous emergencies like the COVID-19 pandemic, as well as countless other types of emergencies. This is evidenced in ramping up to a total available capacity of over 7,500mw and gross generation installed capacity of over 13,000mw.

“In preparation for the current situation, the Gencos have commenced close talks with the Federal Government and other power sector stakeholders to ensure that power plants have the resources they need to ensure generation of power”.

The Gencos in the statement further express willingness to invest in increasing the capacity of the power plants and provide necessary investments to cater to maintenance and the repair.

“Generation Companies are willing to work with relevant stakeholders such as the Federal Ministry of Petroleum Resources and the Nigerian National Petroleum Company (NNPC), two critical stakeholders with oversight over gas resources, to develop novel approaches in making gas available for generation companies.

“Gencos are ever ready to partner with the Federal Government and its relevant stakeholders to evolve strategies that will fast track the quest for optimal utilization of available and recover unavailable installed generation capacity which could make our dear nation to be listed on the roll call of countries with adequate and stable electricity supply in the world”.