1 December 2011, Sweetcrude, ABUJA – The Bureau of Public Enterprises (BPE) has denounced claims made by the Chairman of the Senate adhoc Committee into the activities of the Bureau of Public Enterprises, Senator Ahmad Lawan, that the Bureau fraudulently sold the Federal Government’s five per cent shares in Eleme Petrochemical Company Limited (EPCL), Port Harcourt to Indorama for N4.375 billion.
The BPE in a statement signed by its Head of Public Communications, Mr. Chukwuma Nwokoh, noted that, “For the records, the claim in its entirety is false, uninformed, mischievous and grossly misleading.”
It added that as the Secretariat of the National Council on Privatization (NCP), the BPE could not embark on the sale of any public enterprise without the approval of the NCP and the EPCL transaction cannot be different.
“It may be recalled that EPCL was about to embark on a multi-billion dollar expansion programme, and that the inherent threat of Federal Government’s five per cent shareholding being diluted as a result of recapitalization, necessitated the decision by the Technical Committee of the NCP to negotiate the price for the sale of the shares, on the understanding that the approval of the NCP would be obtained before closure of the transaction.
“A further consideration for the proposed sale of the five per cent shareholding in the company was to initiate a process in which the Nigerian public can benefit from the phenomenal successes recorded by EPCL, as Indorama, the core investor, also agreed that it would make available between 20 and 25% of EPCL shares via Initial Public Offering (IPO) within a period of five years from the effective date on which the Share Purchase Agreement for the five per cent would be signed,” it added.
According to the BPE, a request for approval of the transaction was forwarded to the NCP, and to the Chairman of the NCP, giving full details of the processes adopted, and informing both the NCP and its Chairman, respectively that the sum of N4.375 billion had been placed in an escrow account, pending the final approval of the NCP.
“These actions were taken in the firm belief that they were in the best interest of the nation, in line with the Federal Government’s policy on privatisation, and for the benefit of the Nigerian people. It was also firmly understood that the NCP, by its laws had the power to determine the quantum of shares that a core investor can acquire, and that if for any reason approval was not granted, the proceeds would be returned to the core investor,” the statement added.
It further emphasised that there is no provision in the Public Enterprises (Privatisation and Commercialisation) Act of 1999, that the government must retain five percent shares in EPCL or in any other company scheduled for privatization for that matter.
“We also state that there is no provision in the Privatisation Act that limits equity acquisition by a core investor to a maximum of 75 % as alleged by Senator Lawan.
“It is apt to robustly rebut the assertion that there were higher offers made to the BPE and that the Bureau opted for the lower offer of the core investor. Indeed, while the equity offers to the workers and the host communities are being made at the price (N7, 800 per share) at which Indorama bought its 75 % equity in 2006, the additional five per cent offered to the core investor was at N17, 500 per share.
“May we ask: where did the higher offer(s) come from and at what price did they offer to purchase the five per cent equity?,” it stated.
The Bureau also noted that prior to their privatization, most of the public enterprises had been operationally grounded and were in comatose state. Most of them had been closed down for several years, while the majority of them had retrenched all their work force. EPCL had never broken even before privatization despite the enormous amount of money that was invested.
It said, “The company was a 100% subsidiary of Nigerian National Petroleum Corporation (NNPC) and the largest petrochemical plant in the country designed to produce petrochemicals (ethylene, propylene and butane-1 using primarily gas feed). These intermediate products are very important to the petrochemical industry. It was commissioned in 1996, but since then its performance had been epileptic and had never met its production targets. The company was beset by the usual problems that constrain the performance of most public enterprises— poor plant maintenance, lack of adequate working capital, poor management/bureaucratic approach to commercial business issues, high debt profile, etc— which led to the decision of the Federal Government to privatize it.
“Despite its great potential and ability to operate profitably, the company was drawing from the Treasury to remain afloat. Between 1999 and 2004, it had total liabilities of N210.13 billion. In fact, it got subvention of N22.45 billion. However, with its privatisation in 2006, which has nursed it back to health, the Federal Government not only is relieved from continuous funding of an otherwise commercially viable enterprise, but has, for the first time, received dividends, on its 15 % remaining equity in the company— N3.21 billion in 2008; N3.55 billion in 2009; and N1.69 billion in 2010 (half-year result).”
It added that, presently, the company is not only supplying petrochemicals for the domestic market but is also exporting to other countries in Europe, Asia and Africa.