Financial Energy Review
Power generation companies were paid a total of N311.1bn after providing an invoice of N614.6bn for electricity supplied between January and September 2021, the Federal Government has said.
The government, however, stated that it had to augment the payment to the Gencos with a total of N129.83bn Payment Assurance and that this was for between January and June.
Data from the Nigerian Electricity Regulatory Commission (NERC) the Federal Government agency in charge of regulating electric power showed that the 25 power generation companies in the country recorded a shortfall of N303.5bn in terms of the payment for power captured their invoices.
The NERC stated that the Nigerian Bulk Electricity Trading Plc paid N311.1bn to the Gencos, whereas the actual amount of invoice by the power producers to NBET during the nine-month period was N614.6bn.
The NBET is an agency of the Federal Government that buys electricity in bulk from generation companies through Power Purchase Agreements and sells it through vesting contracts to distribution companies, which then supply to end-users.
It was observed that NBET paid N37.04bn, N26.19bn and N35.78bn to the Gencos in the months of January, February, and March 2021, respectively.
In April, May, and June, the power generators got N39.46bn, N40.55bn and N31.88bn respectively from the bulk electricity trader.
Also, the 22 gas-fired and three hydropower generation companies altogether got N36.03bn, N31.14bn and N32.99bn from NBET in July, August, and September respectively.
It was further gathered that to augment the shortfall in payment to the power producers, the Federal Government doled out N129.83bn as Payment Assurance Guarantee to the Gencos between January and June last year.
The Payment Assurance Guarantee is a credit facility set aside by the Federal Government and managed by the Central Bank of Nigeria to make up for the shortfall in NBET remittances from power distribution companies’ payments to the Gencos.
Payment guarantees of N24.43bn, N22.78bn and N25.54bn were paid to the Gencos by NBET in January, February and March 2021 respectively.
Also, in the months of April, May and June, the bulk trader paid N20.59bn, N17.13bn and N19.36bn respectively to the 25 power generators as payment guarantees.
The NBET had pledged that it would continue to deploy strategies and initiatives to enhance the market liquidity in the sector through improving payments to the Gencos.
In 2016, the bulk trader began the implementation of its N701.9bn payment assurance scheme when generation capacity was greatly threatened due to a shortage of gas and the inability of some Gencos to meet their obligations.
The firm managed and disbursed the N701.9bn from January 2017 till December 2018, as this impacted positively on power generation capacity, moving it from 6,500 megawatts to 7,659MW.
Also, a N600bn payment assurance guarantee was implemented for the Gencos between 2019 and 2020 to further ensure that the power producers continued in the generation of electricity for the country.
