No matter where the pendulum swings, the current stalemate over the planned takeover of the ownership of the Benin Electricity Distribution Company by the Bureau of Public Enterprises over the former’s loan exposure to Fidelity Bank Plc will hurt the distribution company and question the claims of the current administration to adherence to the rule of law, writes Festus Akanbi
In recent times, news about the management and board of the Benin Electricity Distribution Company (BEDC) has continued to dominate the media space, especially from July when it was listed among other Discos billed for takeover by their lenders over the alleged failure to meet their terms on loan repayment.
The, drama which followed the attempt by the lender to Vigeo Power Limited, the majority investor in the distribution company, Fidelity Bank Plc, to recall its loans and change the company’s board, has snowballed into a pitched legal battle for the control of the power distribution company with analysts expressing the fear that the dispute could worsen the performance of BEDC as well as question the truth in the claims of the present administration that it adheres to the rule of law in its dealings.
On July 7, the federal government announced the takeover of Benin, Kano, and Kaduna electricity distribution companies (Discos) by Fidelity Bank.
In November 2013, the federal government unbundled the Power Holding Company of Nigeria (PHCN), and sold 18 utility firms to private investors.
Interestingly, while the takeover processes of other distribution companies were resolved within a short period, that of BEDC continued to generate controversies two months after. The National Council on Privatisation (NCP) explained that the “restructuring was a result of the contractual agreement between the bank and Vigeo Power Limited (VPL), a core investor in Benin Disco”. However, the management of VPL has insisted that it didn’t obtain any loan from the bank.
According to the NCP, “Fidelity Bank informed council, vide its secretariat, the Bureau of Public Enterprises, that they have activated the call on the collateralised shares of Vigeo Power Limited in BEDC.”
The NCP further described Fidelity Bank’s action as a contractual and commercial intervention between the core investor (Vigeo Power Limited) and the lender, pointing out that the BPE is involved because of the 40 per cent shareholding of the government in the BEDC.
Consequently, to safeguard the industry and also support the market stabilisation through restructuring and repositioning to serve the citizens of the franchise area better, the federal government decided to appoint a new board for BEDC comprising KC Akuma (Chairman), Adeola Ijose (Member), Charles Omoera (Member), Yomi Adeyemi (Member), DG (BPE) (Member), and Henry Ajagbawa (Managing Director).
VPL Heads to Court
However, in a swift response, Vigeo Power on July 8, secured an order of interim injunction restraining the bank from taking over the company’s assets.
As the battle for the soul of the company rages, the Managing Director/CEO of the company, Mrs. Funke Osibodu, in a statement assured the public that Benin Electricity Plc is back fully under the governance and operational control of its legal and statutorily recognised board and management.
“We should reiterate that contrary to the deliberate and malicious falsehood being peddled by those who are desperate to illegally acquire BEDC by stealth under the cloak of a non-existent regulatory or contractual power, at no point did Vigeo Power Limited, the core shareholder in BEDC, borrow money from Fidelity Bank (or any other bank), let alone charge its shares in Fidelity Bank (or any other bank).
“We hereby use this medium to assure the general public, both local and international, together with our wonderful customers, that normalcy has since returned to BEDC, under the lawful control and management of its legitimate board and management.”
Struggle for Control
Dismissing the appointment of an interim board by the BPE, the management of BEDC said, “There is no contractual, statutory or regulatory basis for such”, adding that, “For the avoidance of doubt, the shares of BEDC have not been given as security to Fidelity Bank or any other party”.
“As we understand it, Vigeo Holdings Limited (VHL – a non-shareholder of BEDC) obtained credit facilities from Stanbic IBTC Bank Limited, Fidelity Bank Plc, and Keystone Bank Plc (the VHL Lenders).
“We further understand that the said credit facilities (and any enforcement action in relation thereto) have in the meantime become subject of litigation in a Court action instituted by VHL and other plaintiffs (VHL Action) with Suit No: FHC/L/CS/239/22 – Vigeo Holdings Limited and 4 Ors v. Stanbic IBTC Bank Limited, and therefore, sub judice”.
The management of BEDC Electricity Plc warned that “Any attempt by Fidelity Bank and/or BPE to intervene in BEDC in the manner being reported will be illegal, unlawful and will be resisted”.
The company, therefore, urged the members of the public to discountenance the publication by the NERC, saying it amounts to nothing but part of an unguarded plot to occasion chaos and confusion, destabilise the statutorily recognised and legitimate management of BEDC Electricity and forcefully take over the governance of the company contrary to all laws and regulations.
Despite Osibodu’s claims, however, the Nigerian Electricity Regulatory Commission (NERC), on September 1 affirmed that the new Board of Directors and Management of BEDC, headed by Henry Ajagbawa, has come to stay.
The NERC explained that the BEDC “is a distribution licensee of NERC and by powers vested in the commission by the Electric Power Sector Reform Act (EPSRA), regulatory instruments issued under EPSRA and the terms and conditions of the licence issued to BEDC. NERC is the primary authority that is vested with powers to statutorily recognise the board and management of BEDC as an operator in the Nigerian Electricity Supply Industry (NESI).”
The commission stated that the BEDC is a jointly owned venture with Vigeo Power Ltd holding with equity of 60% and 40% being held by BPE on behalf of the federal and state governments.
It pointed out that “One of the shareholders in Vigeo Power Ltd, Vigeo Holdings Ltd, subscribed to its shares vide a loan from Fidelity Bank Ltd”, adding that “In the light of a default in servicing the said loan, the bank has exercised its rights to repossess these shares that were provided as security for the acquisition loan.”
In its reaction, the NCP said the restructuring of the DisCos was concluded before the court order was issued.
In a statement, it said: “The attention of the National Council on Privatisation (NCP or council) has been drawn to an interim order of the federal high court dated 8th of July, 2022, in respect of a suit between Vigeo Power Limited vs. Fidelity Bank Plc and seven others over the board composition of Benin Electricity Distribution Company (BEDC),” the council said.
“Following this unfortunate development, it has become imperative for [the] council to educate both the staff of BEDC and the public; particularly those within the BEDC franchise area comprising Edo, Delta, Ondo, and Ekiti states of the steps taken by the federal government regarding the board composition of the various electricity distribution companies across the country which were concluded on the 5th of July, 2022.”
NCP added that the restructuring of the Discos was published/aired in print and electronic media platforms across the globe.
It, therefore, stressed that the board composition of both BEDC and the other four Discos “was concluded on the 5th July 2022, three days before the purported court order”.
Watchers of the ongoing drama wondered why BEDC’s case is being trailed by controversy given the fact that the issues with other debt-ridden Discos have been resolved with little drama.
Recently, there were issues following the takeover of the assets of Ibadan Electricity Distribution Company (IBEDC) by the Asset Management Corporation of Nigeria (AMCON) over default in the loan payment. AMCON had confirmed the takeover, describing it as obedience to a court order, but decided to change its mind the next day when the corporation sked the public and staff to disregard the earlier statement, that the issue had been resolved with the company.
The gale of loan recall also affected the Abuja Electricity Distribution Company (AEDC), when the lender, (UBA Plc) decided to exercise its rights over the shares of KANN Utility Company Limited, a core investor and part owners of AEDC.
Another Disco which lost its control was the Yola Disco. It was the first to be retrieved by the federal government after the declaration of force majeure by Integrated Energy Distribution and Marketing Company, the core investor in the firm. Consequently, the federal ministry of power took over the management and control of the electricity distribution company and appointed Mr. Baba Mustapha, an engineer, to lead the company.
Currently, the debt owed to banks by the power sector stands at about N819.97 billion as of last year. The National Bureau of Statistics (NBS) had, in 2020, put non-performing loans (NPL) in the power sector at N33.22 billion out of N1.23 trillion NPLs recorded by banks.
Analysts fear that commercial banks and other lenders to the power sector may tighten facility rendering, with the consequence of throwing many into the labour market.
Unless the affected parties can arrive at an amicable settlement, the current struggle for the soul of BEDC may leave the company in a mess with the attendant loss of its market share.