A Review of the Nigerian Energy Industry

Integrated Energy to pursue refund of investment in Yola Disco

22 June 2015, Abuja – Integrated Energy Distribution and Marketing Limited, which acquired both Ibadan Electricity Distribution Company (IEDC) and Yola Electricity Distribution Company (YEDC) under the power privation programme, has commenced plans to persuade the federal government under the administration of President Muhammadu Buhari to refund the money the company invested in the acquisition of Yola Disco,.
Power.electricityThe power investors, it was learnt, are also seeking a refund of the cost of acquisition plus funds, which they injected into the electricity distribution company before it was returned to the federal government due to the Boko Haram insurgency in the North-east.
THISDAY gathered that the investors returned the company to the federal government last year at the height of the Boko Haram insurgency, which made it impossible for them to operate and provide services to customers in their areas of coverage.
Yola Disco, which is responsible for the distribution of electricity in Adamawa, Borno, Taraba and Yobe States, is subdivided into four districts – Yola, Maiduguri, Taraba and Damaturu.
However, sustained attacks by the Islamic insurgents and their occupation of vast swathes of territory last year, led to the destruction of electricity infrastructure in the North-east, which plunged the states in the zone into darkness for over a year, and were only recently reconnected to the national grid.
Owing to the challenges posed by the insurgency, the investors decided to return the company to the federal government and on October 18, 2014, wrote to the National Council on Privation (NCP) and the Federal Ministry of Power, informing them of their decision to return the power asset.
The investors cited a clause in the Share Purchase Agreement (SPA) entered into by the Bureau of Public Enterprises (BPE) and the investors, which provides that an electricity asset may be recovered by the federal government if the owners are forced to declare a force majeure caused by circumstances beyond their control.
A source at the BPE, providing further clarification, said that this was a put option exercised by IEDC under the SPA, whereby the government takes back the asset and repays the investor the money it used for the acquisition of the electricity asset and any other additional capital injected into the company.
The relevant clause in the SPA states that in the event of a put option, the investor is entitled to 20 per cent of its capital outlay over a period of five years as loss of profits.
The clause, the BPE source explained, is contained in all the SPAs executed with respect to the 11 Discos and six generation companies sold by the federal government and is not unique to the Yola Disco.
According to the source, upon receipt of the letter, the Permanent Secretary in the Federal Ministry of Power, Dr. Godknows Igali, was directed to set up a committee to investigate the request by IEDC.The committee subsequently appointed a British consulting firm to assess the situation in Yola Disco.

The British consultant was said to have travelled to the North-east to verify the claims of the investor, following which the firm recommended that Yola Disco be taken back and the investor be repaid.

As part of its terms of reference, the consultant was also asked to verify the claims by Integrated Energy that in addition to the $59 million the investor used to acquire Yola Disco, it also invested additional capital in the replacement and upgrade of electricity infrastructure under the five-year plan approved by BPE during the privatisation process.

At the end of the exercise, it was accepted that the total sum of $185,634,681 was due to Integrated Energy, as demanded by the investor in its letter to the federal government.

The amount, THISDAY gathered, included the acquisition sum of $59 million, additional capital injection, as well as interest charges and penalties incurred on debt arising from bank loans.

However, owing to the electioneering period, the federal government kept the decision on Yola Disco in abeyance, until the dying days of the former President Goodluck Jonathan administration.

THISDAY learnt that it was a week before Jonathan’s handover that the former the president, based on the recommendation made by the NPC, gave approval that the amount demanded by IEDC be refunded to the firm, with the caveat that only $145 million should be paid to it, while the federal government would retain $40 million.

The outstanding $40 million, NCP had advised, should be escrowed, pending an audit to be conducted on Yola Disco by the federal government, following which the balance would be paid at a future date.

But given the fact that it was only approved just a week before Jonathan’s handover, the investors who put pressure on the Nigerian Bulk Electricity Trading Plc to pay the approved sum, were unable to recover the money.

The Bulk Trader was said to have informed the NCP that it did not have that kind of money to pay Integrated Energy and that it was the responsibility of the Ministry of Finance to make such refunds.
As it stands now, sources within Integrated Energy are concerned that the federal government has both the asset and money and are said to be preparing a reminder for the new administration on its indebtedness to the former owners of Yola Disco.

An official of Integrated Energy said: “The banks keep charging interest and penalties on the monies we took from them for Yola Disco, so it is imperative that this matter is brought to a closure soon.

“Besides, government is a continuum, so by reminding the new administration led by President Muhammadu Buhari, we will be informing them that there is a subsisting presidential approval, which we hope the government will honour.”

– This Day
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