The power Generation Companies (GENCO) have sued the federal government for giving “preferential treatment” to two competitors with intent to harm the business interests of the others.
GenCos, who said they are on the verge of collapse over debts in excess of N1 trillion currently generate 80 per cent of the power consumed in Nigeria.
They accused the Federal Government of giving preferential treatment to Azura Power West Africa Limited and Accugas Limited to the detriment of the Nigerian Electricity Supply Industry and the power sector as a whole.
In a suit filed by 13 GENCOs, the defendants are the Federal Government, the Central Bank of Nigeria, CBN, Minister of Power, Works and Housing, Nigeria Bulk Electricity Trading Plc, NBET, Azura and Accugas.
The GENCOs, represented by Mainstream Energy Solutions Limited (Mainstream), Transcorp Power Limited (Transcorp Power), Egbin Power Plc (Egbin) and Northsouth Power Company Limited (Northsouth), are arguing that the defendants, have continuously meted out unfair treatment to them, their investors and suppliers. Specifically, the GENCOs stated that they had made huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to the Nigerian Bulk Electricity Trading, NBET Plc and are facing the threat of business failure as a result of their huge indebtedness to banks and financiers, which provided the foreign currency-denominated acquisition loans with which the power plants were acquired from the Federal Government.
They alleged that NBET has consistently defaulted in paying them for electricity generated and put on the national grid in breach of its contractual obligation, which required that the GENCOs be paid in full (100 per cent) not later than 45 days of invoice submission and upon delay in payment, be paid with interest at the agreed rate.
Implication The GENCOs noted that failure to pay them has caused them to default in meeting their obligations to their lenders, O&M contractors, equipment manufacturers, service providers and other persons and entities.
The GENCOs put the total amount owed them for electricity supplied at approximately N800bn, adding that when interest is added, it amounted to over N1trillion. They stated that the N701bn Payment Assurance Facility could have enabled government to pay for all electricity generated and supplied from January 2017 to December 2018. The GENCOs are aggrieved that the Federal Government has not kept faith with payments from the N701bn facility as payment timelines are not clear, regular or consistent. Specifically, they stated that only 80 per cent of invoiced amounts are paid whenever the Federal Government chooses to pay, with 90 per cent of gas supply invoices paid directly to gas suppliers out of the said 80 per cent payment, adding that whatever is left of any payment tranche was hardly sufficient for any meaningful activities of the GENCOs.
Hopelessness The GENCOs stated that payments are insufficient, adding that the outstanding payments owed the GENCOs before the introduction of the N701bn Facility and the monthly shortfall payment of 20 per cent of invoices have continued to pile up without any clear idea of how these will be paid.
They disclosed that even though they appreciate the introduction of the N701 billion, it was neither a privilege nor a favour to them as they are entitled to full payment for electricity generated and supplied.
The GENCOs stated that they took loans from Nigerian banks with some of the banks leaning on international banking institutions to provide support for them.
Mr. Olusegun Joseph Ajayi-Kadir, Director-General, Manufacturers Association of Nigeria (MAN) stated that poor power supply has impacted negatively on the activities of manufacturers in the nation. Ajayi-Kadir said many manufacturers incur huge costs in the process of generating their independent power.
He said the GENCOs and others should cooperate to solve the problems in order to improve power supply to all classes of consumers, including manufacturers.
However, a source in the Ministry of Power, Works and Housing, who preferred not to be named said “the poor state of the sector may hinder the execution of Federal Government’s Power Sector Recovery Programme (PSRP) targeted at increasing power supply from 4,000mw to 6,000mw between 2017 and 2020. The government had emerged with the PSRP, a series of policy actions, operational, governance and financial interventions for implementation over the next five years to restore the financial viability of Nigeria’s power sector, improve transparency and service delivery, and reset the Nigerian Electricity Supply Industry (NESI) for future growth. The PSRP was intended to restore the sector’s financial viability; improve power supply reliability to meet growing demand; strengthen the sector’s institutional framework and increase transparency in the sector. It was also targeted at implementing clear policies that promote and encourage investor confidence in the sector; establish a contract-based electricity market and bring about financial interventions to fully fund historical and future sector deficits. The programme was also intended to fund future sector deficits from 2017 to 2021 and execute a plan to fund the required Electricity Market Support until tariffs attain cost recovery levels in the nation.”
