BPE okays billions for power Discos

The Bureau of Public Enterprises (BPE) has approved the payment of $146.8 million (about N29.2 billion) to Integrated Energy Distribution and Marketing Company (IEDM) in a share buy-back deal. IEDM is the core investor in the Yola Electricity Distribution Company (YEDC/Yola Disco) which it acquired less than a year ago.The company has invoked the force […]

The Bureau of Public Enterprises (BPE) has approved the payment of $146.8 million (about N29.2 billion) to Integrated Energy Distribution and Marketing Company (IEDM) in a share buy-back deal.

IEDM is the core investor in the Yola Electricity Distribution Company (YEDC/Yola Disco) which it acquired less than a year ago.
The company has invoked the force majeure clause in the contract agreement and applied to BPE to opt out.
It said the activities of the Boko Haram militants had crippled its businesses in Borno, Yobe, Adamawa and Taraba states.
Daily Trust also learnt that eight other discos apart from Kano and Kaduna have also declared force majeure in their operations citing the lowering of tariffs by the Nigerian Electricity Regulatory Commission (NERC) in March.
They are said to have claimed that they could not recover their investment owing to the new tariff.
If their requests are granted the government would be made to pay billions of naira in share buy-back deal.
In a letter to the Bureau of Public Enterprises (BPE), the board of Integrated Energy said it could not continue their business of electricity distribution in the four north east states.
It cited clause 7 of the Performance Agreement it signed with the BPE in the purchase of the disco.
Yola Disco is one of the successor companies created following the unbundling of the Power Holding Company of Nigeria Plc (PHCN).
It was privatized through a sale of 51 per cent of its equity to the investor (IEDM).
Director General of the BPE Mr. Benjamin Dikki in a memo to the National Council on Privatization (NCP) recommended that IEDM be paid $146.8 million. He also recommended that a management team be procured to carry on the operations of the Disco by the ministry of power.
Integrated Energy had complained that out of the 13 Business Units (BUs), only three were able to operate efficiently at the height of the Boko Haram crisis.
It said despite making investments worth N264 million on network and service improvements, the activities of insurgents meant the revenues generated could not sustain the business.
A total of 60, 282 customers had been cut off the network which severely impacted on revenue collection resulting to negative cash flow for 11 months, it said.
By the arrangement by the BPE, the federal government will buy back all of IEDM’s shares in YEDC at the purchase price value of $59 million; the payment to YEDC of a return on this purchase price from August 2013 for a period of five years at 20 per cent which is estimated at $87.8 million and the repayment of any approved loans to YEDC and Share of Undistributed Profits since handover.
The BPE boss noted the short time left before a new government will be sworn in and advised that the matter be included among other transition issues to be discussed by the two transition committees.
The NCP considered the memo NCP/01/04/2015 in its April 2015 meeting with subject: “Memo on the Security Situation in Yola Electricity Distribution Company (YEDC): Declaration of Force Majeure by YEDC investors” and expressed a “No Objection” to the invocation of force majeure by IEDM, according to document seen by Daily Trust.
Director General of the BPE Benjamin Dikki did not answer when our reporter called his mobile phone. He also did not reply the text message sent to him.
Spokesman of the bureau Mr. Alex Okoh had earlier promised to provide a response to our reporter’s inquiry. He never did even after repeated calls a day after.
However, chairman of the Nigerian Electricity Regulatory Commission (NERC) Dr. Sam Amadi told Daily Trust that Integrated Energy’s force majeure declaration was irrelevant to the sustainability of the Yola disco.
He insisted that Yola disco was still up and running according to its checks.
Amadi said: “Let’s keep this in mind. The transaction is between the BPE and the core investor. They bought an asset and that asset is operational which is under the purview of NERC. If a disco declares a force majeure, NERC will take responsibility and take over that disco and recommend so that they can continue to be of service. There are certain business units they are having some difficulties but they are not enough for them not to operate. Yola disco is doing well financially and operationally.”
Dr Hussaini Abdu, the Country Director of Plan International in Nigeria and a development and good governance expert told Daily Trust that Integrated Energy’s demand to be paid back its investments and profit was “completely unacceptable”.
He said: “That such a clause for buy-back is provided, if they true, show how unserious the NCP is. Electricity is too important to gamble with. If you buy something, you can return it immediately, but not after using it and wasting our time and resources. 
“I think government should take it back. The companies should be punished and denied access to any national asset. They can be paid, not in their terms. The NCP will subtract the cost of damages, disruption and time wasted. They should be charged for national sabotage,” he said.