FG approves N701bn power purchase guarantee for Gencos

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N263m for gum arabic seedlings

To pickup funding of 2nd Niger Bridge

The Federal Executive Council (FEC) presided over by Acting President Yemi Osinbajo, has approved N701 billion as Power Assurance Guarantee for the Nigeria Bulk Electricity Trading (NBET).

It also approved the sum of N263 million for three research institutions to produce gum arabic seedlings for Nigerian farmers and for export.

Briefing State House correspondents at the end of the meeting, the Minister of Power, Workings and Housing, Babatunde Fashola, said the N701 billion NBET fund to 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.

According to him,  the amount will be drawn on monthly basis to tackle liquidity challenges faced by Gencos. Part of the liquidity problem faced by Gencos is the inability to pay their gas suppliers.

Fashola explained that NBET will pay Gencos in arrears of electricity generated as a deliberate step to improve their confidence and that of intending investors into the sector.

“NBET, as you know, is government’s own company, that is the Bulk Trader Electricity, which buys power from the Gencos. The liquidity problems that have characterised the market have affected NBET’s ability to deliver on its Public Private Partnership (PPP) obligations through the Gencos. So, going forward, in order to strengthen NBET, CBN is providing a payment assurance guarantee for any energy produced by any Genco 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, they are also 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 per cent government-owned company, to pay on a monthly basis its obligations for energy actually produced on to the grid to the Gencos that are its customers.”

On how much it will cost the government, Fashola said, “‎the reality is that we want more power and for that reason we are expanding our transmission capacity regularly. I have been here to announce to you transmission projects that have been approved by council over the last one year, plus the transmission capacity has grown to almost 7,000 from 5,000 and is continuing to grow with every project. So, it’s not the problem of taking power, ‎it’s 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  2,000 megawatts. It’s back now at over 4,000 megawatts. 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 is 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 we have briefed you about that we were planning to undertake.”

Fashola said he also briefed the cabinet on the PPP status of the Second Niger Bridge and Lagos-Ibadan Expressway.

“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 were signed to build the Lagos-Ibadan Expressway.”

He said council was presented with options, which include essentially that ‎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.”

Minister of Agriculture, Audu Ogbeh, said the council approved the sum of N263 million for three research institutions to produce gum arabic seedlings for Nigerian farmers and for export.

He said Nigeria earned as much as $43 million from export of gum arabic last year, and that more would be earned with increased production, especially as the commodity is in high demand in 17 other countries.

Ogbeh disclosed that similar efforts are on to boost cassava production, even as he described as “interesting” the recent discovery of well-packaged ‘garri’ imported from India.‎

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