Here is why Gencos may halt power sector investment plans

Power Generation Companies (Gencos) may no longer invest in the power sector should the current market conditions where it declared generation capacities remain ignored and unpaid.

Speaking through their umbrella bodythe Association of Power Generation Companies (APGC)the Gencos maintained that the current market conditions and unpaid debt were discouraging them from investing to expand the power sector production level.

In a statement made available to felicitate with the Minister of Power, Saleh Mamman, and Minister of State for Power, GoddyJedy-Agba on their appointment to head the ministry, the Gencos also sought the stability of the country’s power market.

The statement read, “We wish to put on record that Gencos as patriotic partners with the federal government has exceeded their contractual obligations of recovering lost capacities. The sector can now boast of available capacity of about 8,000MW and installed capacity of about 13,427MW as against an average of 3500MW utilised capacity. 

“This poor utilisation figure is a huge disincentive to further investments in capacity recovery and installing additional generation capacity, as it makes no sense for a Genco to increase its available generation capacity only to be rejected and hence uncompensated. 

“For gas Gencos, it is double jeopardy as the gas feedstock is on a take-or-pay basis, meaning the Genco must pay for the gas irrespective of the gas being utilised or not as well as finance the cost of making capacity available.” 

Before now, there had been speculation that the Gencos were losing about 6,625 megawatts of electricity and the firms might sue selected agencies of the Federal Government in the sector for “lots of irregularities” in the power industry.

Reports also have it that the 6,625MW of energy was not yielding revenue to the Gencos, despite the fact that they supplied a sizable amount of this power to the grid.

Challenges facing the GencosAccording to a statement signed by APGC’s Executive Secretary, Joy Ogaji Ogaji, the country’s power generation is faced with numerous challenges, and the various challenges facing the Gencos are – liquidity issues, power rejection by the electricity distribution companies and gas constraints due to the state of the market.

Source: Nairametrics

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