Disco’s debt to Gencos hits N30 Billion monthly

Industry close watchers has again reiterated that the abysmal market liquidity squeeze originating from the inability of distribution companies (Discos) to collect tariffs due them has got generating companies (Gencos) struggling to secure the necessary funding for their operations.

With mounting debt, Market payment statistics shows that on a monthly basis, generation companies’ invoices amount to about N35 Billion to N40 Billion, out of which only about N7 Billion is paid. The implication is that the debt profile of the Gencos is about N30 Billion per month.

Investigation has shown that only 20 percent of the cost of power produced across the supply value chain is being paid for.

Experts are of the views that despite federal government continued assurances, a lack of investors’ confidence has definitely hampered the expected growth of the sector, as it has been nearly impossible to get new money into the sector.

Ayodele Oni, an energy expert observed that Liquidity challenges have proved to be an almost immovable obstacle to the regular supply of electricity.

Oni in a recent article disclosed that over N534 Billion in revenue was lost by the power sector in 2016.according to him, “Among the reasons for the loss are shortages in gas supply, frequency and line limitations and water levels management constraints that led to several cases of outage in the country.

He further said that over time, Discos’ remittances to NBET for energy has fallen from an average of 65 percent in 2015 to 35 percent over 2016, whilst monthly revenue shortfalls have increased from an average of N9 Billion in 2015 to N25 Billion in 2016.

“The N534 Billion is the value of electricity lost on account of the challenges, part of which could have been used to bridge the liquidity gap in the power sector, that is put at N1 Trillion. Simply put, the billions of naira lost do not exactly reassure investors (particularly foreign ones) that NBET shall be able to deliver on its own obligations through the Gencos, in spite of the fixed N701 billion”, he said.

Analysts opine that the most important thing is for government to provide an environment of stability and certainty of exchange rate risk.

Both domestic and foreign investors and producers have important roles today in achieving a sustainable electricity future in Nigeria says Claudius Awosope, professor of Electrical and Electronics Engineering pointing out that the mobilisation of the financial resources to support a dramatic scaling up of  the power sector will be a major challenge giving the hiccups bedevilling the sector.

KELECHI EWUZIE