Home Editorial The lifeline for power generating firms

The lifeline for power generating firms

The recent release of N213 billion to the Power Generation Companies, Gencos, by the Federal Government is a welcome and timely intervention in the operations of a sector that was already burdened by huge debts to banks and gas supply companies, but this lifeline must impact positively on power consumers across the country for the initiative to be meaningful.
The intervention has come at a time the Gencos were said to be owing banks over N250 billion and were, as a result, losing their capacity to repay or attract further loan facilities.  
They were, in fact, near ground zero financially and could barely maintain operations.  They reportedly also owed gas companies several billions of naira for gas supplied to them – a development that led to the gas companies cutting off gas supplies to them.
According to Governor of the Central Bank of Nigeria, CBN, Mr. Godwin Emefiele, whose bank is midwiving the financial intervention, the essence of the facility is to protect lenders, electricity consumers, and other stakeholders.
Government’s action is a reaction to the risk affecting the power industry as a whole especially as it affects the sustainability of the reforms.
Under the programme rolled out by the CBN, the funds would be released to the Gencos through banks at less than 10 per cent interest rate and would be repaid over a period of five years.
At present, public sector lending attracts over 30 per cent interest rate from banks, a development that has led to the shutdown of several small and medium scale businesses.
Welcome as this initiative is, it can only provide the needed elixir for electricity consumers in the country, only if the funds are diligently and accountably invested in the power sector as proposed, especially in power generation and allied operations, including sustainable gas supply.
It is, however, difficult to believe that the Federal Government which organized the sale of the power generating stations to the new owners did not consider the fact that the oil and gas firms, which accommodated indebtedness by the former Power Holding Company of Nigeria, PHCN, on account of gas supplied it, would not continue to stomach such indebtedness under a privatized arrangement.
If the need to promptly discharge gas supply obligations by the Gencos were factored into the handover arrangement, perhaps, the economy would not have had to grapple with the shutdown of the power plants in the recent past on account of epileptic gas supply.
Although the issue of pipeline vandalization has been advanced as reason for the drop in power generation, the more compelling reason has been the failure of the Gencos to pay for the gas supplied them.
Inability to access gas also appears to be the reason why some of the already completed Independent Power Projects, IPPs, cannot, till date, be streamed. Two of the 10 IPPs already completed cannot be streamed because the gas supply infrastructures needed to fire them have not been completed. Unless this redressed, the current shortfall in power generation may still linger.
The release of the N213 billion, despite the challenges facing the nation’s power transmission and distribution networks, is still a major boost for electricity delivery in the country.
The Federal Government, from available evidence, is doing everything possible to ensure that its power reform programme succeeds.
The efforts are also meant to justify the choice of privatization as the preferred option for the power sector. This latest financial intervention is one of such efforts.
It must, however, be stressed that since the Gencos are getting the loan facilities at little or no interest, they must reciprocate the government’s gesture by immediately improving their services so that power consumers  in the country would experience better power supply.
Government should, however, diligently monitor the release of the funds to the Gencos by the lending banks to ensure strict utilization of the resources on power generation and gas supply programmes. This is because the significantly low lending rate makes the fund attractive for diversion to other uses where unscrupulous bankers and even operators of the Gencos could make more profit faster than investing the funds in the power projects that it has been provided for.

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