Following the failure by the Bureau of Public Enterprises (BPE) to hand over the power distribution and generation assets to the core investors that met the August 21 deadline for the payment of the 75 per cent of the transaction value of the assets, the investors have written to the privatisation agency, demanding payment of interest on the funds that have been in bank accounts of the bureau, THISDAY has learnt.
This is coming as Eastern Electric Limited and JBN-Nestoil Power Services Limited, the reserve bidders for Enugu Electricity Distribution Company and Sapele Power Station, respectively, have indicated their preparedness to pay for the assets after the preferred bidders failed to complete the full payment on August 21, as provided in the transaction documents the investors signed on February 21, 2013.
THISDAY gathered from a source within the BPE that the investors who met the deadline had in the letter sent to the privatisation agency last Friday, argued that since they had borrowed the funds to acquire the assets from the banks, the agency should pay the interest for failing to hand over the assets on schedule.
The privatisation guidelines require that successful investors that paid the 25 per cent deposit should complete payment of the remaining 75 per cent by August 21 before they are handed over the assets.
An estimated N304.82 billion ($1.957 billion) was paid into the coffers of the federal government by 14 of the preferred bidders that met the deadline, bringing the total money realised from the sale of the assets to N425.830 billion ($2.733 billion).
But three weeks after the investors fulfilled their own part of the deal, the BPE has not handed over the assets to the new owners.
THISDAY gathered that following the demand by the investors to be paid interest, a meeting between the investors and the privatisation agency has been slated for tomorrow to find a way of resolving the issue.
A BPE source told THISDAY at the weekend that the agency has not handed over the assets because the federal government has not concluded payment of the benefits of the workers of the Power Holding Company of Nigeria (PHCN).
“Now the investors have fulfilled their own part of the deal but BPE is not meeting its obligations under the privatisation process because the government has not concluded the payment of workers’ benefits, comprising severance pay, gratuity and pensions of PHCN workers, as a condition precedent before the handover.
“The government only paid part of the severance package and gratuities but has not paid any of the pensions to PHCN’s pension scheme. Besides, the calculation done by the government used June 2012 as the cut-off date. However, the electricity union is saying that the period July 2012 to September 2013 should be factored in,” he explained.
According to him, the non-payment of workers’ benefits has made it impossible for the investors to take over and commence shadow management operations, which was supposed to last for six months before they finally take full control of the assets.
The BPE source also said the stalemate over the sale of the Enugu Disco had put the privatisation agency in a very tight corner.
“They are also delaying the handover so as to resolve the issues on Enugu Disco. But how can they delay the other investors that borrowed the money to acquire the assets just because they deliberately put themselves in a difficult position by bending the rules to favour one investor? This is unfair to the other successful investors.
“The situation with Enugu Disco is threatening the good track record the government set in the privatisation process,” he added
He further alleged that the National Electricity Regulatory Commission (NERC) was also not ready for the Transition Electricity Market (TEM) arrangements, post-privatisation.
“NERC promised to act after the investors had made full payment. But up till now, they are yet to come up with a number of things, including the methodology for defining tariffs and the transition market arrangements, among other issues. They are yet to conclude these processes and have no interim solutions on how to operate,” he said.
In addition, Eastern Electric and JBN-Nestoil Power Services, the reserve bidders for Enugu Disco and Sapele Power Station, respectively, have indicated their readiness to pay for the assets.
This followed the failure of Interstate Electrics Limited and CMEC/Eurafric Energy Limited, the respective preferred bidders for Enugu Disco and Sapele Power Station, to complete the full payment on August 21, as stipulated in the privatisation rules.
Interstate failed to meet the August 21 payment deadline, and paid piecemeal in two installments after the deadline had expired, contrary to the rules guiding the privatisation exercise.
In the case of CMEC/Eurafric, of the $150.75 million, representing 75 per cent of balance outstanding for Sapele power plant, the bidder only paid $120.034 million on August 21, leaving a balance of $30.717 million.
Since making the $120 million payment last month, CMEC/Eurafric has been unable to complete payment for Sapele Powr Station.
Sources said the two reserve bidders have since approached BPE insisting that since the preferred bidders failed to adhere to the key industry document which all bidders signed on February 21, the reserve bidders should be invited to make payment.
They warned that preferred bidders, who have issue raising the acquisition funds, would face an uphill task raising working capital needed to rehabilitate and upgrade the power assets.
Information from This Day was used in this report.