Gencos May Bypass Discos to Supply Electricity to Consumers

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  • Gencos May Bypass Discos to Supply Electricity to Consumers

Following the huge debt owed the power generation companies (Gencos) by the distribution companies, which receive bulk power through the Nigerian Bulk Electricity Trading Plc (NBET), the power generators are making subtle moves to bypass the Discos and supply power directly to certain class of customers.

The financial distress facing the power sector arose from the inability of the Discos to meet their payment obligations to NBET for power supplied by the Gencos, a development that has also made it impossible for the Gencos to pay the gas suppliers.

The Discos have blamed their inability to meet their financial obligations in the electricity value chain on non-reflective tariffs, vandalism, low power generation, inability to access credit facilities from the banks and non-payment of bills by customers.

The Discos have also claimed that they are being owed a debt of N100 billion by ministries, agencies and departments (MDAs), a debt, which the Minister of Power, Works and Housing, Mr. Babatunde Fashola said was subject to verification.

However, while some Discos have demonstrated increasing capacity to access funds for network development, the financially weak ones have cited the non-reflective tariffs and the N3 trillion exposure of the financial sector to the banks as an excuse for their failure to discharge their obligations.

The failure of the Discos to meet their financial obligations in the value chain had prompted Fashola to advise that “those Discos who cannot run the business must be honest with themselves and begin to look for options either to raise capitals, to get more strategic partners in or to do whatever they consider appropriate within the framework of their contract in order to get on with this job.”

One of the Gencos at the weekend that through their umbrella association, they have resolved to approach the Nigerian Electricity Regulation Commission (NERC) for approval to supply power directly to certain categories of customers and also collect the bills directly.

“The Discos owe the Gencos a lot of money and that is why there is crisis in the sector. Some of the Discos actually do not have what it takes to run the sector and some of them will soon go under. The Gencos are not talking like the Discos because they also owe gas suppliers. They have also formed their own association and plan to meet NERC for approval to supply power directly to certain class of customers and also collect the bills directly. That is the only out to ensure that the Gencos do not collapse,” a source at one of the Gencos explained.

However, despite the challenges, Nigeria’s foremost power generation company, Egbin Power Plc has released its maiden sustainability report, which the company said was a demonstration of its commitment to operate in tandem with global best practice while enhancing power generation to boost access to affordable, reliable and sustained energy in Nigeria.

Entitled “Building a sustainable future” the report highlighted Egbin’s current status since its privatisation in 2013.

Speaking on the report, Egbin’s Chairman, Mr. Kola Adesina said the report reinforced “our resolve to ensure sustainable growth for the company having achieved major milestones since the new management took over on November 1, 2013. Egbin remains committed to working with all stakeholders as we seek to establish Egbin as a foremost industrial hub for economic growth and development.”

The plant was one of the generation companies worst hit by the crisis in the sector.

Though the new investors upgraded the plant to generate its full capacity of over 1,000 megawatts, generation has dropped below 200 megawatts due to non-availability of gas.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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