Nigeria: Electricity Firms Drag FG to Court over N1 trn Debt

510 Viewed admin 0 respond
Nigeria: Electricity Firms Drag FG to Court over N1 trn Debt
  • Accuse FG of unfair practices, refusal to pay for power generated
  • Allege favouritism towards 2 coys in gas supply

The power crisis in the country may worsen as the Power Generation Companies in Nigeria, GENCOs, have 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.

The GENCOs, which said members were on the verge of collapse over debts in excess of N1 trillion currently generate 80 per cent of the power consumed in Nigeria.

They accused the Federal Government of 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 13 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), are arguing 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.

They alleged that NBET has consistently defaulted in paying them for electricity generated and put on the national grid in breach of its contractual obligation, which required that the GENCOs be paid in full (100 per cent) not later than 45 days of invoice submission and upon delay in payment, be paid with interest at the agreed rate.


The GENCOs noted that failure to pay them has caused them to default in meeting their obligations to their lenders, O&M contractors, equipment manufacturers, service providers and other persons and entities.

The GENCOs put the total amount owed them for electricity supplied at approximately N800bn, adding that when interest is added, it amounted to over N1trillion.

They stated that the N701bn Payment Assurance Facility could have enabled government to pay for all electricity generated and supplied from January 2017 to December 2018.

The GENCOs are aggrieved that the Federal Government has not kept faith with payments from the N701bn facility as payment timelines are not clear, regular or consistent.

Specifically, they stated that only 80 per cent of invoiced amounts are paid whenever the Federal Government chooses to pay, with 90 per cent of gas supply invoices paid directly to gas suppliers out of the said 80 per cent payment, adding that whatever is left of any payment tranche was hardly sufficient for any meaningful activities of the GENCOs.


The GENCOs stated that payments are insufficient, adding that the outstanding payments owed the GENCOs before the introduction of the N701bn Facility and the monthly shortfall payment of 20 per cent of invoices have continued to pile up without any clear idea of how these will be paid.

They disclosed that even though they appreciate the introduction of the N701 billion, it was neither a privilege nor a favour to them as they are entitled to full payment for electricity generated and supplied.

The GENCOs stated that they took loans from Nigerian banks with some of the banks leaning on international banking institutions to provide support for them.

They argued that it will be destructive and quite discouraging because, “these banks have empathised with us and the Federal Government in the last four years to realise that the Federal Government is supporting and paying new entrants in full with all risks covered without extending the same treatment to the GENCOs.”

They said they are in a dire situation, adding that notwithstanding their commitment to the development of the power sector, not addressing the issues raised in their letter and their demands would inevitably affect the GENCOs’ capacity to continue to generate electricity.

Fashola’s letter

The GENCOs attached, as exhibit, a letter they had sent to Mr. Babatunde Fashola, Minister of Power, Works and Housing on the various issues, including confirmation of a plan for 100 per cent payment of all outstanding indebtedness 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 cannot 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.

The case, which came up before Binta Nyako on March 1, 2018 has been adjourned till April 16, 2018.

Skateholders react

Commenting on the development, Victoria Ibezim Ohaeri, Executive Director, Spaces for Change, disclosed in a telephone interview with Vanguard that the GENCOs have taken the right step to go to court at this time.

“I think the GENCOs have taken the right step to head to the court. Let the court decide or rule on the issues raised.

The former Managing Director/Chief Executive Officer, Eko Electricity Distribution Company, Engr. Oladele Amoda, said the development showed that the sector is passing through a challenging phase.

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.”

Mr. Olusegun Joseph Ajayi-Kadir, Director-General, Manufacturers Association of Nigeria (MAN) 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.

However, a source in the Ministry of Power, Works and Housing, who preferred not to be named said “the poor state of the sector may hinder the execution of Federal Government’s Power Sector Recovery Programme (PSRP) targeted at increasing power supply from 4,000mw to 6,000mw between 2017 and 2020.

“The government had emerged with the PSRP, a series of policy actions, operational, governance and financial interventions for implementation over the next five years to restore the financial viability of Nigeria’s power sector, improve transparency and service delivery, and reset the Nigerian Electricity Supply Industry (NESI) for future growth.

“The PSRP was intended to restore the sector’s financial viability; improve power supply reliability to meet growing demand; strengthen the sector’s institutional framework and increase transparency in the sector.

“It was also targeted at implementing clear policies that promote and encourage investor confidence in the sector; establish a contract-based electricity market and bring about financial interventions to fully fund historical and future sector deficits.

“The programme was also intended to fund future sector deficits from 2017 to 2021 and execute a plan to fund the required Electricity Market Support until tariffs attain cost recovery levels in the nation.”


As published by Vanguardngr

Don't miss the stories followAfrican News Today and let's be smart!
0/5 - 0
You need login to vote.
Nigeria: Corruption getting worse in Nigeria – Transparency International

Nigeria: Corruption getting worse in Nigeria – Transparency International

Nigeria: Learn from Ghanaian President, PDP Tells Buhari

Nigeria: Learn from Ghanaian President, PDP Tells Buhari

Related posts

Leave a Reply

Notify of