March 1, 2024

Blackout looms as GenCos blame worsening liquidity crisis


Blackout looms as GenCos blame worsening liquidity crisis

Blackout looms as GenCos blame worsening liquidity crisis

….say FG yet to fully disburse N600 intervention fund

By Solomon Ezeme

The liquidity crisis facing the Nigerian power supply industry may compel electricity generation companies (GenCos) to shut down power plants across the country, even as they claim that the Federal Government has failed to fully disbursed a N600 billion intervention fund it promised to inject into the sector in 2019.

Sources with the  knowledge of the development, who spoke to EnergyDay, said the liquidity crisis has continued to  increase ; and this  has led to  inability to meet their  obligations to gas suppliers despite governments promises to intervene.

According to a source close to the GenCos, the companies may be forced to stop power supply to the distribution companies (DisCos) as remittance from them continue to dwindle leading to the inability of the Bulk Electricity Trading (NBET) Plc to settle its invoice obligations.

“It is not that GenCos do not want to supply power to the DisCos, but you already know gas is needed for this to be possible. There is no way GenCos can supply power if there is no initial supply of gas.

“Again, the machines need to be well- maintained so that power can be generated. There are so many factors. You are aware of all of them as you are not new to this industry”, the source said.

“Recall that the N600 billion promised by the federal government was meant to cover the period from May, 2019 to May, 2020. Already, we are in May, 2021, nothing has been done since June, 2020. Even the one meant for 2020 is yet to be finalised. No business man survives that way,” the source who pleaded  anonymity told  EnergyDay.

Confirming the crisis facing operators in the generation sector, the Chairman, Egbin Power Plant, Kola Adeshina, attributed the situation to GenCos growing inability to settle gas suppliers invoices.

“The gas companies are refusing to render services to us because of the huge gas debts. How can we generate power without gas?” he said.

The industry regulator, Nigerian Electricity Regulatory Commission (NERC), had attributed the liquidity shortfall in the industry to numerous reasons including inefficient revenue collection by the DisCos.

According to the Commission’s second quarter report on the performance in 2020,  the total revenue collected by eleven (11) DisCos from customers in the second quarter of 2020 stood at ₦121.61billion out of the total bill of ₦164.07billion.

Giving detailed analysis of the collection, the report said “for every ₦10.00 worth of energy billed to customers by DisCos in the period approximately ₦2.59 still remained unrecovered from customers. This low collection efficiency combined with billing inefficiency has continued to adversely impact the financial liquidity of the industry, which in turn, has led to low investment in NESI.”

Expatiating on the challenges faced by the generation companies in the industry the report stated that while the GenCos were busy increasing generations due to improved facilities, the DisCos did the opposite.

According to the report, available average generation capacity rose by 14.28% to 6,359MW during the period.

“This increase in available generation capacity is attributable to the increase in the number of generation units after completion of maintenance and repair of some plants. On average, 73 plant generation units were available during the second quarter of 2020 compared to 66 generation units available during the first quarter of 2020.

“With the increase in available generation capacity, the total electric energy generated increased by 1.40% from 8,613,997.79MWh recorded in the first quarter to 8,734,927.04MWh in the second quarter of 2020.”

Comparing generation to utilization the report said, a review of both the daily average available generation capacity and actual generation (in MW) from the first quarter (January – March) to the second quarter (April – June) of 2020 indicates a decline in capacity utilisation.

It further said “while 62.86% of the available capacity was utilised in the second quarter of 2020, indicating 8.16 percentage points decrease from the capacity utilisation rate recorded in the first quarter of 2020. “By implication, about 37.14% of the total available capacity during the quarter under review was redundant due to the increased technical and operational constraints relating to inadequate gas supply, transmission constraints, limited distribution networks, and commercially induced low load off-take by DisCos.”

Leave a Reply

Your email address will not be published. Required fields are marked *