Olusola Bello
With the disbandment of the management of Abuja Electricity Distribution Company, the United Bank of Africa has now become the majority shareholder in the company with 60 percent equity stake.
The 60 percent represents the equity stakeholding of the former management of the company who have been unable to liquidate the$122million, about N20 billion loan they took from the bank to acquire the company from the government.
Some stakeholders told Business Standards that the action of the United Bank of Africa against the company is in order given the fact it is the financier of the acquisition of the company. Because it financed the acquisition of the utility company, it has a lien on it pending the time the company will liquidate what it has borrowed.
They said what the bank is trying to do is to take back its money. AEDC is now an asset to UBA
According to Ayodele Oni, a legal practitioner who is very knowledgeable in the power sector, he said, “I believe the bank does have the powers to take over management of the company (AEDC) like banks usually ensure they do, under financing arrangements, especially where there is an event of default by the borrower.”
He said: “Neither NERC nor the Federal Government has the powers to remove or change the management. Although, NERC issued a Regulations, pursuant to Section 96(2) of the Electric Power Sector Reform Act to do that, but the Federal High Court struck down the relevant section of the Regulations. I think the regulations were validly issued and the court erred but that’s just my view. The law is that neither NERC nor FGN as at today (until judgment is reversed) can take such steps.”
He said where NERC does come in, is that the banks can’t really enforce security without regulatory approval and I think thats what NERC did- gave approval and people are mistaking it for FGN or Buhari changing AEDC management.
He urged all involved in the management of the information emanating from the takeover of AEDC to manage them well so as not to further reduce the attractiveness of the electric power sector to investments.
“If people think government can just take over companies, then they won’t invest in a sector that is already challenged,” he said.
Clarification
Nigerian Electricity Regulatory Commission (NERC) and Bureau of Public Enterprises (BPE) have said that the action to appoint an interim team to manage Abuja Electricity Distribution Company (AEDC) was not done on the directive from the Federal Government, but on the basis of legal processes arising from the failure of the core investor in the company to meet its obligations to a lender.
NERC and BPE in a joint statement on Wednesday, signed by Sanusi Garba and Alex Okoh, Chairman and Director General respectively, stated that there has been an ongoing dispute amongst competing factions of AEDC’s majority shareholder/core investor i.e. KANN Utility Company Limited (KANN); and the dispute eventually spilled over with the lender that provided the acquisition loan to KANN for the acquisition of majority shares during the privatisation exercise in 2013, over KANN’s inability to service its debt to the bank.
The United Bank for Africa (UBA) had acted as Mandated Lead Arranger, underwriting the entire facility of $122million, about N20 billion then for Kann Utilities acquisition of the Abuja Electricity Distribution Company.
“During the course of the intractable crisis, AEDC not only struggled to meet its obligations to the market under the terms and conditions of its licence but was also unable to meet its obligations to key stakeholders in the organisation including staff culminating in the industrial action by members of the Nigerian Union of Electricity Employees (NUEE). Eventually, this resulted in a total service disruption on 6th December 2021 for over 14 hours in AEDC’s network area. The provision of electricity supply in AEDC’s network area was only restored after the intervention of the Minister of Power, NERC and BPE following an agreement with the union on the terms for the suspension of the industrial action on 6th December 2021.
“The general public should note that arising from KANN’s inability to service its acquisition loan and the ensuing dispute over the servicing of the loan from U BA Plc, the lender exercised its rights by appointing a Receiver/Manager over KANN.
Stakeholders including NERC, Central Bank of Nigeria (CBN) and BPE had on several times worked to broker an amicable resolution between the contending parties. The protracted resolution of the dispute exacerbated the state of affairs at AEDC resulting in industrial action and a total blackout in the service area for over 14 hours.
“It then became apparent that decisive steps were required to address the matter and BPE agreed with the lender’s request to exercise its powers as Receiver/Manager over KANN by exercising its powers over the 60% equity in AEDC as a means to recovering the acquisition loan granted by the Bank.
“The action to appoint an interim team to manage AEDC was not done on the basis of a directive from the Federal Government as being falsely reported in the press but on the basis of legal processes arising from the failure of the core investor in AEDC to meet its obligations to a lender.
“The Receiver/Manager has agreed to the appointment of an interim management team in conjunction with BPE as part of measures designed to address business failure events and ensure continuity of service to end-user customers in the service area.