Electricity Firms Drag Federal Gov’t To Court Over N1 Trillion Debt

Electricity Firms Drag Federal Gov’t To Court Over N1 Trillion Debt

By Wires Editor | The Trent on March 8, 2018
Babatunde Fashola, Chris Okonkwo, Chinedu Bosah, Ogunleye Biodun, Godwin Idemudia
Babatunde Fashola, Nigeria's minister of works, and housing

The power generation companies in Nigeria, GENCOs, have taken the federal government before a Federal High Court sitting in Abuja, on Thursday, March 1, 2018, over alleged preferential treatment to two of its competitors with intent to harm their business interests.

The GENCOs, which said members were on the verge of collapse over debts in excess of N1 trillion currently generates 80 percent of the power consumed in Nigeria.

They accused the Federal Government of giving preferential treatment to Azura Power West Africa Limited and Accugas Limited to the detriment of the Nigerian Electricity Supply Industry and the power sector as a whole.

In a suit filed by 13 GENCOs, the defendants are the Federal Government, the Central Bank of Nigeria, CBN, Minister of Power, Works and Housing, Nigeria Bulk Electricity Trading Plc, NBET, Azura, and Accugas.

The GENCOs, represented by Mainstream Energy Solutions Limited, Mainstream, Transcorp Power Limited, Transcorp Power, Egbin Power Plc, Egbin, and Northsouth Power Company Limited (North-south), are arguing that the defendants have continuously meted out unfair treatment to them, their investors and suppliers.

Specifically, the GENCOs stated that they had made huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to the Nigerian Bulk Electricity Trading, NBET Plc and are facing the threat of business failure as a result of their huge indebtedness to banks and financiers, which provided the foreign currency-denominated acquisition loans with which the power plants were acquired from the Federal Government.

They alleged that NBET has consistently defaulted in paying them for electricity generated and put on the national grid in breach of its contractual obligation, which required that the GENCOs be paid in full (100 percent) not later than 45 days of invoice submission and upon delay in payment, be paid with interest at the agreed rate.

The GENCOs noted that failure to pay them has caused them to default in meeting their obligations to their lenders, O&M contractors, equipment manufacturers, service providers and other persons and entities.

The GENCOs put the total amount owed them for electricity supplied at approximately N800 billion, adding that when interest is added, it amounted to over N1 trillion.

They stated that the N701 billion Payment Assurance Facility could have enabled the government to pay for all electricity generated and supplied from January 2017 to December 2018.

The GENCOs are aggrieved that the Federal Government has not kept faith with payments from the N701 billion facility as payment timelines are not clear, regular or consistent.

Specifically, they stated that only 80 percent of invoiced amounts are paid whenever the Federal Government chooses to pay, with 90 percent of gas supply invoices paid directly to gas suppliers out of the said 80 percent payment, adding that whatever is left of any payment tranche was hardly sufficient for any meaningful activities of the GENCOs.

The GENCOs stated that payments are insufficient, adding that the outstanding payments owed the GENCOs before the introduction of the N701 billion Facility and the monthly shortfall payment of 20 percent of invoices have continued to pile up without any clear idea of how these will be paid.

They disclosed that even though they appreciate the introduction of the N701 billion, it was neither a privilege nor a favour to them as they are entitled to full payment for electricity generated and supplied.

The GENCOs stated that they took loans from Nigerian banks with some of the banks leaning on international banking institutions to provide support for them.

They argued that it will be destructive and quite discouraging because “these banks have empathized with us and the Federal Government in the last four years to realize that the Federal Government is supporting and paying new entrants in full with all risks covered without extending the same treatment to the GENCOs.”

They said they are in a dire situation, adding that notwithstanding their commitment to the development of the power sector, not addressing the issues raised in their letter and their demands would inevitably affect the GENCOs’ capacity to continue to generate electricity.

The GENCOs attached, an exhibit, a letter they had sent to Babatunde Fashola, the minister of power, works and housing on the various issues, including confirmation of a plan for 100 percent payment of all outstanding indebtedness and interests due to the GENCOs for electricity supplied and ancillary services provided by them; 100 percent payment (not 80 percent payment) of all invoices to be submitted by GENCOs under the payment assurance programme and payment of all sums due as capacity charge to the GENCOs from 2013 till date.

The demands also included non-admission of any additional beneficiary into the  N701 billion assurance facility without corresponding increase in the facility amount, payment of the balance of  N213 billion from CBN Electricity Market Stabilization Fund, removal of all administrative bottlenecks delaying drawdown of payment assurance funds and provision of sovereign guarantee and/or partial risk guarantee for all payment obligations to GENCOs.

The GENCOs indicated that the suit became necessary as engagement with the minister, Fashola, did not yield fruits.

They are contending that the Federal Government and its agencies are duty bound to be fair, just and/or equitable in all their actions, dealings and directions as the same may relate or pertain to all actions, steps and/or directives given or enforced to the benefit or detriment of all persons and/or corporate entities engaged in the provision of power/and or electricity within the Federal Republic of Nigeria.

According to them, the ministry and agencies cannot lawfully and/or legally take any step, action or give any directives which have the effect of violating the legitimate expectations of the GENCOs to be treated equally, justly, fairly and reasonably as it relates to all policies and decisions which affect or have the possibility of affecting the business interest of the plaintiffs.

They want the court to restrain the government and its agencies from applying funds from the payment assurance facility for the payment of bills and invoices submitted by Azura and Accugas to NBET for payment/settlement.

The case, which came up before Binta Nyako on March 1, 2018, has been adjourned till April 16, 2018.

Read more at Vanguard


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