Hope that the liquidity challenges that have crippled the electricity sector will soon be sorted out was kindled Tuesday when players in the sector on Tuesday signed sets of definitive agreements as a first step to kickstart the disbursement of the Central Bank of Nigeria’s N213 billion Nigeria Electricity Market Stabilisation Facility (NEMSF).
CBN governor, Godwin Emefiele, said at the signing that the apex bank was collaborating with the Ministry of Petroleum Resources, Ministry of Power and the Nigerian Electricity Regulatory Commission (NERC) to intervene in the Nigerian electricity supply industry (NESI) with a view to resolving liquidity challenges which had frustrated stabilisation of the electricity sector since privation concluded almost a year ago.
Of foremost concern to the players is the settle approximately N36.9 billion legacy debts owed to gas suppliers by the power the sector, the PHCN over the last few years.
This measure is expected to bring to the grid, an additional 2.5 billion cubic feet per day of gas over the period, from now till 2017 – over 80 percent of this gas will go to the peer sector and it will support an additional 5 to 6 gigawatts, relative to today’s capacity.
According to the CBN governor, the facility would be disbursed at 10 percent per annual rate, with a tenor of not be more than 10 years. The agreements would be followed by disbursement of funds and monitoring implementation of the agreements.
Emefiele spoke at the signing event in Abuja.
“In partnership with the banking sector, the CBN is providing this facility to address shortfalls in power sector revenues caused by immediate adjustments in the electricity tariffs, gas debts,”he said.
He said a Special Purpose Vehicle (SPV) that complies with section 31 of the CBN Act 2007 would serve as an intermediary between the banks and the electricity market players.
The Nigeria Electricity Regulatory Commission (NERC) would be required to reset the Multi Year Tariff Order (MYTO) to ensure that it provides for the loan repayment, including the costs of setting up and operating the NEMSF.
The other power sector value chain players are likewise expected to agree to specific service related commitments including, gas suppliers to commit to assured gas supply at higher volumes; Generating companies (GENCOs) and Distribution Companies (DISCOs) to commit to utilising the funds for equipment/infrastructure acquisition, refurbishment and/or upgrade.
Part of the implementation requirements is also that all parties that are licensed by the Nigerian Electricity Regulatory Commission (NERC) to operate in the electricity market must accept to be immediately bound by performance agreements signed with the relevant authorities including the Bureau of Public Enterprises (BPE).
All parties would also be subject to additional oversight mechanism to be developed by NERC and CBN, to ensure business continuity and that all power sector players meet obligations that are critical for continued electricity supply.
The Petroleum minister, Diezani Alison-Madueke said with this intervention, “all undisputed claims are hereby settled, creating a new page in the Nigerian domestic gas market.”
She said going forward, it is expected that appropriate security mechanisms would be put in place to assure that gas sold to the power sector gets paid for, thereby creating a viable and sustainable gas sector to carry Nigeria into the future.
“Today’s, intervention is also complimented by a reciprocal commitment by the gas suppliers themselves,” Alison-Madueke noted, adding, a “medium term gas supply commitment from the various gas suppliers is also being made today.
She assured on short term progress in gas supply, saying that today, the Otologo-Ugelli gas plant is actually producing at its highest levels, as production ramps up from about 350 million cups per day a few months ago to over 400 million cups per day currently.
She said in addition, the supplies to Gbaran IPP were also being finalised for readiness before the end of December.
The minister further assured that with this combination of projects, the target of 5,000 megawatts by December ending would be met from a gas availability perspective.
According to her, other supply projects are also progressing and “we are expecting that over 250 millions cups per day will be added to the grid by first quarter, 2015.
“I believe that these interventions cumulatively will bring permanent closure to the problems of under supply of gas in the domestic market,” she told the gathering.
