The N701 billion payment guarantee initiated by the Federal Government to assist electricity generation companies (GenCos) in settling their obligation to gas suppliers as remittances from electricity distribution companies (DisCos) dwindles, will run out by December 2018, fuelling concerns about sustainability.
Babatunde Fashola, minister of Power, Works and Housing when announcing the project in March 2017, said the decision to approve the payment assurance guarantee for the Nigerian Bulk Electricity Trader (NBET) was to pay gas suppliers so that plants can stay on following poor collections by DisCos.
The GenCos now say they are concerned that as the money will run out next month, there is no provision to sustain it and the issues that necessitated it are still very much around.
“We don’t know what is happening next,” Joy Ogaji, executive secretary of the Association of Power Generation Companies (APGC), a trade group representing power generation companies in Nigeria, told BusinessDay by phone.
Angered by the inclusion of Azura Independent Power Project in the intervention fund beneficiaries list, 5 GenCos took the Federal Government and NBET to court in March this year, to force them to prioritise settlement of over 11 months of unpaid bills.
The Federal Government and NBET have since reached an understanding and began settling market invoices since 2017 but payment has stalled since July this year. On its website, NBET said it paid GenCos N15.08bn for the July 2018 invoices of N51.79bn which represents 29.14 percent payment.
The Federal Government, in June, had through NBET released the first tranche of about N12 billion to 10 GenCos from the N701billion intervention fund. Further releases have since been made to GenCos with consequent improvement in power generation capacity.
The concern for GenCos is that the problems may resurface again.
“When the government starts something, it does not think it through and does not consult with the operators who have the technical knowledge, hence this situation,” Ogaji said, “Nigerians need to ask government what they are doing with their money.”
The Nigerian Electricity Regulatory Commission (NERC) also thinks the process could have been managed better.
“Somebody put in N701 billion to support a business you have already said you are the owner. You took a licence to run your business, if you make a profit, declare it. Go and find out how the businesses called DisCo, Genco are doing, you will shake your head,” James Momoh, chairman of NERC said in an interview with BusinessDay.
Momoh further said, “We have not seen the impact of that investment. Remittances are still very low. This is a sign that the DisCos are not doing well.
“In most cases, we have not seen new technology introduced to improve operational efficiency. We have not seen meters and that is why we are engaged in metering. We have also not seen a full participation between the customers and DisCos in terms of what they will do to get out of the hole.”
According to the government’s plan, the N701bn fund will assuage the huge debt to gas suppliers GenCos cannot meet because DisCos are not making enough remittances. This will allow DisCos the opportunity to improve their collections and as the fund depletes, they would have been able to settle their market obligations.
“The plan was that they will make the DisCos to improve their remittance by the end of December but the remittance has gotten worse than even when they started it, we are asking questions but no one is answering,” Ogaji said.
According to NBET data, the average energy received by DisCos in July was 2,445.06 MWh, they paid NBET N6.08 billion for the January invoices of N44.85 billion which represents 13.58 percent of energy received in the month. DisCos late payment for December 2017 cycle was N3.37 billion which makes the total receipts for January 2018 N6.08billion.
ISAAC ANYAOGU
