Power Producers Sound Alarm Over N3.7tn Debt

Power generation companies in Nigeria have issued a stark warning that the sector’s indebtedness, now standing at N3.7 trillion, poses a serious threat to the continuation of electricity production. The Association of Power Generation Companies (APGC) highlighted the urgent need for the Federal Government and key stakeholders to address the chronic underpayment for electricity generated and consumed on the national grid.

In a statement issued in Abuja on Sunday, Col. Sani Bello (retd), Chairman of the Board of Power Generation Companies, outlined the dire financial straits facing the sector. “Gencos are currently owed over N2 trillion for power generated and put onto the national grid, which has been consumed by end-users. This debt is compounded by an additional N1.7 trillion funding gap created by the recent supplementary MYTO order 2024, without a designated fund to cover the shortfall.”

Bello warned that this enormous debt burden severely hampers the Gencos’ ability to meet their obligations, including maintenance, procurement of spare parts, and employee salaries. He noted that hopes for financial relief through external support, such as the World Bank’s Power Sector Recovery Programme, have been dashed due to other market participants’ failures to meet distribution-linked indicators.

Access to foreign exchange is another significant challenge, as major operational and maintenance expenses in the power generation sector are dollarised. “The importance of a specialised forex window or a stable dollar allocation option for Gencos cannot be overstated,” the statement read.

The APGC called for a coordinated approach by all stakeholders in the Nigeria Electricity Supply Industry (NESI) to realistically and sustainably address the liquidity crisis. The association warned of potential national security issues if the Gencos are unable to maintain steady electricity generation.

Bello criticised the payment prioritisation policies within NESI, which often leave Gencos with only a fraction of their due payments. “This is a clear departure from the terms of the Power Purchase Agreement between Gencos and the Nigeria Bulk Electricity Trading Plc (NBET),” he said. “Gencos should be accorded utmost priority in payments to ensure their continued capacity to produce electricity.”

To address the crisis, the APGC demanded immediate implementation of payment plans to settle all outstanding invoices, reprioritisation of payments under the waterfall arrangement to ensure full payment of Gencos’ invoices, and a clear financing plan to cover exposures in NERC’s Supplementary Order to the MYTO and the DRO 2024.

Additionally, the APGC called for the provision of payment security backed by the World Bank or the African Development Bank, greater transparency in the billing and remittance processes, investor-friendly policies, market liberalisation, and strict enforcement of market agreements by the regulator.

“The liquidity challenge facing Gencos must be addressed urgently and sustainably,” the statement concluded. “Solving these issues expeditiously will enable Gencos to meet their critical needs and ensure that Nigerians enjoy a sustainable and reliable electricity supply.”