A crisis of confidence has hit the Nigerian Bulk Electricity Trading Plc (NBET) over an N701billion subsidy for Generation Companies (GENCOs). NBET Managing Director Dr. Marylin Amobi has redeployed some officers in the Finance and Internal Audit sections, who had reservations about the N701billion loan for the GENCOs, The Nation Newspaper reports.
The officials’ stand is that it is absurd for the government to obtain a loan for some of the GENCOs who have been allegedly inflating requests for reimbursement from NBET. Also, some NBET officials are opposed to the agency leading the initiative for the N701billion loan for GENCOs, which are selling electricity to the agency.
The aggrieved officials said since the loan will be paid back through Retail Electricity Tariff, consumers would bear the burden with an increase in tariffs. Following a strong internal opposition and to pave the way for the loan, the MD/ CEO of NBET has reportedly embarked on a sudden restructuring of the agency without consultations with the Minister of Power, Mr. Babatunde Raji Fashola, who is holding brief for the board.
The board of NBET is yet to be reconstituted. But there is a relief from the CBN which has set nine conditions before the loan can be granted. In a June 20, 2017, letter to NBET, the CBN approved the N701billion for NBET as Payment Assurance Facility for Generation Companies (GENCOs) with 10 percent per annum interest.
The letter said: “We refer to your application for the Payment Assurance Facility for Generation Companies dated March 02, 2017 and hereby convey the Bank’s approval for the N701billion facility. “Purpose: A bridging facility to enable Nigerian Bulk Electricity Trading Plc(NBET) provide a minimum level of payment to generation companies to meet their obligations to gas suppliers and increase their levels of generation.
“The date on which the first disbursement of this facility shall occur is subsequent to the following: That all the conditions precedent, here defined, have been fully met or waived to the satisfaction of the CBN. “Effective date: January 2017. The loan tenor is the period from Effective Date until the earlier of: (i) 10 years (ii) December 31, 2028 “The facility shall be used only to assure the payments due from NBET to power generation companies for the capacity and energy delivered beginning from the invoice month of the Effective Date.”
The CBN gave the details of the funding as follows: (i) Enhance the existing Nigeria Electricity Market Stabilization Facility(NEMFS); and (ii) CBN to subscribe to debenture to be issued by NESI Stabilization Strategy Limited(NESI SS Ltd) “Drawdowns will be made monthly based on invoices over a period that shall not exceed 24 months from first disbursement. All applications for disbursement will contain comprehensive breakdowns of the elements of the payment showing the amounts due to each participating generator and its approved third parties. “Applications for disbursement will be sent by NBET and confirmed by the Permanent Secretary, Federal Ministry of Power.”
The proposed sources of repayment are as follows:
- Moratorium period(on principal repayment only). Repayment of interest(Est, 73.02b NGN) to be serviced by the Federal Ministry of Finance from the Federal Government’s Consolidated Revenue Account through auto-debit from Consolidated Revenue Fund(CRF).
- Post-Moratorium Period(Principal and Interest): Repayment of outstanding principal and interest will be recouped as follows:
(i) From the Retail Electricity Tariff or only if and where arrangements have been fully agreed and finalized upon at the time of repayment.
(ii) From any combination of the following: (a,) Budgetary Appropriation; (b) External borrowings by the Federal Ministry of Finance(FMoF); (c) Any other payment arrangements to be agreed upon by the CBN and FMoF, including auto debit into the Consolidated Revenue Fund(CRF).
- Additional indebtedness: “In addition to this facility, NBET is permitted to raise additional debt subject to prior approval from CBN which shall not be unreasonably withheld, including but not limited to Capital Market Bonds or similar securities.”
A top official of NBET spoke of some management members’ opposition to this loan because they believe that it will lead to the same problem in the petroleum sector where marketers were claiming endless subsidy grants from the government. Some of these GENCOs are said to have been demanding “outrageous” reimbursement from NBET but through internal collaboration, these payments have been effected.
“One of the GENCOs actually demanded N1.251, 881,528.04billion reimbursement from NBET whereas the Audit Unit said it was only entitled to N124.352million. Another company asked for payment of N1, 023, 532,974.89billion when the Audit Unit said it only deserved N346.377million,” the official said.
Some of these GENCOs are believed to have been claiming billions of naira monthly “without any justification. The government should allow the Economic and Financial Crimes Commission (EFCC) to look into the books of the NBET and some of the GENCOS. A lot of underhand deals are being perpetrated,” the official, who pleaded not to be named, said, adding: “But some forces in the management went ahead to pay billions to the affected GENCOs by circumventing the processes.
“The opposition to the crazy bills from GENCOs led to the redeployment of some officers in the Finance and Internal Audit units and the floating of a new management structure without the approval of the Board which is being represented by the Minister of Power. “ We want the Federal Government to have more than passing interest in what is happening in NBET. “Some officials of the NBET misled the Federal Government on this N701billion loan because of selfish interest.”
A member of the management staff insisted that the NBET management, led by Dr. Marylin Amobi, was “not gullible on the loan” because CBN has put nine conditions in place to access the facility. “The major aim of the management is to ensure stable power supply. All payments being made to GENCOS are in line with the agreement with them,” the source added.
The CBN ‘s conditions for the loan include the following:
- FEC approvals for CBN to grant this facility to NBET;
- duly executed Loan Repayment Guarantee Agreement with the Federal Ministry of Finance (FMoF);
- approval by the Nigerian Electricity Regulatory Commission (NERC) for repayment through tariff;
- approval by the NBET Board for the borrowing;
- the conclusion of tripartite agreements between NBET, NERC, and CBN on payment calculations, disbursement procedures, repayment plans, tariff, business continuity, penalties etc.
- approval and implementation by NERC of a monthly market settlement of waterfall after the repayment of monies to the NEMSF;
- CBN’s receipt of a NERC directive, or order, of an incentive-based mechanism that NBET will use at each settlement period to allocate the availability payments efficiently to Market Participants that are responsible for the balancing actions the System Operator(SO) undertakes each day that increases the total cost of maintaining the grid’s technical performance with its acceptable bounds. The adoption and operationalization by NBET of an NERC-approved framework for the administration of the payments of the Large General Service (LGS) customers; and
- Receipt, by the CBN, of all signed agreements between NBET and each participating generating company.