The Federal Executive Council (FEC) on Wednesday approved a payment guarantee assurance by the CBN for power generating companies (GENCOS) to solve liquidity problems in the energy sector.
The Minister of Works, Power and Housing, Mr Babatunde Fashola, who announced this to State House Correspondents, said the CBN would hold N701 billion for regular payment for power generated onto the national grid.
He said that the government’s bulk energy buyer, Nigeria Bulk Electricity Trading (NBET) had series of liquidity problems which made it difficult to fulfil its delivery obligations.
“The liquidity problems that have characterised the market have affected the Nigeria Bulk Electricity Trading (NBET’s) ability to deliver on its PPP obligations to the Gencos. So going forward in order to strengthen the NBET, CBN is providing a payment assurance guarantee for energy produced by any Genco, so that Gencos can pay their gas suppliers when they are 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.
“They see now payment assurance and also people who are planning to invest in the gas sector which is being championed by Ministry if Petroleum also are seeing the same thing in terms of payments for gas produced.
“So 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 what was actually produced onto the grid , to the Gencos that are its customers.’’
Fashola said that the nation’s power transmission capacity had moved from 5,000 megawatts to 7,000 megawatts while generation had moved up from below 2,000 megawatts to 4,000 megawatts.
The minister denied that the transmission company of Nigeria (TCN) did not have the ability to take in all the energy generated adding that government was regularly expanding its transmission infrastructure.
He said that it was observed that there was un-evacuated power on the Eastern part of the Delta adding that the ministry had solved the transmission of power in the Ikot Ekpene axis to evacuate 1,000 megawatts but the gas producers were not being paid.
“As to the quantum of the guarantee, it is for two years from January this year through Dec. 2018. It is capped at a maximum of N701 billion but it is to be drawn monthly.
“That is the cap, it is possible it will not reach that but we have projected on the total cost that NBET is likely to pay and that is for power generated on the grid only,’’ he said.
He said the measure was part of the reforms being done in the sector adding that government had plans to recover the power sector and keep its fundamentals.
Fashola also announced that FEC approved that government should take over the financing of the Second Niger Bridge and the Lagos – Ibadan road projects from the private sector operators for speedy delivery.
He said that the decision was taken after the PPP status of the infrastructure projects were reviewed and government took the option of leading in financing where there were problems in the PPP.
He said that while engaging the private sector as it remained committed to PPP in infrastructure renewal, it would take some initiatives to improve infrastructure.
“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 infrastructure.
“It was a strategy memorandum. The conclusion essentially is that government is committed to doing both self-financing as much as possible and encouraging PPP as much as possible,’’ he added.