The Federal Government is making concerted efforts to offset at least N3 trillion Naira debt it inherited in the power sector.
The Minister of Power, Mr Adebayo Adelabu, disclosed this while speaking with journalists in Abuja on Wednesday
“Today, we are owing the Power Generating Companies (GenCos) a total of N1.3 trillion, out of which 60 per cent of it is being owed to gas suppliers.
”We have a legacy debt of 1.3 billion dollars before 2014 to gas supplier companies at today’s rate, which is close to two trillion Naira.
“If you add the two trillion Naira legacy debt to N1.3 trillion owed by GenCos, we have an inherited debt of more than three trillion Naira in the power sector.
“How will the sector move forward? Nigerians deserve the right to know, and we are working underground to resolve these issues,” he said.
Adelabu explained that the Federal Government plans to settle the existing sectoral outstanding debt obligations to the gas supply and power generation companies using partly cash payments and guaranteed debt instruments.
He stressed that the Ministry of Power was partnering with the Ministry of Finance, Budget, and Economic Planning and Office of the Special Adviser on Energy to the President to settle the outstanding debt.
“We are also working with the Minister of State for Petroleum Resources (Gas) to have a working arrangement for firm gas supply contracts for the Gencos.
”And possibly agree on gas to power domestic supply pricing in local currency to reduce price fluctuations,” he said.
The minister pointed out that the issues with the electricity supply value chain are multiple simple technical operational problems across all segments of the value chain.
These issues, he said, are complicated by a lack of sustaining liquidity and infrastructure funding, as well as structural misalignment.
He identified the simple technical issues to include an inadequate shortage of gas supplies and ageing, dilapidated generation machinery.
“Causing below-optimal capacity utilisation, leading to short supply by the GenCos,” he said.
Others include inadequate power evacuation capacity at Genco locations, coupled with unstable and fragile transmission lines devoid of automated frequency controls.
”Lacking in fail-over or backup capacity with frequent human disturbances through vandalism and theft.
”Ageing weak distribution infrastructure (lines and transformers) coupled with a huge meter gap is causing unbearably large technical and collection losses.
“These are issues that look so simple on the surface and should ordinarily require little effort to fix over time, ”he said.
Adelabu stated that it had been difficult to get these problems fixed over the years due to the complications wrapping the entire value chain end-to-end.
He stressed that the road map to stabilising the sector in preparation for turn-around and transformation was the settlement of existing sectoral outstanding debt.
The Minister said that there was also a need to discourse on the nation’s perspective on electricity supply, commercial products, or social services.
“There must be an agreement across divisions on how we define electricity.
“Depending on the outcome of the above, either the implementation of a cost-reflective tariff or a cash-backed Federal Government guaranteed subsidy funding regime will inject liquidity into the sector.
”Increased investments across the value chain for infrastructure improvements, capacity expansion, and transmission automation.”
The minister said that diversification of power generation to absorb renewables and facilitate the nation’s journey to the energy transition target was key.
He made it clear that the roadmap would encourage a distributed power strategy in conjunction with sub-national governments prioritizing embedded power models.
He noted that this would reduce pressure on the national grid and ensure alternative electricity supply to electricity distribution companies.
The minister said that the development of a rural electrification plan from a bottom-up and top-down approach to identify the unserved and underserved rural and suburban communities was required.
Adelabu said this will help the government to direct targeted subsidy through rural electrification agencies at a national and subnational level.
”Using renewables (small hydro, solar bottom-up, solar home systems, and wind technology).
”Develop and expand capacity for sectoral regulation, technical inspection, and sectoral expertise.
Adelabu equally revealed that there were ongoing activities in the Ministry of Power and its agencies to improve power supply.
He declared that these activities include the augmentation of the hydro plants: operational capacity. and thermal power.
”The recent completion of the 700 Megawatts (MW) Zungeru Hydroelectricity Power Plant in Niger State.
”Financing the required infrastructure to enable complete evacuation of the 40 MW Kashimbila Hydro Power Plant in Taraba using the Promissory Note facility at the Debt Management Office (DMO).
”Resuscitation of abandoned 26 small and medium-sized hydroelectric plants across the country with solar hybridization.
”This will adopt an embedded power model with connectivity to the regional Discos distribution network.
Others, he said, is the completion of the 20 MW wind/solar hybrid power plant in Katsina.
”Completion of infrastructure is required for a complete evaluation of the $30 million Gurara Dam Power Plant.
”Re-visitation of the abandoned 15 IPP solar plants in the northern part of the country and developing an IPP solar auction with the support of the World Bank,” he said.
