By Cyril Ogar
Energy market expert, Lanre Elatuyi has reacted to the poor liquidity in the power sector which he was at the heart of the drop in plant availability capacity, noting that without finances it would be difficult for companies to maintain their plants.
Mr Lanre was reacting to report of a whopping ₦600 billion of debt owed the Niger Delta Power Holding Company attributable to the federal government through the Bulk Electricity Trading Company and other bilateral entities which is having a dip effect on the Gencos operations as the Integrated Power Project under NDPHC’s management are experiencing difficulties due to insufficient monetization.
“Plants’ available capacity has dwindled due to mechanical faults that have not been attended to due to poor liquidity in the sector, and also due to gas constraints. Many plants are poorly maintained, suffer feedback issues as a result of poor grid operations, and the need for required maintenance is made difficult by poor revenue to the GenCos as a result of low remittance in the industry.
“Also, load offtake from the DisCos hasn’t improved substantially, so it becomes difficult for the GenCos to embark on any capacity expansion”.
According to him, Mainly, these inefficiencies are those of lack of sanctity of contract, poor liquidity, revenue shortfalls and poor grid operations. These revenue shortfalls stem from low remittances from the market ,DisCos, and delayed market subsidies/intervention.
Capacity payments (available or deemed) are global norms in the electricity supply industry and play critical roles in enabling the Generating Companies ,GenCos, who have mobilised debts and equity financing options to optimize their power generation capacities as well as make such capacities available when called upon.
Recall that the Managing Director of Niger Delta Power Holding Company ,NDPHC, Jennifer Adighije, had recently expressed concern that its 2,000-megawatt electricity generation capacity remains untapped due to a staggering N600 billion in gas debts and other challenges.
Adighije spoke when she appear as a guest on Channels Television programme Monitored by AljazirahNigeria correspondent in Abuja .
According to her, It’s combined because we have customers that are government customers and then we also have private customers in terms of off-takers, bilateral customers, eligible customers that are also owing. About ₦400 billion is being owed by the government, you know, through the Bulk Electricity Trading Company”, she stated.
Despite these obstacles, NDPHC has made significant efforts to restore five turbine units at the Calabar, Omotosho, Sapele, and Ihovbor power plants, which were previously offline. Adighije noted that these plants now add an extra 625 megawatts to the national grid.
She said “the GenCos have over the years been at the receiving end of the Nigerian electricity market inefficiencies.
“The current practice of ignoring that component shatters the aim of the reform and prejudices the GenCos ability to meet financial ratios imposed by the Lenders, and certainly reduces the Investors’ returns.
It also restricts and undermines the robustness of the electricity market by deflating the appetite or ability of investors to invest, with detrimental long-term effects of decreasing power plant financing options.
This recognition will demonstrate this administration’s desire for growth in the power sector and ensure that investors are attracted and are compensated as the current anomaly in the market is being corrected by reinstating available capacity payments.
“This issue will persist until resolved in a manner that is fair to GenCos. Not resolving the issue of capacity and deemed capacity payments will continue to raise the pivotal question of how much good faith has been extended to GenCos as it concerns the privatisation of the power sector assets
when ask about the Service-Reflective Tariffs, the MD said the recent electricity tariff adjustment especially the cost-reflective tariff introduced for Band A customers saved Generation Companies ,GenCos, from financial collapse.
She commended the Honourable Minister of Power, Adebayo Adelabu, for the boldness and the courage to effect this policy that has saved the GenCos from collapse.
She maintain that “Now, NDPHC is able to get about 30% of invoice settlement on the invoices that they issue, and that has also helped the company liquidity. Before that, we were unable to meet our operational and OPEX and CAPEX obligations, but now we’re able to develop a coping mechanism and we’re surviving”.
She explained that before the Band A tariff reform, only 10% of GenCo invoices presented to the Bulk Trader were settled. But with the implementation of the Band A structure, which covers just 15% of the market, liquidity in the sector increased by 70%, rising from ₦1 trillion to ₦1.7 trillion.
“The electricity that we’ve consumed over the years hasn’t been cost-reflective. And so there are tariff shortfalls and then market shortfalls also arising from the complexities in the electricity market the losses the DisCos are not able to remit optimally”, she noted.
When asked what could help Nigeria achieve stable 24/7 power supply, the NDPHC managing director said Nigerians must either pay optimally for uninterrupted electricity or the government must apply smarter, more effective subsidies to enable the GenCos generate efficiently and transmit to the last mile in the most cost-effective manner.
