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Fears Of Licence Revocation: GENCOs Increase Generation Capacity To 13,496mw

As the clamour to revoke licenses of the buyers of the privatised power assets continues, the Electricity Generation Companies (GENCOs), have disclosed that they have increased Nigeria’s generation capacity from 12, 500 megawatts, mw to 13, 496mw.

In a report – Assessing the Challenges in Operating a GENCO, given Current Market Consideration – obtained by Vanguard, the GENCOs stated that generation companies have delivered on their set targets.

The report stated: “At inception, the GENCOs were contractually obligated to ramp up electricity generation capacity by about 5,000 megawatts, over a five-year period.

“Modernisation of existing plants is necessary but will require significant capital investment; some of the GENCOs have taken heavy loans to overhaul their plants (Egbin, Ughelli, Geregu I, Shiroro, Transcorp, Mainstream just to mention but a few.)”

It stated: “Generation companies despite the stern challenges they are faced with from inception till date, have in association with the above FGN objective, kept to the terms of the industry agreements they entered into with the Bureau of Public Enterprises (BPE), which defines the relationship between the privatised companies and the government with a five year period to recover lost capacities.

“Records from BPE show that as at the takeover date in November 2013, available generating capacity was 4,500. Also, installed generation capacity currently stands at 13, 496mw as against 12, 500mw at take over.

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“GENCOs engaged in a massive capacity recovery plan with their acquired asset and achieved in no time lost capacities increasing available capacity to 7,913mw. Generation companies have also improved in operational performance in the area of human resource management, quality, health safety & environment standards and community service responsibilities, which are all components of their agreement.

“Today, the BPE confirms that most of the GENCOs have exceeded their contractual obligations. Overhaul has been successfully carried out on one of the generating units at Jebba plant. Capacity recovery process on other unavailable units continues which will enable the plants recover to full installed capacity.”

The report noted that the privatisation of the country’s power sector had exposed the inherent structural weakness in the sector, adding that investors, GENCOs are worst hit in the electricity market logjam.

It further stated: “historical generation data for the period 1st November 2013 to 31st December, 2,018 shows that there has been 75 per cent increment in the available generation capability, amounting to about 3,169.95mw (4,214.32 in 2013 – 7,384.27MW in 2018) within this period.”

The report, however, disclosed that investment on generation is at the instance of the off-taker (the buyer of the power generated), adding:  “GENCOs were promised 100percent payment of all they are capable of generating by the government through its agency called NBET. The promise provoked some additional investments by GENCOs with its attendant high cost of capital, increased regulatory risk, increased debt profile.”

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In a recent report obtained by Vanguard, the GENCOs added: “the grid cannot conveniently take over 4500mw without rejecting load. Generation above 5,000mw has either been lost or rejected. TCN constantly rejects load with reports it is due to DISCOs. Effects of ramping up and down, non-payment for ancillary service and faulty transmission lines amongst others.”

Source: Vanguard

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