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As GENCOs,DISCOs lock horns with FG…



As GENCOs,DISCOs lock horns with FG…

Amidst gross inefficient electricity supply faced by millions of Nigerians, the 13 power generation firms have dragged the Federal Government before Justice Binta Nyako over N1 trillion debt. The distribution firms are also in court. ADEOLA YUSUF examines implications of these on the ailing sector and the hapless customers…


Like the proverbial ill-fated grass underneath two feuding elephants, electricity consumers in Nigeria continue to be at the receiving end of the bickering between the Federal Government and investors in the generations and distribution strata of the power industry.

Latest on the long list of the bickering between the government and its investors is the case, which came up before Binta Nyako on March 1, 2018 in which the 13 Generation Companies (GENCOs) dragged the Federal Government before a Federal High Court sitting in Abuja, over alleged preferential treatment to two of its competitors with intent to harm their business interests.

Like their counterparts in the power distribution, the investors in power generation said in the case, which has been adjourned till April 16, 2018 that the businesses of their members, who currently generate 80 per cent of the power consumed in Nigeria, were on the verge of collapse over debts in excess of N1 trillion.

The Federal Government, they alleged, has been giving preferential treatment to Azura Power West Africa Limited and Accugas Limited to the detriment of the Nigerian Electricity Supply Industry and the power sector as a whole.

In a suit filed by the GENCOs the defendants are the Federal Government, the Central Bank of Nigeria, CBN, Minister of Power, Works and Housing, Nigeria Bulk Electricity Trading Plc, NBET, Azura and Accugas.

The GENCOs, represented by Mainstream Energy Solutions Limited (Mainstream), Transcorp Power Limited (Transcorp Power), Egbin Power Plc (Egbin) and Northsouth Power Company Limited (Northsouth), insisted that the defendants, have continuously meted out unfair treatment to them, their investors and suppliers.

Specifically, the GENCOs stated that they had made huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to the Nigerian Bulk Electricity Trading, NBET Plc and are facing the threat of business failure as a result of their huge indebtedness to banks and financiers, which provided the foreign currency-denominated acquisition loans with, which the power plants were acquired from the Federal Government.

Before this case, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, had said, for the umpteenth time, at different fora that the Federal Government was willing to pay the debts to both the GENCOs and the GENCOs. He, however, shocked many observers of events in Nigeria’s power sector on Monday, September 11, 2017.

That day, he took to the podium of the 19th monthly meeting with operators in the electricity industry in Lagos to publicly ask the Nigeria Immigration Service to investigate the Managing Director of Egbin Power Plc, Mr. Dallas Peavey Jnr., an American, over his visa and work permit status in Nigeria.

Mr. Peavey had earlier told a delegation of American lawmakers that his company was constrained by a number challenges including stranded power due to weak grid, debts by the government’s Ministries, Departments and Agencies (MDAs), among others. Accusing the American of working against Nigeria’s interest, Fashola alleged that Peavey had lied about the quantity of power being produced by the company, the capacity of the country’s transmission system and the amount of debt owed electricity companies by government’s MDAs.

Though nothing has been heard about the issue again, it was among other issues, seen as a reflection of the politics that has permeated the business of power in Nigeria.

Privatisation in troubled water
About five years after the November 1, 2013 handover of assets belonging to Power Holding Company of Nigeria (PHCN) to private investors, Nigeria is still entangled in acute shortage of electricity for its teeming population.
The last time, Fashola reacted for the umpteenth time, to growing concerns raised by Nigerians. He resorted to the blame game – the same line towed by all his predecessors. “Distribution of power, but not power generation, is the problem,” he was reported to have said at the last power stakeholders’ meeting in Abuja penultimate Monday.

Although the Association of Nigeria Electricity Distributors (ANED), an umbrella body for investors in distribution companies, has yet to react to Fashola’s claim as it usually does, investigations by New Telegraph showed that the sheer inability of the government to ensure strict distinction between politics and the power business is its greatest undoing in the sector.

In government’s armpit
The gale of privatization, which blew across the entire value chain in the power sector, missed the transmission stratum. In what was described as grand politics that is still hurting the sector, the government held on firmly to the funding and control of the transmission, whereas, it gave out the generation and distribution strata to the control and funding of the private sector. Described as the weakest link, the transmission has not fared well and its shortcoming is rubbing on the entire value chain.

The blame game
Beyond the new Court case, key players in the electricity sub-sector, Gencos, DISCOs and Transmission Company of Nigeria, (TCN), have kept trading blames over the worsening electricity supply situation in the country.

In the latest blame game, the GENCOs said the DISCOs are unserious on their mandate, while also accusing TCN of inability to transmit electricity due to inadequate and obsolete infrastructure.
TCN, on the other hand, said that debt overhang is militating against the efficient power supply by DISCOs.

Managing Director of Mainstream Energy Solutions Limited, owners of Kainji and Jebba GENCOs, Mr. Lamu Audu, said that it was ironical that power generation companies such we Mainstream were suffering losses due to unutilized power, while Nigeria had no power to run their businesses and for domestic uses.

“I think TCN should answer because they are the ones taking the energy from us and giving to the DISCOs but if the DISCOs are not utilizing it they will know better than anybody else. The DISCOs can deny but TCN should have the records to tell us what is happening to the energy that we are generating, simple question. Why has the frequency been high?”, he inquired.
Chairman of Transcorp Ughelli Power, Tony Elumelu, however, said that some of the DISCOs have not shown seriousness since the privatisation of the sub-sector.

“I believe the GENCOs have demonstrated capabilities, in some of the DISCOs, in my viewpoint, I do not see seriousness and so government should engage more with these DISCOs and see how a marshal plan can be put in place.

“It is unfortunate, may be the wrong people bought some of these Doscos. People who have capacity should own the Discoe. The generating companies are reeling and suffering, there is a limit to how far we can subsidise the system because that to me is what is happening today,” he said.

Brand and Communication Manager of Ibadan Electricity Distribution Company, IBEDC, Kikelomo Owoeye, expressed the belief that TCN could not meet the expectations of Nigerians even if generation doubles. According to Owoeye, notwithstanding the challenges of energy theft and vandalism, most of the equipment to produce and distribute the required energy are obsolete.

He stated: “On our transmission, even if the GENCOs generate enough megawatts or gigawatts as the case may be, the equipment at the Transmission Company of Nigeria (TCN) cannot wheel out all the required supply.
“There are challenges on the equipment; most of them are obsolete,” she said. But Bede Opara, General Manager in charge of Transmission at TCN, believes that GENCOs have not been able to pay their debts due to energy theft and other issues.

Message for Fashola
In the latest Court case, the Gencos attached, as exhibit, a letter they had sent to Minister of Power, Works and Housing, Mr. Babatunde Fashola, on the various issues, including confirmation of a plan for 100 per cent payment of all outstanding in

debtedness and interests due to the GENCOs for electricity supplied and ancillary services provided by them; 100 per cent payment (not 80 per cent payment) of all invoices to be submitted by GENCOs under the payment assurance programme and payment of all sums due as capacity charge to the GENCOs from 2013 till date.

The demands also included non-admission of any additional beneficiary into the N701bn assurance facility without corresponding increase in the facility amount, payment of the balance of N213bn from CBN Electricity Market Stabilization Fund, removal of all administrative bottlenecks delaying drawdown of payment assurance funds and provision of sovereign guarantee and/or partial risk guarantee for all payment obligations to GENCOs.

The Gencos indicated that the suit became necessary as engagement with the minister, Fashola, did not yield fruits. They are contending that the Federal Government and its agencies are duty bound to be fair, just and/or equitable in all their actions, dealings and directions as the same may relate or pertain to all actions, steps and/or directives given or enforced to the benefit or detriment of all persons and/or corporate entities engaged in the provision of power/and or electricity within the Federal Republic of Nigeria.

According to them, the ministry and agencies could not lawfully and/or legally take any step, action or give any directives, which have the effect of violating the legitimate expectations of the GENCOs to be treated equally, justly, fairly and reasonably as it relates to all policies and decisions, which affect or have the possibility of affecting the business interest of the plaintiffs.

They want the court to restrain the government and its agencies from applying funds from the payment assurance facility for the payment of bills and invoices submitted by Azura and Accugas to NBET for payment/settlement.

Customers are not kings
In all these, the electricity consumers who are paying through their nose are the worst hits. The government and the investors in GENCOs and DISCOs that are now bickering have promised these hapless Nigerians that the power supply would improve tremendously with the November 1, 2013 privatisation of the power sector.

Director-General, Manufacturers Association of Nigeria (MAN), Mr. Olusegun Joseph Ajayi-Kadir, stated that poor power supply has impacted negatively on the activities of manufacturers in the nation.
Ajayi-Kadir said many manufacturers incur huge costs in the process of generating their independent power. He said the Gencos and others should cooperate to solve the problems in order to improve power supply to all classes of consumers, including manufacturers.

Stating that the power sector and its customers are going through the challenging phase, former Managing Director/Chief Executive Officer, Eko Electricity Distribution Company, Engr. Oladele Amoda, charged all stakeholders to close ranks to collectively rescue the sector.

He said: “All stakeholders, including the Federal Government, NERC, GENCOs, DISCOs and others should come together in order to rescue the sector from collapse. Indeed, if the allegations, especially unfair treatment against the GENCOs are true, something needs to be done urgently in order to tackle the liquidity and other problems that stare the sector in the face.”

Last line
The Federal Government and investors in GENCOs and DISCOs should find a common ground on the on-going feud, which is a major threat to the sector. These parties have promised Nigerians that their marriage consummated on November 1, 2013, would benefit the sector and its customers. This promise is sacrosanct and any attempts to frustrate its accomplishment should be guarded against.

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