Power generation companies (GenCos) in the country have rejected contract offers from the Federal Government requiring them to accept 50 percent of the total sum of debt owed to them for electricity supplied to the national grid.
Described as a 50 percent haircut, the proposed contracts, through which the government proposed to pay the companies about N2.4 trillion or 49.9 percent of its total indebtedness, were sent out to all the GenCos with the exemption of Azura Power West Africa.
The government’s debt profile to the GenCos increased to over N5 trillion at the end of June and President Bola Tinubu had in July, during a meeting with the representatives of the companies, promised to offset the debt through bond issuance.
Following the approval of the proposal by the Federal Executive Council in August, top government functionaries held a meeting the GenCos’ owners in early October following which the Special Adviser on Energy, Olu Verheijen announced that the parties agreed on the debt repayment model.
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Consequently, the Federal Government on October 16, 2025, sent out two contract documents to the GenCos, requesting them to forfeit 50 percent of the debt owed to them as final payment.
Specifically, the documents titled “NBET deed of settlement” and “Deed of novation”, proposed to transfer the government’s debt from the Nigerian Bulk Electricity Trading Plc (NBET) to a new special purpose vehicle named NBET Bond Finance Company Plc.
The contracts documents partly read: “GenCo hereby accepts the sum of (“Settlement Amount”) as the full and final settlement of the outstanding Legacy Debt, including any interest thereon and any other claim for losses whether present or future and whether known or unknown in respect of the Legacy Debt.
“For the avoidance of doubt, GenCo agrees that the Settlement Amount as a compromise of its rights to the Legacy Debt, hereby (i.e., from the date of this Agreement), extinguishes its right to any Claims to the Legacy Debt including any contractual claims for losses whatsoever and howsoever arising whether from deemed capacity, true ups and interest on delayed payment of substantive invoice amounts, true-up compensations or deemed capacity payments referenced in Appendix A or elsewhere.
“The Parties agree that subject to prompt payment of the Settlement Amount as contemplated in the payment structure under Clause 3 below and Appendix B, the Settlement Amount shall not bear any interest or give rise to any further Claims for any losses whatsoever.
“NBET’s obligation to pay the Settlement Amount to GenCo shall be novated to Bond SPV via the Novation Agreement and upon its execution, Bond SPV shall be solely responsible for payment of the Settlement Amount.
“The Parties acknowledge and are aligned on the PPSFRP’s plan for the Settlement Amount to be paid by Bond SPV solely from the outcome of an FGN-backed public bond issuance programme that will be conducted by the Bond SPV (“Bond Programme”).
“These bond proceeds are expected in successive issuance phases and tranches that will have an impact on the exact timeline for payment of the Settlement Amount in installments (where applicable)”, it added.
However, a news report from Vanguard newspapers indicated source at one of the GenCos as saying that the deal, being pushed through by the Presidential Power Sector Debt Reduction Plan Committee, is in bad faith and designed to undermine President Tinubu’s earlier promise to offset the debt now threatening operations of the Nigerian Electricity Supply Industry (NESI).
According to the source, who spoke on condition of anonymity, disclosed that the 50 percent offer made by the government during a meeting between the Ministers of Finance and Power, the Special Adviser to the President on Energy and selected Chairmen of the GenCos was rejected
Specifically, the source maintained: “For them now to draw up individual contracts for the companies and force it down on them is quite unfortunate. The GenCos have again rejected it and we are insisting that the government should pay off the debt in full.”
The source clarified that following the rejection of the offer by the GenCos, the companies presented two potential options to the government for offsetting the debt which the contract documents did not consider.
He disclosed that the first option was for the government to immediately pay N2.4 trillion to the GenCos with the balance deferred to an agreed time of settlement while the second was for the application of a 10 percent haircut on interest relating to energy and capacity delivered while paying deemed capacity and true-up in full.
