The Association of Power Generation Companies (APGC) has issued a pressing call to the federal government, urging the settlement of an accumulated N3.7 trillion debt owed to power generation companies (Gencos) for their services. The significant debt burden is reportedly crippling their operations and threatening the stability of the nation’s power supply.
Col. Sani Bello (rtd), Board Chair of the APGC, emphasized the severity of the situation in a statement, highlighting how the outstanding payments are hampering the Gencos’ ability to maintain and expand their operations. The organization has stressed the urgent need for the government to address the inadequate payment for electricity generated and consumed on the national grid.
Bello pointed out that the ongoing liquidity crisis in the Nigerian Electric Supply Industry (NESI) has severely constrained the Gencos’ operational capacity. Despite these challenges, the Gencos have adhered to their contractual obligations since their takeover in 2013, continuously increasing their generation capacity. However, systemic constraints and financial limitations have impeded their full potential.
Minister of Power, Adebayo Adelabu, recently assured that the government has finalized plans to initiate partial payments, as approved by President Bola Tinubu. Nevertheless, the Gencos remain skeptical, given the extensive difficulties they face, including risks associated with inflation, foreign exchange volatility, and an unsatisfactory supplementary Multi-Year Tariff Order (MYTO) that leaves a significant portion of their monthly invoices unpaid.
The APGC warned of dire consequences for the entire power value chain if the debt issue remains unresolved. The Gencos are currently owed over N2 trillion for power already generated and utilized by end-users, in addition to a N1.7 trillion funding gap created by the recent MYTO order. This massive debt accumulation severely restricts the Gencos’ ability to meet financial obligations to lenders, procure essential maintenance and spare parts, and fulfill employee-related commitments.
Access to foreign exchange is another critical challenge, as many operational and maintenance needs are dollar-denominated. The Gencos have called for a specialized forex window or a stable dollar allocation to mitigate this issue. They also highlighted the need for a coordinated effort by all stakeholders in the NESI to realistically and sustainably address the liquidity crisis.
The APGC has proposed several measures to alleviate the situation, including immediate implementation of a payment plan to clear all outstanding invoices in line with Power Purchase Agreements (PPAs), reprioritization of payments under the waterfall arrangement to ensure full payment of Gencos’ invoices, and provision of payment security backed by the World Bank or African Development Bank (AFDB) to guarantee full payment and support the Gencos’ operational needs.
Furthermore, the APGC urged for greater transparency in billing, collection, and remittance processes, along with investor-friendly policies to stimulate growth and confidence in the power sector. They also called for market liberalization to enhance market viability and creditworthiness, ensuring strict adherence to all market agreements and regulations.
The APGC underscored the urgency of resolving the liquidity challenges to prevent potential national security issues arising from power generation failures. They emphasized that addressing these issues promptly would enable Gencos to sustainably generate electricity, thereby improving access to reliable power for Nigerians.
The Gencos’ plea is a stark reminder of the critical state of the power sector and the immediate need for comprehensive and coordinated solutions to ensure its stability and growth.