FG’s N701bn power sector funds not to settle industry debts
The N701 billion which has been approved by the Federal Government will not be used to settle legacy power sector debts, which have now been estimated to cross the N1 trillion mark.
Instead, it will be used in making payments for gas to be consumed by power generation companies (Gencos) beginning from the month of January 2017 so as to guard against liquidity challenges previously experienced that are now threatening to shut down the entire Nigerian electricity supply industry.
Saidu Mohammed, who is the chief operating officer (COO), Gas and Power Division of the Nigerian National Petroleum Corporation (NNPC), stated this Thursday, during a speech at the Oloibiri Lecture Series and Energy Forum in Abuja, the Nigerian capital.
“It is not money for legacy debts but money meant for gas consumed from January 2017 to be paid going forward,” he explained.
Mohammed further stressed that going forward, the mid stream segment of the Nigerian gas supply market will be opened, especially in terms of processing and transportation.
This, he said, “is intended to serve as an intervention by government that once we attain 6000 megawatts, there will be no going down.”
He therefore advised that the issue of legacy debts in the power sector should also be addressed going forward.
Saka Matemilola, who is chairman of the Society of Petroleum Engineers (SPE), said the essence of SPE’s Oloibiri Lecture Series and Energy Forum was to ensure that “as a people and as a nation, we don’t forget the beginning of oil exploration and exploitation in Nigeria.”
However, Barth Nnaji, who is the chief executive officer (CEO) of Geometric Power, a power generation firm base in Abia State, held that the N701 billion to be provided by the Federal Government will not solve Nigeria’s power sector liquidity problem, unless the regulator must be a clearly transparent umpire.
On Wednesday, March 2, the Federal Government approved N701 billion that it said was a power assurance guarantee for the Nigerian Bulk Electricity Trading (NBET) Company.
The move, the government explained, could also act as an incentive for improved gas supply to power generating plants across the country.
This became necessary due to the fact that the Gencos operating in Nigeria have recently threatened to cut off power supply to the transmission lines because of the huge debts being owed them by the power distribution companies (Discos).
Also, the Gencos themselves could not pay for the gas supplied to them by the gas companies because of the mounting debts owed them on the distribution and consumer ends of the power sector.
The Nigerian electricity supply market hit an estimated N1 trillion shortfall by December 2016, according to Nigeria Electricity Hub, an initiative of Nextier Power.
Chiedu Ugbo, who is the CEO of Niger Delta Power Holding (NDPHC), stated that since the establishment of the company’s first power plant in 2011, the estimated energy invoiced by its 8 power plants currently amounts to N235.4 billion.
Of this estimate, about 55.3 percent, he explained, has been paid while the remaining 44.7 percent is still outstanding and owed NDPHC by the Discos.
He lamented that as at August 2016, debts owed the company by the market stood at N105 billion.
“The implication is far reaching: capacity utilization, low productivity, inability to meet obligations, asset replacement issues and, finally, it challenges us as a growing concern,” the NDPHC boss decried.
Azu Obiaya, CEO of the Association of Nigerian Electricity Distributors (ANED), while assessing the liquidity challenge from the perspective of the Discos, explained that Discos are experiencing a revenue shortfall of N38 billion monthly and that the government alone, through its ministries, departments and agencies (MDAs).
By the end of the 2016, “the Discos’ books no longer reflected cash flows that were necessary for lenders to accept funding their ongoing projects, with debts owed amounting to N309 billion,” Obiaya confirmed.
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