NBET begins N729bn power debt settlement with GenCos

The Nigerian Bulk Electricity Trading Plc (NBET) has started settling outstanding debts to power generation companies and their associated gas suppliers, following the issuance of N728.979 billion in bonds under the Federal Government’s Power Sector Multi-Instrument Issuance Programme. This settlement is part of President Bola Tinubu’s Power Sector Debt Reduction Programme. The initial phase of the settlement comprises N402 billion in cash bonds and N326.979 billion in non-cash bonds.

NBET’s Managing Director and CEO, Akin Odeyemi, announced this development in a statement, emphasizing it as a significant step towards resolving past financial obligations and improving the financial standing of companies in the power generation and gas supply sectors. The successful issuance and signing of the Series 2 bonds enabled NBET to begin the settlement process, as outlined in the approved framework.

The settlement process involves a combination of cash bonds and non-cash bonds, with N402 billion classified as cash bonds and N326.979 billion as non-cash bonds. Specific details regarding the distribution of these funds to individual participating generation companies and gas suppliers, as well as the number of beneficiaries, were not disclosed in the statement.

The initiative aims to address accumulated financial obligations that have weakened the finances of electricity market participants over time. Gas-powered power plants depend on reliable fuel supplies, so settling outstanding obligations among both generation companies and gas suppliers is expected to alleviate some financial pressures within the power generation chain.

Odeyemi highlighted that the settlement goes beyond clearing old debts and would help establish a more sustainable financial framework for the electricity market. This shift towards a more predictable payment system will enable companies to plan their operations with greater certainty and contribute to the gradual transition towards a more sustainable market cash-flow framework.

The commencement of this settlement comes amid concerns over the financial sustainability of Nigeria’s electricity market, which is characterized by a chain involving gas suppliers, generation companies, transmission infrastructure, distribution companies, and market operators. Payment shortfalls have affected the ability of participants to fulfill their obligations. The debt reduction initiative seeks to settle historical liabilities through bond issuance rather than relying solely on immediate cash payments.