Power Generation Companies (GENCOs) have sued the Nigerian government for alleged discriminatory treatment of the companies and their gas suppliers with intent to harm their business interests.
The GENCOs also accused the government of conferring preferential treatment on Azura Power West Africa Limited and Accugas Limited to the detriment of the Nigerian Electricity Supply Industry and the power sector as a whole.
The suit filed at the Federal High Court, Abuja, has the GENCOs represented by Mainstream Energy Solutions Limited (“Mainstream”), Transcorp Power Limited (“Transcorp Power”), Egbin Power Plc (“Egbin”) and Northsouth Power Company Limited (“Northsouth”) as the plaintiffs in the suit.
The defendants are the Federal Government of Nigeria (1st defendant), Central Bank of Nigeria (2nd defendant), Minister of Power, Works & Housing (3rd defendant), Nigeria Bulk Electricity Trading Plc, NBET, (4th defendant), Azura Power West Africa Limited (5th defendant) and Accugas Limited (6th defendant).
According to the suit, the GENCOs are contending that the Nigerian government and its agencies have treated and intends to continue treating the GENCOs, their investors and suppliers unfairly and in a discriminatory manner.
This, the plaintiffs said, was despite the fact that the GENCOs have been bending backwards to continue generating electricity for the national grid, making huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to the Nigerian Bulk Electricity Trading Plc. (NBET), and facing the threat of going into extinction as a result of their huge indebtedness to banks and financiers who provided the foreign currency-denominated acquisition loans with which the power plants were acquired from the FG during the privatization exercise in 2012.
The GENCOs claimed that NBET has consistently defaulted in paying them for all electricity generated and put on the national grid in breach of its contractual obligation, which required that the GENCOs be paid fully not later than 45 days of invoice submission, and upon delay in payment be paid with interest at the agreed rate.
By reason of the failure of NBET to pay the GENCOs, they said they have in turn been forced to default in meeting their obligations to their lenders, O&M contractors, equipment manufacturers, service providers and other persons and entities engaged by the GENCOs for the purpose of ensuring the smooth and effectual generation of power in all power plants owned, controlled and/or managed by the GENCOs.
The GENCOs put the amount owed them for electricity generated and supplied by them is approximately N800 billion, adding that together with capacity and interest payments due to them, they are owed in excess of N1 trillion.
But they claimed that as a way to addressing the huge mounting indebtedness of FG and NBET to the GENCOs, the FG working with the Ministry of Power, Works and Housing, NBET, CBN and the GENCOs created as a temporary relief, with the N701 billion Payment Assurance Facility under which the GENCOs were to be paid for all electricity generated and supplied from January 2017 to December 2018.
The process of working out the facility and the presentation of same to the GENCOs clearly indicated that the N701 billion Facility was meant to pay existing GENCOs as at the time the facility was put in place, as the target beneficiaries.
The GENCOs however said that they are aggrieved that the government has not kept faith with payments from the N701 billion facility as payment timelines are not clear, regular or consistent.
Again, they said only 80% of invoiced amounts are paid whenever the FG chooses to pay, with 90% of gas suppliers invoices paid directly to gas suppliers out of the said 80% payment and whatever is left of any payment tranche is hardly sufficient for any meaningful activities of the GENCOs.
They claimed further that the outstanding payments owed the GENCOs before the introduction of the N701bn Facility and the monthly shortfall payment of 20% of invoices have continued to pile up without any clear sight of how these will be paid to the GENCOs.
While the GENCOs are getting very close to a point where their plants may not be able to generate power again and be shut down, the Federal Government deliberately and clearly entered into certain engagements with Azura and Accugas, under which both were, amongst other things, given the preferential treatment of having a World Bank Partial Risk Guarantee supported by the Sovereign Guarantee of the FG securing all payments due from NBET to Azura for power generated by the new Independent Power Plant and to Accugas for gas supplied to the Calabar NIPP which it never provided for GENCOs at the inception of the privatization exercise when the risk was enormous.
In what they called alleged continued discriminatory treatment of Nigerian investors, the FG became more concerned and committed to promptly paying Azura and Accugas 100% of their respective invoices while the GENCOs generating about 80% of the power being consumed in Nigeria continue to be owed huge debts for which they get paid only 80% of their invoices in an irregular and indeterminable manner.
The GENCOs averred in their Statement of Claim that on the 12th February 2018, the FG concluded steps to immediately pay Azura and Accugas for their first invoices (totaling USD8,140,000) from the N701bn facility meant for the GENCOs (target beneficiaries), which is not even sufficient to pay the GENCOs.
They said this will automatically deplete the insufficient facility and further get the GENCOs closer to shutting down operations. In all, the FG intends to pay Azura and Accugas a total of USD373,492,398.00 from the N701bn facility.
The GENCOs said they are worried that the FG appears not to be concerned about the destructive effect of these discriminatory practices on the power sector as a whole, adding that such discriminatory practices appear to be enjoying the tacit endorsement of the World Bank, which has IFC as an investor in Azura, and could unduly influence decisions to protect their interests to the detriment of the entire power sector.
Prior to instituting the suit, the GENCOs said they made frantic efforts to draw the attention of the FG to the implications of such one-sided preferential treatment of one or two new operators to the detriment of the GENCOs responsible for the lion share of Nigeria’s electricity generation.
By a letter exhibited by the GENCOs in the suit, dated February 13 2018, and addressed to the Minister of Power, Works and Housing, a copy of which was endorsed to the MD/CEO of NBET, the GENCOs noted that as difficult as the situation the FG foisted on them was, they (GENCOs) extended an uncommon understanding as patriotic and faithful Nigerians trusting that together, the FG would work with the GENCOs to resolve teething problems of the sector and by so doing ensure steady electricity supply in no too distant future.
The GENCOs expressed surprise on learning that they are operating with a set of rules different from those applicable to Azura and Accugas which confers Azura and Accugas with preferential treatment with regards to payment structure for power generated, guarantees provided by the Government and payment for gas supply.
The GENCOs stated that sequel to their letter, a meeting was held on February 14 amongst the GENCOs, Minister of Power, Works and Housing, Babatunde Fashola, SAN and NBET CEO, Marilyn Amobi.
At the said meeting, the Minister confirmed FG’s decision to settle the bills and invoices of Azura and Accugas in full and with priority from the N701bn Facility, even though the FG was fully aware of the consequences of such unjust and inequitable decision vis-à-vis the interests of the GENCOs.
Although, the Minister denied any intentional discriminatory treatment of the GENCOs, they said the meeting did not address the issues raised by the GENCOs in their letter, thus compelling the GENCOs to seek judicial protection and safeguard of the power sector and their investments by ensuring that the wrongs against the GENCOs do not continue.
The plaintiffs in the suit are asking the Court to declare that the government and its agencies are duty bound to be fair, just and/or equitable in all their actions, dealings and directions; that the defendants cannot lawfully take any step which have the effect of violating the legitimate expectations of the GENCOs to be treated equally, justly, fairly and reasonably.
The GENCOS are also praying the Court to grant an Order of Perpetual Injunction restraining the 1st – 4th defendants from applying funds from the Payment Assurance Facility for the payment of bills and invoices submitted by the 5th and 6th Defendants (Azura and Accugas) to the 4th Defendant (NBET) for payment/settlement in a manner and form which ensures that the percentage of the 5th and 6th Defendant’s invoices paid by the 1st to 4th Defendants is higher than the percentage of the GENCOs invoices paid by the Defendants or which gives preferential treatment to the 5th and 6th Defendants or discriminates against the GENCOs.
The suit has been fixed for the hearing of the GENCOs Application for Interim Injunction on April 16 by Justice Binta Nyako of Federal High Court, Abuja.