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Fashola Signs Power Purchase Guarantee for GenCos to Help Provide Steady Electricity for Millions of Nigerians
Posted by Thandiubani on Wed 01st Mar, 2017 - tori.ngIn a bid to make power steady in Nigeria, the Minister of Power, Works and Housing, Babatunde Fashola, has announced the signing of the Power Assurance Guarantee.
Minister of Power, Works and Housing, Babatunde Fashola
As Nigeria's power generation hits 4,000 megawatts, the Federal Executive Council (FEC) on Wednesday approved N701 billion as Power Assurance Guarantee for the Nigeria Bulk Electricity Trading (NBET).
This was revealed by the Minister of Power, Works and Housing, Babatunde Fashola while briefing State House correspondents at the end of FEC meeting chaired by Acting President Yemi Osinbajo.
He was accompanied by the Minister of Information, Lai Mohammed and Minister of Agriculture, Audu Ogbeh.
Fashola said that the facility, which will be made available by the Central Bank of Nigeria (CBN), is to guarantee the payment for the evacuation of power produced by Generating Companies (GenCos) for the national grid.
The amount, he said, will be drawn on monthly basis to tackle liquidity challenges faced by GenCos.
NBET will pay GenCos in arrears of electricity generated as a deliberate step to boost their confidence and that of intending investors to the sector.
Part of the liquidity problem being faced by GenCos is the inability to pay their gas suppliers.
Fashola said: “You will recall that a few weeks back we announced the approval of council for early works for the second Niger Bridge. That bridge at some time was part of a PPP initiative. You will also recall that at some time some private agreements have been signed to build the Lagos-Ibadan express way.
“The first memo is to brief council on the PPP status of those infrastructure projects and present options to government which was essentially that government where those PPPs are having problems, government must lead and finance the infrastructure while continuing to engage the private sector. Government remains committed to having private participation in infrastructure renewal.
“But government as a matter of strategy thinks that it can continue until financial closures, agreements and all of that are put in place when PPPs become ready and viable to help deliver. So, it was a strategy memorandum, the conclusion essentially which is that government is committed to doing short financing as much as possible and encouraging PPP as much as possible.
“The second memorandum is in another area of critical importance which is power. Part of the challenges there was 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, which is the Bulk Trader Electricity who buys power from the GENCOS. The liquidity problems that have characterized 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 proving a payment assurance guarantee for any energy produced by any GenCos, 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, who are concerned about how to recover their money….. payment assurance and also people who are planning to invest in the gas sector which is being championed by the ministry of petroleum also are saying the same thing in terms of payment for gas produced.
“So, the approval of council was to provide this guarantee for NBET, which is a 100 percent government owned company to pay on a monthly basis it’s obligations for energy actually produced on to the grid to the GenCos that are its customers,” he said.
He said that the government is expanding transmission capacity regularly because it wants to generate more power.
He said “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 seven thousand from five thousand 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 2000. It’s back now at over 4000. Because what we were seeing on the eastern side of the Delta was that there power. 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.
“As to the quantum of the guarantee, it is for two years from January this year right through to December 2018. It is capped at a maximum of N701 billion but it is to be drawn monthly. It is possible it may not reach that. But we are projected on the total cost that NBET will likely to 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 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,” he said.
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