FEC Approves N701bn Power Purchase Guarantee For GenCos | WakaWaka Reporters
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FEC Approves N701bn Power Purchase Guarantee For GenCos

The federal government yesterday approved the sum of N701 billion as Power Assurance Guarantee for the Nigeria Bulk Electricity Trading (NBET).

The facility, which is to be made available by the Central Bank of Nigeria (CBN), is to guarantee payment for the evacuation of power produced by Generating Companies (GenCos) for the national grid.

This was disclosed by the Minister of Power, Works and Housing, Babatunde Fashola, after the weekly Federal Executive Council (FEC) meeting presided over by acting president Yemi Osinbajo at the Presidential Villa, Abuja.

Fashola who said the amount would be drawn on monthly basis to tackle liquidity challenges faced by GenCos noted that part of the liquidity problem faced by GenCos is the inability to pay their gas suppliers.

He pointed out that NBET will pay GenCos in arrears for electricity generated as a deliberate step to improve their confidence and that of intending investors in the sector.

The minister said, “The second memorandum is in another area of critical importance, which is power. Part of the challenges were addressed in the memo that was presented to council to solve some of the liquidity problems, especially as it relates to NBET.

“NBET, as you know, is the government’s own company; that is the Bulk Trader Electricity who buys power from the GeNCos. The liquidity problems that have characterised the market have affected NBET’s ability to deliver on its PPP obligations through the GenCos. So, going forward in order to strengthen NBET, CBN is approving a payment assurance guarantee for any energy produced by any GenCo so that the GenCos can pay their gas suppliers when they get paid so that the hydros 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 and those who are concerned about how to recover their money payment assurance. Also, people who are planning to invest in the gas sector, which is being championed by the ministry of petroleum are saying the same thing in terms of payment for gas produced.”

Fashola explained that 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 on to the grid to the GenCos that are its customers.

Explaining further he said, “The reality is that we want more power and for that reason, we are expanding our transmission capacity regularly. 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 7000 from 5000 and is continuing to grow with every project.

“So, it is not the problem of taking power; it is actually a problem of getting power from generation. If you recall, just about a few weeks ago you were reporting that power supply had dropped to a little over 2000mw. It is back now at over 4000 mw. We have solved the transmission problem in Ikot Ekpene, largely to evacuate over a thousand, but the gas suppliers were being owed. So, they were not supplying gas for the power producers.”

Fashola further noted that while the quantum of the guarantee is for two years, precisely from January this year to December 2018, it is capped at a maximum of N701billion and it is to be drawn monthly.

He continued: “It is possible it may not reach that, but we are projected on the total cost that NBET will likely pay. And that is why it is for power generated onto 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 and 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.”

During the weekly FEC briefing, the Minister of Agriculture, Audu Ogbeh, also hinted that FEC approved the sum of N263 million for three research institutions to produce gum Arabic seedlings for Nigerian farmers as well as for export.

He said Nigeria earned as much as $43 million from export of gum Arabic last year and that more will be earned with increased production, especially as the commodity is in high demand in 17 other countries.

Ogbeh disclosed that similar efforts were on to boost Cassava production, even as he described as “interesting,” the recent discovery of well-packaged ‘gari’ imported from India.