Gencos Reject Senate’s Call for Reversal of Privatisation of Power Sector

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*Text Box: Say FG owing power firms over N1tn

By Emmanuel Addeh

Electricity Generation Companies (Gencos) in Nigeria have yesterday kicked against the call by the senate to reverse the privatisation of the power sector , following the inability of the operators to deliver electricity to Nigerians more than six years after the sector was handed over to them.

Executive Secretary of the Association of Power Generation Companies (APGC), Dr. Joy Ogaji, in a statement in Abuja, argued that instead of seeking to upturn the privatisation of the sector, the senate should look into how the current challenges can be sorted out.

The Gencos who operate under the banner of the APGC, while empathising with Nigerians on the current abysmal situation of electricity supply, maintained that the reversal of the privatisation exercise of 2013 is not the solution to resolving the current abysmal state of the sector.

They complained that close to seven years after privatisation, a number of the guidelines stipulated in the governing contract have still not been activated, leading to non-payment for power generated and supplied to the national grid.

“This has led to a huge outstanding debt of approximately N1 trillion owed to gencos from the inception of privatisation till date. All contracts remained inactivated, notwithstanding the declaration of the Transitional Electricity Market (TEM), which heralds contract effectiveness.

“The Gencos were made to bear the brunt of this lacklustre performance on the part of NBET (Nigeria Bulk Electricity Trading) as the off-taker of the Gencos power,” the generation companies argued.

According to the Gencos, the generation companies only receive a payment of between 11 per cent and 30 per cent of their invoiced amount on a monthly basis, leaving out a huge outstanding receivables and arrears in excess of 1,000 days after invoicing without taking cogniscance of the interest on delayed payments and foreign exchange volatility.

While noting that the weak transmission (grid) and distribution network inherited from the PHCN days are still in existence and are not complementing their efforts in maximising available capacities, the Gencos said that they had worked to attain average available capacity of 8,589 MW and installed capacity of 13,427 MW with an expansion capacity of 20,000MW.

They argued that if not for the weak grid system, average stranded capacity that could have been made available to Nigerians in the light of maximum attained grid capacity is an average of 3,214MW.

“This implies that if we had a grid capacity that matches our average available capacity, 3,214 MW can be immediately made available to Nigerians with the current state of operations of the Gencos and at no additional cost,” APGC said.

It added that notwithstanding the non-payment of Gencos’ invoices for power supplied to the national grid, the companies took loans and other credit facilities to fund the capital expenditure required to meet the minimum performance threshold by ramping up capacity.

“It is very important to stress that the Gencos have doubled their available capacities from 4,214MW at takeover in 2013 to 8,145MW in 2020. Out of the 8,145MW available capacity, only 3,987MW is generated for Nigerians. The balance 4,159MW is stranded as a result of constraints in the national grid capacity.

“Gencos in addition to acquiring the assets for over $1billion , have invested heavily in ramping up nameplate capacity through frequent maintenance, minor and major inspections and also major overhauls,” the generation companies said.

The APGC argued even in the face of national grid constraints, outstanding debts owed by the federal government and failure of government agencies and other operators in the power value chain to honour their commitments, its members had continued to deliver.

“To this end, we view the call by the senate to cancel the privatisation exercise as premature and as such focus should be on the structural issues that we have highlighted above.

“Most importantly, emphasis should be placed on fact-finding with respect to commitment of the various stakeholders in the fulfillment of contractual obligations that were drawn up to guide and regulate the privatisation of this all-important sector,” they said.