The introduction of the N701.9 billion Payment Assurance Facility (PAF) to raise Generation Companies’ (GenCos) monthly revenue by 80 per cent has raised generation capacity to 7,009 megawatts (MW) in the past 18 months, according to official update obtained from the Nigerian Bulk Electricity Trading (NBET). The fund was borrowed by the Agency as an intervention in the electricity market due to poor performance by the 11 DisCos.
NBET is the manager and administrator of the electricity pool in the Nigerian Electricity Supply Industry (NESI). It acts as the middleman between the GenCos and the DisCos in creating assurance for payment of electricity generated and supplied. As the systems settlement administrator for NESI, NBET manages and implements the N701.9bn PAF to the GenCos.
The funding, which was initiated by the Minister of Power, Works and Housing, Babatunde Raji Fashola, in April 2017, is to pay at least 50 per cent of GenCos’ invoices in addition to the average of 20 per cent the DisCos were remitting monthly to guarantee adequate electricity generation. This regular funding, according to NBET’s data, had increased and sustained electricity generation onto the national power grid. PAF, in its workings, guarantees 80 per cent of the GenCos monthly invoices to the DisCos, and 90 per cent of gas invoices.
“The N701.9bn PAF is a loan to NBET to meet its obligation of GenCos, which means that like all loans, it is expected to be paid back by NBET to the borrower, in this case the Central Bank of Nigeria (CBN), with interest,” the Agency said through its spokesperson, Henrietta Ighomrore.
The fund is to cover settlement from January 2017, up to 2019, when it is expected that through the Power Sector Recovery Programme (PSRP), the electricity market would have become buoyant and the DisCos would have improved significantly on their remittances for energy supplied.
The regular funding, according to NBET’s data, had increased and sustained electricity generation onto the national power grid. PAF, in its workings, guarantees 80 per cent of the GenCos monthly invoices to the DisCos, and 90 per cent of gas invoices. The guaranteed payment to the gas suppliers ensures that GenCos continue to receive constant and reliable gas supply. The GenCos, according to the electricity trading middleman, had been able to maintain their plants, which in turn translated to increase in energy injected onto the grid.
The Agency said as at June 2018 Market Payment Cycle, “We have observed incremental supply of electricity from generators during the last 18 months of implementing PAF, possibly due to GenCos implementing their network development plans in response to the certainty of receiving 80 per cent of their invoices each month under the PAF.”
For the DisCos, NBET said the average performance from January 2017, till June 2018, was an average of 27 per cent. Hence, the market has largely been sustained by the implementation of the 701.9bn PAF approved as loan facility to NBET so that it can meet its obligations.