The Federal Government of Nigeria has adopted fresh measures that will aid the Nigerian Bulk Electricity Trading PLC, NBET, to meet its financial commitments to power generating companies.
The Generating Companies, GENCOS, have been complaining that the inability of the government owned NBET to pay them for power delivered to the national grid is affecting their operations.
They said the heavy debt burden may likely force them to close shop.
To solve the problem. The Federal Executive Council, FEC, on Wednesday approved a memo from the Ministry of Power, Works and Housing in which the Central bank of Nigeria, CBN, is now mandated to provide payment assurance guarantee for any energy produced by any GENCO.
The Minister of Power, Babatunde Fashola, who briefed State House correspondents at the end of the meeting which held inside the Council Chamber of Aso Rock Presidential Villa, said part of the major problem that has affected the power sector is lack of liquidity which made it impossible for NBET to deliver on its obligations to the GENCOS.
“So, going forward in order to strengthen NBET, CBN is providing a payment assurance guarantee for any energy produced by any GENCO, so that they can pay their gas suppliers when they get paid, so that the Hydro Stations can continue to operate.
“What we seek to achieve here is to bring some stability to the production side of the power value chain and also give confidence to investors who want to come in, who are concerned about how to recover their money,” he said.
Mr. Fashola said the government is aware many are planning to invest in the gas sector which is being championed by the Ministry of Petroleum and that they are also concerned “in terms of payment for gas produced”.
“So, the approval of council was to provide this guarantee for NBET which is a 100 per cent government owned company to pay on a monthly basis its obligations for energy actually produced into the grid,” he said.
The minister said the government has already succeeded in expanding the nation’s transmission capacity from 5000 MW to 7000 MW.
“I have been here to announce to you transmission projects that have been approved by council and over the last one year plus, the transmission capacity has grown to almost seven thousand from five thousand and is continuing to grow with every project.
“If you recall just about a few weeks ago you were reporting that power supply had dropped to a little over 2000. It is back now to over 4000.
“We have solved the transmission problem in Ikot Ekpene which can largely help to evacuate over a thousand MW. But the gas suppliers were being owed so they were not supplying gas for the power producers,” he said.
Mr. Fashola said the guarantee to be provided by the CBN is for two years beginning from January this year to December 2018.
“It is capped at a maximum of N701billion but it is to be drawn monthly. It is possible it may not reach that. But we are projecting on the total cost that NBET will likely pay.
“And that is why it is for power generated unto the grid only. So, if the power generated does not meet that cost we don’t pay for it. It is paid in arrears at the end of the month, not in advance.
“So, it is for actually what gets unto the grid. And this is part of the reforms that we have briefed you about that we were planning to undertake,” he said.