Nigerian Bulk Electricity Trading (NBET) has assigned the country's electricity generation companies (Gencos), the right to draw down payments for power supplied but not paid for by electricity distribution companies (Discos) from standby letters of credit (L/Cs) lodged as payment guarantees with their banks.

According to NBET, the state-owned clearing-house that manages the purchase and resale of electricity from Gencos, it currently holds L/Cs from eight Discos.

New system

While generators previously had to go through NBET to draw on these standby L/Cs, the clearing-house says it has now devised a new system to enable Gencos to demand payment directly from the L/C issuing bank should a Disco default on its payment obligations.

The strategy has been precipitated by the poor payment record of Discos as well as what NBET describes as a disregard by Discos for the market rules governing the country's electricity market.

Debt burden

Revenues for generators have fallen recently by an average of 40 per cent as the Gencos have been unable to produce and supply sufficient electricity.

This has left Gencos short of working capital, a strain compounded by an increasing debt burden as they wait for payments

Six of Nigeria's recently privatised Gencos issued a statement saying that, between them, they are owed US$460 million.

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