Okeke: Azura Not Interested in Taking Over Govt Assets
In this interview, the Managing Director of Azura Power West Africa, owners of the 461mw Edo-Azura power plant, Edu Okeke, speaks on the purported plan to take over government assets in case of any default in the deal as well as the recent controversy surrounding the $30 million monthly bill remitted to the firm. Emmanuel Addeh presents the excerpts.
Tell us a bit about how Azura operates and the whole purported misgivings by the National Assembly about your services.
Azura was designed to be a flagship. But when people ask who signed off on Azura, the connotation is ‘who messed up’. A lot lot of people worked on the project and I know that the National Assembly has looked into this matter. When I spoke to the Economic and Financial Crimes Commission (EFCC) chairman, he laughed.
Since the Azura story started, the EFCC has looked at everything. If somebody had done anything untoward, by now they would be in jail. The former Chief Of Staff, Abba Kyari of blessed memory, I remember that for four years, somebody had fed him with a wrong story about us. He didn’t want to see us.
It was when he now went to Germany that things changed. Now we are talking of Siemens deal and that Germany will help Nigeria. The only way Germany will help Nigeria is through their DFI, the Development Finance Institute.
It’s just like the UK will not write a cheque directly, same with the US. Germany has two DFIs, so if they’re going to put a penny on the Siemens deal, it is through their agencies and two of them are on Azura.
That’s what people don’t know. Because when Abba Kyari went to Germany to talk about how to finance this deal, the German agency told him categorically that he should start with Azura and that’s why he met us.
He was surprised by what he had been fed for four years and that it was wrong. Unfortunately, for him to come back and reverse things, he fell sick. So Azura was developed by lots of people and we say every agency of government signed off and it went through the normal process and the final was the legal opinion.
For those that don’t understand how it works, in project finance, when you finish signing a contract (more than 100 contracts were signed on Azura), the lawyer for me will now give a legal opinion to say I have the right and authority to sign on behalf of Azura. The other party will do the same thing.
So they actually came out with a legal opinion saying that because the Minister of Finance Minister and the Minister of Power had approved , it didn’t need a legal opinion. We insisted we must get a legal opinion from the Attorney General. More than 1700 people worked on Azura. And then things began to unravel and we said we were not going to move.
You can look at the lending governments, the DFI of UK, the US government, Germany, France Sweden, Netherlands and then World Bank. You know when people talk, you think all of them will now sit down and say how do we go and screw Nigeria?
But the reality is that a lot of these developed countries were interested in Nigeria because building Nigeria’s economy starts with the power sector. It wasn’t that only the US could not write the cheque and cover Azura. But all of them wanted to be there because the gap in terms of energy in Nigeria is huge.
So all of them put small amounts to be in Azura because they wanted to make sure that they kept an eye and make sure that the template was firm for everybody so that subsequent projects will then need to go through it, but unfortunately, we now jettisoned everything.
I remember the discussions I had with some of these embassies and they will tell me, if you do anything outside the book, you’re going to prison and I’m not going to… There are just some things I will never do.
He (the then Attorney General) wrote a memo to stop the project. He said that the sovereign guarantee, because normally when a country has structural problems, then you actually think of the sovereign guarantee and the World Bank.
As a company, we are not interested in sovereign guarantee because if we terminate today, we are not even going to talk to Nigeria, it’s the World Bank we will be talking to. But for the world Bank to give that blanket guarantee, the partial risk guarantee, they had to get a sovereign guarantee.
But the funny thing is that of all the loans Nigeria has taken, because we are never grilling these officials, to China and the rest that have gone bad, that Nigeria is paying today, why didn’t they raise the issue with them.
The first time we met, the then minister said that we should make sure that we don’t garnishee the assets of the Central Bank of Nigeria (CBN) or the Sovereign Wealth Fund (SWF). We are not interested in the assets of CBN or anybody because we can never go there.
There are other issues in the public space on this Azura matter…
The second one is that he looked at the project and said there will be pipeline vandalism. But the Nigerian National Petroleum Company (NNPC) has a parent guarantee that if the Nigerian Gas Company (NGC) fails, they will step in. All these things were documented. The day we met former President Goodluck Jonathan, it was election period, so he didn’t have the time.
The president called him (the same minister) on the phone in our presence and he asked him (the attorney general at the time), what is the problem with Azura and he said “there is no problem sir , it is just that I haven’t got to it, but I will approve it very soon.” But as a company, we were never going to do certain things.
So, how was the legal opinion thing finally resolved?
When this administration came in, it was reviewed. All the contracts had been signed, except the legal opinion, which this administration now did. There are many people that worked on Azura like I said, the Bureau of Public Procurement (BPP), ministers etc. So, it’s not like three people sat in a room and signed Azura like some people allege.
There’s the take-or-pay controversy. What’s that about?
Yes, the other sticky point is that of the take-or-pay. So, what does take-or-pay mean? For us to generate electricity, we have to have constant gas. Now for you to make sure you have gas , there is the take-or-pay. That’s how it is structured in every project of this nature.
Normally, that take-or-pay is not the quantity of gas you use, it is slightly below it. And if you’re generating power, that take-or-pay is immaterial, because you’re using it.
Now, Azura is not the only company that has take-or-pay. Every power plant in Nigeria that has effective Power Purchase Agreements (PPAs) has take-or-pay. The oil companies have, but because they own the power plants and the gas , it is not called take-or-pay.
But when people talk about take-or-pay, they don’t realise that if Azura pays for that gas, they even have two years. That money that was paid for in 2018 and 2019, Nigeria used the gas after. They still had two years to use the gas.
But that’s not even the interesting part of it, because that money even though it is paid through Azura, Seplat and Nigerian Petroleum Development Company (NPDC) are in a joint venture. So that money is actually from government purse to government purse. But they won’t tell you that.
And they say we are not allowing the evacuation of other plants, but we did a study with the Transmission Company of Nigeria (TCN) on what can be evacuated.
During construction, I was the Deputy Managing Director of Azura at the time. In the course of construction, somebody said the plant may not be evacuated but I said since all the negotiations we have been having, they told us there’s no problem.
So, we flew people in from TCN in Abuja and National Control Centre (NCC) in Oshogbo to come and tell us what the whole thing was about. But we were told that it was supposed to be 1200mw but that they couldn’t trust the cables which could only manage 900mw evacuation because they were weak and were built a long time ago.
So they said they could push 900mw, meaning that the NIPP could shut one or two turbines for them to build a turnkey facility which they haven’t built for the past seven years. But even if Azura is down today, the NDPHC cannot do more than one turbine because they don’t have gas. So, effectively, for people that make the noise, there’s no plant that is idle because of Azura.
What about the $30 million you are said to be receiving every month?
Again, there is what is called capacity. This is made up of two parts: capacity and energy produced. Capacity is what you can put on the grid. But some plants are being cheated. Only those with effective PPAs get their full capacity. So that’s Azura, Omotoso, Olorunsogo, Okpai, Afam, the five of them.
The second part which is about 50 per cent of the invoice is the power you put on the grid. So they are not even evacuating us fully. We are losing money on that. But that’s the way it’s structured. The difference is that they pay us fully because we have the structure to make them pay us, but they owe the others. But everyone talks as if it’s only Azura, it’s not.
But what they haven’t told you is that the day they pay us that $30 million, 40 per cent goes back to government the next day. The only thing is that they have said we should allow them pay our contractors, but we said no, because there will be a default. The contract is a value chain. Sometimes, it’s up to $30 million and sometimes, it’s not up to, but let’s assume it’s $30 million.
About $10 million of that money is gas and it goes the next day to the Nigerian Petroleum Development Company (NPDC)/Seplat and NPDC owns about 60 per cent of that. So NPDC takes $6 million into its pocket. About $4 million goes to the Nigerian Gas Company (NGC) which is again owned by the government, which is the biggest lender to Azura.
We have about 16 lenders. The biggest lender is the Central Bank of Nigeria (CBN) through the Bank of Industry (BoI), but they won’t tell you that. And they get their money immediately.
I have gone to the minister of finance to say if this amount is too much, you can decide to tell NPDC, NGC, CBN not to send in their invoices at the end of the month. She came back to say they all said no.
Nobody will tell you we are paying that much. We are not talking about taxes now. We are talking about the loan repayment to the CBN and others.
The World Bank is standing, wanting everybody to do the right thing…and they know that if you do anything untoward, you go to jail and I am not ready for that. So, you need to understand these dynamics when people talk about Azura.
If Discos remit 100 per cent, nobody will talk to the Minister of Finance. Discos will remit 50 per cent and NBET will distribute that 50 per cent but because we are backed by the World Bank, we say you can’t owe us. But the interest on all the other Generating Companies (Gencos) every month is bigger than what Azura collects. Nobody talks about it.
What steps are you taking to ensure that the National Assembly and its committees have full information because it would seem that many people are not aware of these conversations.
I have brought the whole house committee on power to this place. But am I going to bring every member of the national assembly to this place? Then all of a sudden it’s now the house committee on finance and they didn’t even invite us (for the last hearing). I am making an attempt to go see them. But if I think of how things should work, it should be house committee on power and senate committee on power. We have explained to all of them. We have even done them a memo.
What’s the tenor of the partial risk guarantee?
It’s 20 years. It has two parts: The liquidity part and the combination. There’s termination due to buyer’s default and there’s the one due to seller’s default. If it’s me that’s not doing my job and Nigeria wants to terminate, they can just pay what is remaining to the lenders. There are about five different scenarios when you’re terminating.
Has there been anytime that NBET came to verify the capacity of Azura and they weren’t allowed into your premises?
They come here every year. There’s no way we can stop them from coming in. They can enter here anytime they want. Even the TCN can enter here anytime they like.
The public perception is that Nigerians do not have electricity and your firm is collecting $30 million. The public doesn’t know what’s happening.
What the public should be asking is that how many power plants have been built in the last seven years. Just Azura. I don’t dispute that we don’t have power. But the discussion we should be having is how we should be building more. Nigeria should be adding two Azuras every year.
People are also asking why Azura is being paid in dollars.
When the project was being developed, there were two sources of financing: foreign and local. We don’t manufacture turbines. In building the plant, there was the naira portion and the dollar portion.
The loan to CBN is in naira but the loan from other foreign sources is in dollar. When we submit an invoice it has two parts. Ordinarily, the naira portion should match naira and dollar should match dollar, but NBET will put everything in naira before we now have to go looking for dollars.