By Chineme Okafor in Abuja
The federal government has renegotiated and reached an agreement with Integrated Energy and Distribution Marketing Company (IEDM) on a payout of $87.8 million as against the $186 million earlier approved as compensation to the company after it returned the Yola Electricity Distribution Company (YEDC) to the federal government in 2015, THISDAY has learnt.
Integrated Energy, a firm fronted by Mr. Tunde Ayeni, Capt. Osa Okunbor, and a former military head of state, Gen. Abudulsalami Abubakar, had acquired the Yola and Ibadan Discos for $228 million in 2013 under the privatisation programme.
A year later, however, Integrated Energy was forced to declare force majeure and returned Yola Disco to the federal government on the grounds that it was impossible to operate and access the assets of the electricity distribution firm in the North-east due to the Boko Haram insurgency.
After a joint evaluation of the electricity asset, as provided under the terms of the share purchase agreement, the Bureau of Public Enterprises (BPE) and Ministry of Power, in the twilight of the Goodluck Jonathan administration, had approved $186 million as the sum to be refunded to Integrated Energy.
But the payment of the sum was stalled over concerns that the $186 million was too high, forcing the parties to the transaction to renegotiate the compensation to be paid to Integrated Energy.
The non-payment of the refund to Integrated Energy has been linked to some of the non-performing loans (NPLs) on the books of Skye Bank Plc, as the promoters of Integrated Energy had borrowed from the bank to acquire and inject capital into Yola and Ibadan Discos.
However, their inability to service the loan for Yola Disco was one of the factors that led to the erosion of Skye Bank’s capital adequacy and liquidity ratios and ultimately the sack of its former chairman, Ayeni, and other directors of the bank by the Central Bank of Nigeria (CBN) penultimate week.
It was gathered from a reliable source, who was privy to the fresh negotiations yesterday in Abuja, that the Permanent Secretary in the Ministry of Power, Works and Housing, Mr. Louis Edozien, led the negotiations on the new payout terms which Integrated Energy’s principals have agreed to as full and final payment for their acquisition and investment in Yola Disco.
It was further learnt that the new payout was negotiated outside the original clause provided in the share purchase agreement that the government signed with Integrated Energy when it sold the power asset in 2013 and which allowed the investor to ask for compensation for its investment in power asset and had declared force majeure.
“Ten days ago, there were negotiations with the permanent secretary for power. The government has negotiated with Integrated and it was $87.8 million they agreed with the company,” said the source.
Providing further details on the agreement, the source stated: “They have signed with the company already,” adding that negotiations were outside the provision of the share purchase agreement the company signed with the government.
“The permanent secretary said the negotiation was outside the agreement, and that agreement included opportunity cost and everything that it provided for, but the government begged that the company should go outside the agreement.
“The company was supposed to be paid about $186 million which the former president, Goodluck Jonathan approved but it was not paid.
“If they had released 50 per cent down payment to the company’s bank at that time when the first payment was approved, the crisis Skye Bank has now might have been averted, because that would have reduced its exposure to the power sector,” added the source.
He also stated that the BPE, which superintended the sale and subsequently recommended the payout to Integrated energy, was involved in the renewed negotiations and agreement.
“The BPE has signed but nobody knows when the payment will be paid. The vice-president and president would have to approve this. We don’t know how long that will take even though it is subject to their approval, but the company believes that the vice-president is a lawyer and understands the complexities of respecting the sanctity of contracts,” the source explained.
The BPE, had at the time Integrated Energy declared the force majeure, justified government’s approval of $186 million, saying it was upholding the sanctity of the contract it entered with the company.
According to the BPE, Integrated Energy, which was the core investor in the Yola Disco, was entitled to the money which included 20 per cent of its five years projected profit.
It also said Integrated Energy’s declaration of the force majeure on its operations in the four north-eastern states of Adamawa, Yobe, Borno and Taraba as a result of Boko Haram insurgency was catalogued in a process thus guaranteeing the payment.
It had stated then that the company declared force majeure on six occasions starting from November 10, 2013, just 10 days after the assets of Yola Disco were handed over to it. The last force majeure, it said, came on May 13, 2015.
BPE also said force majeure clause was a standard clause in most contracts and includes events like natural disasters; wars and other occurrences, adding: “So the existence of the clause in the contract is normal. The share sale and performance agreements are standard industry agreements signed by all the Discos, so YEDC is not being given any special treatment.”