GenCos Decry N6.2tn Debt, Fault FG Subsidy Policy

The Association of Power Generation Companies (APGC) has decried an accumulated debt of over N6.2tn owed to generation companies (GenCos).

To this end, it warned that the Federal Government’s current subsidy and market settlement framework is pushing operators to the brink of insolvency.

In a press release issued in Abuja, titled “The GenCos’ Dilemma: A Clarification on Capacity Payments, PPAs, and Market Realities,” the association said persistent misconceptions about capacity payments, Power Purchase Agreements (PPAs), and electricity market operations have obscured the real causes of the liquidity crisis in the Nigerian Electricity Supply Industry (NESI).
The statement, signed by APGC Chief Executive Officer, Dr (Mrs) Joy Ogaji, said the issues are about market design, contractual sanctity, and the sustainability of power generation in Nigeria.

APGC faulted what it described as the effective removal of payment for available capacity from PPA consideration, arguing that it has discouraged investments in recovering idle capacity.

“Unfortunately, in Nigeria, the capacity made available has been removed from PPA consideration, disincentivising any desire to invest in recovering mechanically unavailable capacity, which can be estimated at 7,000MW of the 15,500MW grid-installed capacity,” the statement read.

According to the association, GenCos declare daily available capacity based on their Net Dependable Capacity (NDC), which forms the basis for allocation to distribution companies. However, payments are increasingly tied only to called-up capacity; the volume of power that transmission and distribution companies can actually take, rather than what is made available.

The group argued that where the System Operator directs generators to ramp down output to ensure grid stability, natural justice and contractual provisions require that GenCos be paid for the full declared available capacity and the energy they would have generated.

“GenCos have mobilised and paid for every input variable — fuel, labour and all other overhead costs needed to produce energy as declared,” it said.

APGC disclosed that GenCos have received only about 35 per cent of their invoiced amounts since 2015, leaving a huge funding gap that has snowballed into over N6.2tn in outstanding receivables.

“These debts continue to accumulate because GenCos are not fully paid for their output, despite incurring high costs for gas supply, plant maintenance, foreign exchange exposure, and financing obligations,” the association stated.

It added that most GenCos are now technically insolvent and constrained in their ability to invest in maintenance and expansion.

The association also rejected claims that operators benefit from the current subsidy regime.

“In summary, GenCos are not beneficiaries of the current subsidy regime but are, in fact, its biggest victims,” APGC said.

It insisted that its members are only demanding payment for power generated and consumed, as reflected in the Multi-Year Tariff Order (MYTO) and Nigerian Bulk Electricity Trading (NBET) documents.

APGC expressed concern over reports that the bulk trader has only five active PPAs, describing the situation as alarming for investors.

The absence of active PPAs, according to the group, has also made it difficult to secure Gas Supply Agreements (GSAs), further compounding operational risks.

The association blamed the current market design for exposing GenCos to downstream inefficiencies, including transmission constraints, load rejection, and poor revenue collection by distribution companies.

APGC warned that continued disregard for contractual terms and capacity payments would undermine investor confidence and the objectives of the Power Sector Recovery Programme.