Five power generation companies including Egbin, Transcorp, Mainstream and two others are suing the Federal Government over its decision to prioritise the settlement of its obligations to Azura IPP from the N701bn power guarantee to mitigate distribution companies DisCos inability to settle their market invoices.
Sources with knowledge about the matter told BusinessDay that the suit was instituted yesterday at the Federal High Court in Abuja. The GenCos are asking the court to prohibit the Federal Government from paying Azura IPP from the N701bn Power Guarantee.
BusinessDay had reported on February 21, that power generation companies are fretting over the decision of the Federal Government to include the Azura Edo IPP among beneficiaries of the N701billion power assurance fund announced in March last year. Now it seems they are seething.
“The GenCos are asking that Azura must be paid from the market just like every other market participant. In the unlikely event that Federal Ministry of Finance or Nigerian Bulk Electricity Trading (NBET) insist that they would pay, they must pay the same amount they pay to Azura to them as a GenCo, that they must be treated equally since they are all GenCos,” the source said.
Parties joined as defenders in the suit include the Federal Ministry of Finance, Federal Ministry of Power, Works and Housing, the Nigerian Bulk Electricity Trading (NBET) PLC, Azura IPP, and Accugas.
Joy Ogaji, executive secretary of the Association of Power Generation Companies (APGC), a non-profit and non-political organisation that represents generation companies, confirmed this development by phone. She also said the matter would come up today in court.
“I am yet to see the court documents but I can confirm that they are in court,” she says, “This is now a case of some animals are more equal than others.”
Ogaji said that the legacy power plant which have the capacity to generate over 7,000MW of electricity were denied a sovereign risk guarantee only for the Federal Government to gift Azura the same guarantee including a partial risk guarantee from the World Bank even when it has capacity to generate only 450MW.
“Don’t you see that something does not add up?” Ogaji said in a telephone interview granted BusinessDay.
However, a source close to Azura told BusinessDay that the GenCos argument is irrelevant. “The N701bn was initiated at the instance of the Federal Government and it has the prerogative to decide how it wants to disburse it.”
The decision to pay Azura from the N701bn guarantee was taken to forestall a possible default by the NBET of its obligation to pay for power supplied to the national grid in December by Azura. But the generation companies are concerned that not only is Azura getting favourable treatment, it would now happen at their own expense.
“The Federal Government did not make any provision for subsidy for power so they cannot pay Azura from any other source without recourse to the N701bn power guarantee, this is the issue,” says Chuks Nwani, an energy lawyer.
Nwani further said, “The inclusion of Azura IPP in the payment guarantee will mean that significant funds would be diverted to paying Azura possibly derailing the plans, this is why GenCos are resisting the move because it spells trouble for their business.”
If litigation holds up payment for Azura IPP’s invoice due in June, it could impact Nigeria’s credit ratings. According to the terms of the Put and Call agreement the Federal Government signed with Azura, the company is empowered to go to the key lenders JPMorgan Chase & Co., Standard Chartered Plc and Standard Bank Group Ltd, present their claim and get paid while Nigeria’s sovereign ratings will take a beating upon calling the partial risk guarantee from the World Bank. This will in effect be a loan to Nigeria.
Azura secured a $900m debt financing from a consortium of 15 banks from 9 different countries, including most of the European development finance institutions to build a 450MW Open Cycle Gas Turbine in Benin City, Edo State,
The first Nigerian power project to benefit from both the World Bank’s “Partial Risk Guarantee” structure ($237 million of debt used to build the plant), the political risk insurance supplied by the Multilateral Investment Guarantee Agency, Azura delivered on budget and ahead of schedule by 7 months and could raise Nigeria’s peak generation from 5,155MW to over 5,500MW.
Last month, Azura sent to NBET, the market bill for test power from a single turbine of 153MW delivered to the grid on December 20 and three more tests are scheduled. During the four-month commissioning period, the plant will produce over 100,000 megawatt hours of electricity which will be sold NBET to DisCos. The invoice will be due for payment by June.
ISAAC ANYAOGU
