Blackout Looms as GenCos Operations May Collapse Under N3.7 Trillion Debt
The operations of Nigeria’s Electricity Generation Companies (GenCos) are under severe threat due to a crippling debt of over N3.7 trillion. Without swift intervention from the Federal Government, these companies warn of an imminent collapse in electricity generation.
Under the aegis of the Association of Power Generation Companies (APGC), the GenCos have highlighted the severe financial strain caused by the ongoing liquidity crisis in the electricity sector. In a statement by APGC Chairman Col. Sani Bello (Rtd.), the association criticized the current Multi-Year Tariff Order (MYTO) by the Nigerian Electricity Regulatory Commission (NERC), which has exacerbated their financial woes by resulting in payments of only 9 to 11 percent of the services rendered by customers.
“GenCos are currently owed over N2 trillion for power they generated, put onto the national grid, and consumed by end users,” Bello stated. “This is in addition to the over N1.7 trillion funding gap created in the recent supplementary MYTO Order 2024 without a designated fund to fill the gap. This huge debt outlay is now greatly inhibiting GenCos’ ability to meet their obligations to lenders, O&M operations, necessary maintenance, spare parts procurements, and employee-related obligations.”
The APGC underscored that the cash liquidity crisis is severely reducing their ability to perform obligations, thereby threatening to completely undermine the electricity value chain. Since their takeover in 2013, the GenCos have adhered to their contractual agreements by ramping up capacity despite facing systemic constraints.
“The power generated by GenCos has continued to be consumed in full without corresponding full payment,” Bello explained. This situation persists despite the commencement of the partial activation of contracts in the Nigerian Electricity Supply Industry (NESI) from July 1, 2022, the minimum remittance order, bilateral market declaration, waterfall arrangement, and the supplementary MYTO order. These factors, combined with inflation risks, forex volatility, and the lack of a dedicated window to cushion the forex impact, have left about 90% of GenCos’ monthly invoices unmet without a bankable securitization or financing plan.
The APGC described the new order as an aberration, stating that it departs from the existing terms of the Power Purchase Agreement (PPA) that guides the contractual relationship between GenCos and the Nigeria Bulk Electricity Trading Plc (NBET).
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To sustain their operations, the APGC urged the government to ensure a payment plan to settle all outstanding GenCos invoices in line with their PPAs. Additionally, the association called for the reprioritization of payments under the waterfall arrangement to ensure 100 percent payment of GenCos’ invoices as and when due, and a clear financing plan to backstop the exposures in NERC’s Supplementary Order to the MYTO and the Distribution Reinvestment Obligation (DRO) 2024.
Without such measures, the association warned of dire consequences for the GenCos and the entire power value chain, potentially leading to widespread blackouts.
