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Thursday, December 1, 2022

Electricity Sector Held Hostage by DisCos Unpaid NBET Invoice of N123bn

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Nigerian Electricity Distribution Companies (DisCos), are holding the entire power chain (from gas producers to consumer’s), hostage as the unpaid invoice owed to the Nigerian Bulk Electricity Trader or NBET hit a record high of N123 billion in the first Quarter (Q1) of 2020.

Latest data from NBET seen by MoneyCentral shows that collections have been worsening in the first three months of 2020, compared to the 2019 period.
NBET purchases electricity from the Generating Companies (GenCos) through Power Purchase Agreements (PPAs) and sells to the Distribution Companies (DisCos) through Vesting Contracts.

The Generating Companies include the privatized PHCN successor companies, the Niger Delta Power Holding Companies (NIPPs), the already existing Independent Power Producers (IPPs) and the new IPPs.

The NBET data compiled by MoneyCentral shows that the bulk electricity trader sent an invoice value of N156.7 billion to the eleven DisCos in Q1, 2020.
However, payment from the DisCos was equivalent to only N33.6 billion, leaving DisCos with an unpaid NBET Invoice that rose by 5 percent to N123 billion when compared to Q1, 2019.

In the prior 2019 period the gap was N117.188 billion as an invoice of N161.26 billion was sent out to the DisCos of which they paid N44.07 billion.
The NBET data shows that the steady increase in payment by DisCos in Q1, 2019, reversed completely in Q1, 2020.

In January 2019 the payment performance (percentage of invoiced value paid) was equivalent to 24 percent. It rose to 28 percent in February 2019 and 30 percent by March.
However, the reverse was the case in 2020, as payment performance which stood at 29 percent in January 2020, fell to 25 percent in February and a dismal 11 percent by March 2020. (See table).

NBET Unpaid Invoice by DisCos

None of the DisCos met the NERC approved minimum remittance with the highest being Ikeja and Abuja DisCos at 20 percent and 16 percent respectively in March 2020.
Yola DisCo with 2 percent invoice remittance and Kaduna and Kano DisCos with zero percent invoice remittance came in at the bottom of the table.

NBET unpaid invoices by Discos

The buildup of unpaid DisCo invoices meant the NBET could not meet its obligation to GenCos, leading to only an 11 percent (N5.8 billion) payment to GenCos in March 2020, by NBET, compared to invoices the power generators sent totaling N52.8 billion.

This sorry state of affairs means the whole sector is on the path to bankruptcy as shortfalls for 2020 alone may exceed the N500 billion mark assuming the deterioration continues at current pace.The Federal Government is also largely to blame for the current quagmire the power sector has found itself in.

A reluctance to enact ‘cost reflective tariffs’ since 2015 has meant that assumptions built into tariffs have long been overtaken by macro events such as higher inflation and a devalued naira.

Making matters worse NBET itself has been embroiled in a leadership tussle with President Muhammadu Buhari finally approving the removal of Marilyn Amobi as the managing director.
The Minister of Power, Saleh Mamman, announced the removal of the controversial official Amobi on Monday evening.

The minister, in a press statement, said the removal was approved by President Buhari. He also announced the company’s General Counsel and Secretary, Nnaemeka Eweluka, as the new substantive boss of NBET “with immediate effect.”

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