Are Gencos generating more debt than power?

The Nigerian electricity industry has been under a lot of pressure. Gas supply is low and power generation has been severely affected.

More worrying is that they are owned hundreds of billions of naira in debts by its customers. N93 billion of that debt is owed by Ministries and Department of Government (MDA’s). That debt cascades down the value chain of the power sector with most of it owed to power generating companies.

The power sector value chain is such that power is generated by the Gencos and sold to the Marker Operators (MO), who then wheel the power  through the grid (run by transmission Company) to the Discos and then to consumers. A reverse flow starts when the customers pay their bills to the Discos and then the Discos pay the Market Operators (MO) who then pay the Gencos and then the Gencos pay the gas suppliers.

For the Gencos, the above schematic is now more on paper than in reality. They hardly get enough gas to generate electricity and even when gas is available, they lack the funds to pay for it. Gencos are currently thought to be owed about N50 billion by power distribution companies in Nigeria.

With distribution debts expected to remain high, it’s likely that the Gencos are more likely to generate more debt for every single megawatt of power generated.