Tinubu approves gradual payment of N3trn debt owed to GenCos, GasCos

President Bola Tinubu has approved the gradual payment of the N3.3 trillion debt owed to power generation and gas companies.

Adebayo Adelabu, minister of power, disclosed this at the 8th Africa Energy Marketplace held on May 16 in Abuja.

The event was themed ‘Towards Nigeria’s Sustainable Energy Future: Policy, Regulation and Investment – A Policy Dialogue for the National Integrated Electricity Policy and Strategic Implementation Plan’.

The power-generating companies (GenCos) are owed N1.3 trillion, while the gas companies (GasCos) are owed $1.3 billion (which is N1.99 trillion using the official closing rate of N1533.99/$ on May 16).

On February 15, Adelabu said Nigeria’s debt to power generation and gas companies was N3 trillion, adding that it was difficult for the federal government to continue to subsidise electricity.

Less than a month later, Ed Ubong, director of the decade of gas secretariat, said the federal government had paid over $120 million to offset some of the debts owed to GasCos.

On March 29, the minister assured his ministry would prioritise the settlement of outstanding debts owed to power plants, including Egbin Power from April.

Speaking on Thursday, Adelabu said the N1.3 trillion owed to GenCos will be paid via cash injections and promissory notes.

Cash injection is an investment in the form of cash, equity, or assets into a company, while a promissory note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money.

Also, Adelabu said Tinubu had directed the minister of finance to make an immediate payment of N130 billion from the gas stabilisation fund to reduce the $1.3 billion owed to GasCos.

He said the companies would be paid via cash and future royalties, a solution deemed satisfactory by the gas-supplying companies.

“It is true that I mentioned that Mr President has approved the submission of the minister of state petroleum (gas) to defray the outstanding debts owed to the gas supplying companies to the power sector operators,” Adelabu said.

“The payments will be in parts. We have the legacy debt and we have the current debt. For the current debt, approval has been given for a cash payment of about N130 billion from the gas stabilisation fund, which the federal ministry of finance will pay, if not already paid.

“The payment for the legacy debts is going to be made from future royalties and streams of income in the gas sub-sector which is quite satisfactory to the gas supply companies.

“The last amount that was being quoted was $1.3 billion, which we believe will go a long way to encourage these gas companies to enter into firm supplying contracts with the power generating companies.

“The situation we are in now is on a best endeavour model, which means there is no firm contract between the gas companies and the majority of the power generating companies. The day they can supply gas, they will, the day they cannot supply gas, there is no penalty. 

“But once there is a firm contract they will be under contractual obligations to supply gas to these power-generating companies so that we can have consistent power generation.”

TINUBU GIVES CONDITION TO PAY GENCOS’ DEBT

Adelabu said Tinubu approved payment on the condition that the government and GenCos conduct debt reconciliation.

“For the power generating companies, the debt is put at N1.3 trillion. I can also tell you that we have the consent of Mr. President to pay on the condition of settling the reconciliation of these debts between the government and the power-generating companies,” he said.

“And this, we have successfully done, and it is being signed off by both parties now.

“The majority have signed off, and we are engaging others to ensure we have a 100 percent sign-off from the power-generating companies. 

“The modalities for paying this will be in two ways. Of course, there will be a cash injection, immediate cash injection.”

‘FG NOT BUOYANT TO PAY N1.3TRN AT A GO’

Adelabu also said the federal government is not buoyant enough to pay down N1.3 trillion once and for all in terms of cash.

“But there is a fraction of it that will be paid in cash while the remaining fraction will be settled through a guaranteed debt instrument, preferably a promissory note,” he said.

“That is more like a comfort to these companies that in the next two, three to five years, the government is ready to defray this debt finally.

“This will go a long way to encourage the power generating companies to incentivise them to even invest more in generation so that you can know our generating output from the level it is now to a higher level because as I mentioned, there is an opportunity for demand locally and across the border. And that is a source of foreign exchange earnings for the country.”

Adelabu also said the Nigerian Electricity Supply Industry has achieved a new record of 5,000 megawatts (MW) with its power generation of 700MW from the Zungeru hydroelectric power plant.