Chineme Okafor in Abuja
Board members of the Abuja Electricity Distribution Company (AEDC) have not had their statutory meetings in the last three years, a statement from a shareholder of the Disco – CEC Africa Investment Limited has disclosed.
CEC Africa in the statement signed by its Chief Executive Officer (CEO), Emmanuel Katepa, and made available to THISDAY, stated that a lingering legal dispute over majority shareholding in the Disco had held back the board meeting for this long.
Katepa, however said that this development has not affected the operations of the Disco which supplies electricity to Nigeria’s federal capital territory, Abuja, and neighbouring states, Kogi, Niger and Nasarawa.
The statement detailed how CEC and its partner, Xerxes Global Investments Limited, acquired the Disco, as well as how their business relationship gradually broke down. It also stated that court actions had been taken in this regard with the situation yet to improve.
“Our attention has been drawn to certain recent reports making the rounds in the Nigerian media sphere regarding shareholders’ dispute at KANN Utility Company Limited (KANN), the majority shareholder of the Abuja Electricity Distribution Company (AEDC).
“We are greatly concerned about some of the issues raised in the media. We will like to be clear that we do not wish to contend any matter that is currently the subject of legal proceedings. We are only addressing the specific issues raised in the various media reports to set the records straight,” said the statement.
Katepa, explained that CECA, and not Xerxes paid $81 million cash to the Bureau of Public Enterprises (BPE) and raised $123 million loan from the United Bank of Africa to acquire the Disco.
According to the statement, both parties agreed to jointly bid and acquire the Disco’s 60 per cent shares with shared obligations, but Xerxes reportedly failed to accomplish its obligation in the partnership.
It added that they executed a joint development agreement in 2012 to incorporate and become shareholders of KANN in the acquisition of the Disco, with each of them agreeing to own and hold 50 per cent of the shares of KANN.
“The purchase price of AEDC was $164 million and it was agreed by XerXes and CECA that this would be funded 25 per cent ($41 million) by cash contributions from Xerxes and CECA and KANN would borrow the remaining 75 per cent of the acquisition costs ($123 million) from a third party lender (which ended up being the United Bank for Africa (UBA).
“When the initial 25 per cent ($41 million) was demanded by the Bureau of Public Enterprises as an upfront payment, Xerxes could not raise its equity contribution, leaving CECA to wholly fund the initial 25 per cent equity payment. CECA paid for that portion of the acquisition amount in full being $41 million in March 2013. XerXes did not fund any of this equity payment,” the statement claimed.
It further said the additional 75 per cent balance payment of $123 million to be funded through a loan from UBA was also solely backed by CECA with a mandatory debt service reserve account of $40 million, adding that at this point CECA had funded the Disco’s acquisition with $81 million alone.
The statement further noted that XerXes subsequently pledged 25 per cent out of its 50 per cent shareholding to CECA to secure the repayment, but eventually began to contest CECA’s decision to affirm its status as the core investor in the Disco.
“CECA which was meant to be the co-investor, however continued to play the role of the core investor as XERXES could not and left the payment and security responsibilities to CECA. To complete the Disco purchase transaction, CECA solely provided the performance guarantee with BPE and provided the UBA loan guarantee. It was not until December 2015 that Xerxes insisted that it must be joined in the UBA loan guarantee.
“The shareholders’ disagreement started in 2013 when CECA wanted to enforce the rights of CECA as the major and core investor in AEDC, having paid all the acquisition fees, and provided security covers for the UBA acquisition loan. Xerxes disagreed with CECA on this view and the parties went for arbitration of the matter at the London Court of International Arbitration (LCIA). The result of this was that the court made an Arbitral award dated 28th October 2016 in favour of CECA Limited, having provided all the financing documents with BPE and the financing bank.”