Financial Energy Review
Power Generation Companies (Gencos) have listed some issues affecting operators and investors in the Nigerian Electricity Supply Industry (NESI), which they want the next president to pay priority attention to.
Executive Secretary of the Association of Power Generation Companies (APGC), Dr Joy Ogaji, said the next administration should clear the Gencos’ N1 trillion outstanding debt, which they are being owed for years.
Ogaji added that the next government should also resolve the gas supply challenge that has been hampering power generation, make foreign exchange accessible to them and ensure adequate risk protection mechanism for Gencos against breach of contract.
She specifically canvassed for government-backed Partial Risk Guarantees (PRGs) for all Gencos to cover private investors against the risk of a government-owned entity failing to perform its contractual obligations with respect to a private project.
Insisting on 100 per cent payment of all outstanding payments due to Gencos by the Nigerian Bulk Electricity Trading Limited (NBET) and the Market Operator, Ogaji suggested that the federal government may provide tradable instruments backed by the Central Bank of Nigeria (CBN) in lieu of outright settlement.
“There has to be full capacity and energy payments on an ongoing basis – for Gencos to maintain and improve available capacity as well as aid implementation of expansion plan (over N1.6 trillion),” she canvassed.
She also demanded that the next administration should put in place a special FX window or arrangement to support operation and maintenance (O&M) needs to keep the power sector operational.
While advocating that concession fees by hydropower generators be paid in naira rather than in dollars, the Gencos’ spokesperson, however, called for an immediate and effective infrastructural improvement to increase the capacity of the national grid.
She further urged the incoming administration to formulate a policy document to address the inequitable distribution of technical and commercial risks in the power sector, stating that this would provide the policy direction for the regulator to design a risk matrix.
Ogaji also demanded government’s immediate intervention to resolve all interface issues between Distribution Companies (Discos) and Transmission Company of Nigeria (TCN) to enhance increased capacity utilisation.
“There should be effective support and design to our proposal of a two-part market to address the current issues in the market and lead us to a more sustainable market.
“Also there should be security of our power facilities from increased community hostility and resistance to payment for electricity. Government should therefore resist the urge to strong-arm investors as this would have a negative effect on Nigeria’s risk profile,” she added.
She noted that the implication of failure of the government to adhere to the principle of sanctity of contract, goes a long way in destroying the confidence every would-be investor ordinarily would have in taking an investment decision.
She said the new government must ensure to provide an enabling and viable commercial environment for the sector, noting that maintaining the bankability of the power sector was crucial to ensuring continued investments to maintain or expand capacity or introduce renewable energy technologies, and investment in new power projects.
“We should move beyond potential to actual. The demand for power in Nigeria is very high. However, this demand alone will not attract the investments required to unlock the potentials of the power sector.
“The good news is that the government is taking steps and committing resources to ensure that the sector is commercially viable. The question is, are they throwing money at the problem or actually solving it apolitically?
“As a new government comes in, sanctity of contracts must remain the bedrock of a new culture in doing business if we must succeed in our power reform agenda to achieve its purpose and for the economy to stabilise, grow and attract more investors,” Ogaji added.
