The Federal High Court in Lagos has issued an injunction restraining the Nigerian Electricity Regulatory Commission (NERC), the Bureau of Public Enterprises, and Sahelian Power SPV Limited from naming Powercom or any other investor as a new core shareholder in Kano Electricity Distribution Company.
The court, on Thursday, also restrained the parties were also restrained from conducting or recognising any other bidding process for the sale of Sahelian’s 60 percent shares in the Kano Electricity Distribution Company.
Other parties equally restrained are Patrick J.N. Ikwueto SAN (in his capacity as receiver manager of Sahelian Power), Fidelity Bank, Kano Electricity Distribution Company Plc and Powercom Smartgrid Nigeria Limited from considering, accepting, approving, or naming Powercom or any other investor as a new core shareholder in Kano Electricity Distribution Company or conducting or recognising any other bidding process for the sale of Sahelian’s 60 percent shares in the Kano Electricity Distribution Company.
Future Energies Africa (FEA) Limited that filed the suit, described the process that produced Powercom Smart Grid Nigeria (PSGN) as the preferred company to take over the Kano Electricity Distribution Plc (KEDCO), as flawed.
Representatives of the consortium of local and international partners that make up Future Energies, stated that NERC and Powercom failed to comply with the guidelines and requirements of the Federal Government, as laid down by the Bureau of Public Enterprises (BPE) and NERC itself.
BPE is the agency in custody of the government’s 40 percent stake in the electricity distribution asset, leaving Fidelity Bank with the temporary ownership stake of the remaining 60 percent.
Through a receiver manager, in collaboration with the BPE, Fidelity Bank initiated a bidding process to get a technically sound and financially competent buyer to acquire the bank’s stake in KEDCO. A few days ago, Powercom had, via a statement, announced its acquisition of KEDCO.
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Adam Ibrahim (an investor and consortium member of FEA), however, faulted the premise of Powercom’s acquisition announcement with the revelation that the company cannot claim to have acquired KEDCO when Future Energies had already completed the execution of contracts and agreements through a share sale and purchase agreement to acquire the shares that both BPE and NERC are aware of.
Ibrahim stated that FEA had “no recourse than to seek legal action having filed a complaint to BPE and NERC that fell on deaf ears. FEA is further surprised that NERC despite (a) its knowledge of a signed share sale and purchase agreement, (b) agreed transaction terms as forwarded to it by BPE and Fidelity’s representative, and (c) a subsequent complaint by Future Energies regarding Fidelity Bank’s attempt to scuttle the completed process, still issued a ‘No Objection’ for PowerCom.”
Future Energies claimed that it had won the earlier bid after a rigorous review and screening process that lasted almost a year, alongside other bidders, and was given a ‘No Objection’ approval by the BPE after meeting the requirements for acquisition as laid down in guidelines set by BPE and NERC.
However, FEA revealed that for some undisclosed reasons, Fidelity Bank, which is the interim owner of the 60 percent stake of the entity, decided to halt the process and approve another bidder after having already signed a valid and binding contract to sell the shares to Future Energies.
Ibrahim said, “My consortium – Future Energies Africa Limited (FEA) was interested in the Kano distribution company, and we put in a bid through Fidelity (and its receiver manager) and BPE -which is the entity responsible for approving the guidelines and overseeing the bid process.
The guidelines were communicated to us by BPE through Fidelity Bank. It is shocking that there is an attempt to destroy the investment and time we spent putting together a competent bid with no explanation.”
“We went through the process, sent in an expression of interest alongside other bidders that were interested in the asset. After a long process and evaluation of us and other bidders, we emerged as the new core investor, and got approval from Fidelity Bank through the receiver manager, to take over the asset. We also obtained a ‘No Objection’ from BPE.”
“We negotiated the core contract that guides the sale of a company, which is the sale and purchase agreement (SPA). We negotiated the document, signed it and Fidelity Bank sent it over to BPE for the BPE to sign the shareholders’ agreement, which is the document that guides all the shareholders in an entity.
“In the process of negotiating the shareholders’ agreement, we understood that a call was placed by Fidelity Bank, telling BPE to halt the process of signing the shareholders’ agreement, even though we had signed the sale and purchase agreement to acquire the asset.
“They (Fidelity Bank) decided to secretly reopen the bid, and they hired PwC to begin a fresh bid process. They also secretly introduced other new companies in the process. We were told to just resubmit our documents, and we had no idea there was a new competitive process after we had already concluded our transaction. We assumed this submission of documents was just for internal purposes. Nonetheless, we reserved all of our rights under the binding contract.”
He added, “The second bidding process doesn’t conform with all of the government’s guidelines and requirements. The risk is that we may end up in the same situation whereby you are selling assets to entities that do not have the technical or financial capabilities to turn around the business.
Analysts say the situation is unfortunate for the Nigerian electricity market given that one of the reasons for the outcome of the initial privatisation process was the failure to adhere to contractual terms.
The analysts say Fidelity Bank and NERC need to explain “why a valid process is being scuttled and a binding contract is not being adhered to”.
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