In the nine months that ended on September 30, 2024, the two publicly traded power companies, Transcorp Power and Geregu Power, spent N174.2 billion on petrol (9M 2024).
This is a 171% increase from the N64.2 billion spent over the same time period in 2023.
The majority of the cost was borne by Transcorp Power, which spent N118.4 billion on petrol over the nine months. This represented a 203 percent increase from the N39 billion spent over the same period in 2023. In 9M 2024, Geregu Power’s gas expenses totaled N55.8 billion, a 121 percent increase from N25.2 billion in 9M 2023.
Since revenue and power generation increased simultaneously, these enterprises’ bottom lines were barely impacted by the rise in petrol prices. The substantial increase in gas supply and transportation expenses is associated with higher power production from both plants throughout the nine months, according to an analysis of the gross margins of both businesses.
At 48.6 percent in 9M 2024, Geregu Power’s gross margin increased 60 basis points year over year from 48.2 percent in 9M 2023. On the other hand, the situation for Transcorp Power is quite different. The company’s gross margin for the 9M 2024 period dropped to 43 percent, five percentage points lower than the 48 percent gross margin for the same period in 2023.
There are now over 60 power plants in Nigeria, with a combined production capacity of about 16,385 MW. Gas-powered plants account for about 80% of this capacity, with Transcorp Power and Geregu Power being entirely gas-dependent.
Transcorp Power Plc runs the Ughelli power station, which has a 900 MW generating capacity. In contrast, Geregu Power Plc maintains the 414 MW generating capacity of Geregu I Power Plant.
Natural gas, the essential raw resource for these power businesses, is a net export from Nigeria. However, regular pipeline vandalism in the Niger Delta has caused problems for NLNG, the primary supplier, with feed gas supply in recent years.Â
Other natural gas firms, including Shell Nigeria Gas (SNG), Nigerian Gas Company, and Heirs Energies, have stepped forward to help NLNG overcome its difficulties.
Nigerian Gas Company supplies gas to Geregu Power, while Heirs Energies supplies gas to Transcorp Power.
An examination of both businesses’ balance sheets reveals that their debt to gas providers is rising in tandem with the rising cost of gas. At the end of the nine months, Geregu Power Plc’s trade payable to gas suppliers had grown by N29.8 billion to N76.5 billion, representing a 64 percent increase over the year.
As the company’s trade payables climbed by N35.9 billion over the nine months to N103.9 billion from N68 billion at the beginning of the year, Transcorp Power’s debt to its gas suppliers also grew.
Both businesses have increased their expenditures on their loans to the gas providers, according to an examination of their cash flow data. Geregu Power spent N34.8 billion in 9M 2024 on its vendor liabilities, 516 percent more than the N5.6 billion it spent in 9M 2023.
Despite not being distinguished from other debts, gas debts make up almost 84% of the company’s total trade payables. Additionally, during the nine months under review, Transcorp Power spent N59.2 billion on its trade payables, a considerable improvement over the N4.9 billion spent during the same period in 2023.
With generating businesses’ liabilities to gas providers estimated at $1.3 billion, debts owed to gas suppliers have long been a major problem in Nigeria’s power sector. Due to financial limitations that affect gas processing companies’ capacity to guarantee constant delivery, these outstanding debts have made it more difficult for the nation’s gas-fired power plants to get a steady supply of gas.
Notably, the FG lowers natural gas prices. The Decade of Gas Secretariat’s director, Ed Ubong, stated in March 2024 that the Federal Government had settled around $120 million of this debt.
