- 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.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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