Power sector may collapse over huge debt burden

By ODUNEWU SEGUN

• revenue shortfall may  hit N1trillion by end of 2016

BURDENED by mounting debts and inability to secure required component spare parts, electricity generating companies may be on the verge of shutting down operations except something is done to save the situation.

According to the first quarterly Statistical Bulletin of the Central Bank of Nigeria (CBN), credit to electricity and energy firms has been rising exponentially and the independent power plants and power generating companies (Gencos), owed the banks N357 billion as at March 2016.

Electricity companies are unable to service a whopping N402 billion debts they have incurred, loans they collectively took to purchase the plants when they were privatized in 2013. The astronomical rise in the exchange rate of the naira to the dollar is also weighing heavily on them.

National Daily gathered that successor companies took loans from local and international banks when the naira exchange rate was N157 to $1. They are now finding it difficult to pay back at the current exchange rate of over N400 to $1. To draw attention to their financial predicament, the Gencos are threatening to shut down their operations if the sum of N156 billion owed them by government agencies is not paid.

Specifically, the Nigerian Bulk Electricity Trading (NBET) owes Egbin Power Plc N68.71 billion, Transcorp Ughelli Power Limited, N28.29 billion, Shiroro Power Limited, N9.66 billion, Geregu Power Plc, N7.98 billion, Kainji/Jebba power stations, N20.94 billion and Sapele Power Plc, N9.9 billion. This is enough to cripple any national operation.

According to the Chief Executive Officer of Frontier Oil Limited. Mr. Thomas Dada, the power sector may collapse soon if nothing is done to address the huge debts power generation companies are owing gas producers and suppliers in the country.

He said power generation companies (Gencos) still owed gas producers more than N110bn, adding that this has made it difficult for them to access gas for production. “The CBN N213 billion bailout package to cover revenue shortfalls and help the companies meet debt-servicing obligations on bank loans was just a drop in the ocean because all Gencos who run thermal plants get their gas from producers.”

Meanwhile, the Association of Nigerian Electricity Distributors, ANED has lamented the huge debts by consumers, which it said was crippling power companies operations, including ability to effectively handle their indebtedness to the banks.

Chief Executive Officer of ANED, Mr. Azu Obiaya, said the Discos now record an average monthly shortfall of N38 billion because of debt owed them by consumers, including the government ministries and departments, as well as a tariff regime that is not cost reflective.

Obiaya noted that the electricity market’s revenue shortfall had risen to N809 billion and could get to N1 trillion by the end of 2016.

Economist and power industry expert, Professor of Economics and Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Adeola Adenikinju, maintained that many government agencies, powerful individuals and organisations were also indebted to the power companies, thereby, worsening the plight of the industry and limiting their ability to meet their obligations to the banks.