GENCOs warns against rising cost of power generation

Generating Companies in Nigeria (Gencos) are raising concern over increasing costs of power generation, even as express worry on grid operations, liquidity challenges, and access to forex to fund plant maintenance and other foreign currency denominated projects.

These they said is a major threat to the electricity delivery in the country which could result in system collapse in not addressed.

“We have not been receiving full payment for the electricity supplied by them, while the gas suppliers are insisting and pressurising the GenCos for full payments for gas supplied to the GENCOs”Joy Ogaji,the Executive Secretary of the Association of Power Generating Companies said in a statement issued on Sunday.

Further in the statement,Ogaji noted that,”The state of the sector finance and access is further corroborated by the Financial Stability Report of the Central Bank of Nigeria, of December 2016, which shows that loans to the power and energy sector accounted 4.5 per cent of the gross loan portfolio of the nation’s banking system as credit to that sector stood at N726.29bn.”

This ,she said led to the Central Bank of Nigeriadirecting the creditor banks to GENCOs to make provisions for power sector loans, whose performance are admittedly very poor (due to the inability of the GenCos to service and repay loans and credit facilities foisted on them by the huge outstanding debts owed them), and the absence of effective payment security and guarantee.

“The effect is GENCOs are under additional pressures and are exposed to the exercise of lenders’ right against bad debtors and the fallout of exercises.”she remarked further.

‎Speaking further on the illiquid nature of the sector,she said,”The illiquid nature of the sector was further corroborated by the World Bank in its recent report which states that the highly leveraged balance sheets of sector operators had severely constrained their ability to access commercial financing. “Local commercial banks on their own are reluctant (and in some cases unable) to extend further financing.

‎”GenCos without equivocation are stressing the need for government and relevant stakeholders to tackle the operational inefficiency and liquidity challenges plaguing the entire value chain and making the sector unattractive for investment by:

Expediting the process of payment of the outstanding balance due to GENCOS under the CBN N213bn Electricity Market Stabilization Facility.”she adds further.

Making further suggestions,she urged the government to address concerns on ,”The Payment of the Outstanding for January 2015(invoice unpaid with MO before TEM)Outstanding/unpaid invoices from Feb 2015 to December, 2016 with accrued interests.Payment for available capacity for the period 2015 February to date

Payment for Deemed capacity for the period 2013 to date .Putting in place an effective financing plan to kick in upon the exhaustion of the N701bn payment assurance facility to sustain payments of invoices till 2021, when FG projects that the NESI would be self-sustaining. “