Emma Ujah, Abuja Bureau Chief
The foreign investors in Abuja Electricity Distribution Company (AEDC), CEC Africa Investment Limited, have cried over alleged plot by a “powerful cabal” to edge them out of the company.
CEC Africa and Xerxes Global Investments Limited formed a Special Purpose Vehicle called KANN Utility Company Limited, a consortium that bought 60 per cent of the equity of AEDC in 2013.
The KAAN ownership structure at establishment was on a 50 per cent equal shareholding between CECA and Xerxes.
CEC Africa Investments Limited, which has over 60 years history of power operations across several southern African countries and Xerxes Global Investments Limited agreed to jointly bid for the purchase of 60 per cent equity stake in AEDC valued at $164 million.
The two companies also agreed to fund 25 per cent of the AEDC equity share ($41 million) by cash contributions in their 50%/50% shareholding interest and KANN would borrow the remaining 75 per cent of the acquisition costs of $123 million from a third party lender, the United Bank for Africa (UBA.
CECA said that Xerxes could not raise its equity contribution when the Bureau of Public Enterprises (BPE) demanded for the initial 25 per cent ($41 million) upfront payment and that as such, CECA alone raised initial 25 per cent equity payment fully in March 2013.
In addition it was also gathered that Xerxes could not guarantee the 75% balance of loan repayment at the UBA, thus CECA provided a mandatory Debt Service Reserve Account of $40 million as a security cover for the UBA loan thereby bringing CECA’s total, both to BPE and loan repayment to $81million.
The two companies agreed that CECA and Xerxes would own and hold 50 per cent each of the shares of KANN and that each of the two parties would make equal financial contribution towards the acquisition amount and costs with regard to the purchase of 60 per cent shares of AEDC.
The foreign investors claimed that to secure this repayment, XerXes pledged 25 per cent out of its 50 per cent shareholding in KANN to CECA thus making the later (CECA) becoming 75% equity owner of KANN in a written agreement.
The foreign investors said that their attempt to enforce terms of agreement with its Nigerian partner, was being frustrated.
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CECA is now alleging that apart from the fact that Xerxes has failed to honour its agreements on equity ownership of KANN on 75 per cent and 25 per cent basis, Xerxes was systematically sidelining it by plotting takeover of AEDC by trying to change key management positions and leave CECA, the biggest investor in denial.
The parties went for arbitration on the matter at the London Court of International Arbitration (LCIA) and CECA on October 28, 2016 won the case.
On account of this case, it has become difficult for KANN to hold statutory meetings of the consortium as every effort to convene general meeting is allegedly being frustrated by Xerxes.
Besides, it was learnt that CECA has been recently harassed by the Department of State Security but the spy agency didn’t find any substance in the issues raised against the company.
However, reacting, Xerxes faulted CECA’s claims, saying that media reports that KANN Utility Company Ltd, the core investor in Abuja Electricity Company, AEDC, had decided to sell its 60 per cent equity stake in the distribution company due to constant squabbles over stakeholders’ debt were not true.
The Nigerian investors told Sunday Vanguard several issues concerning the ownership of shares in AEDC were misrepresented to the public.
Xerxes said that CEC Africa did not single-handedly pay $81m cash and raise $123m loan security to acquire AEDC.
The Nigerian investors claimed that it was the goodwill of the Chairman of AEDC , Amb. Shehu Malami, that actually paved way for CECA and Xerxes through KANN as a special vehicle to win the bid,” Xerxes said in a document sent to Sunday Vanguard.
The local investors claimed, “the truth of the matter is that CEC owns only 30% in AEDC, but misled its parent company in Zambia that it owns majority shares with the sole intent of sourcing for loan from Zambia Stock Exchange,” and that it wanted to “ short-change other shareholders in AEDC.”
It added, “In the same vein, CEC stood honesty on its head when it claimed that it injected funds into KANN as investment. The reality is that the fund was indeed a loan to KANN which is to be repaid by the company. So, technically, there is no equity investment made by CEC, but a loan to KANN at exorbitant interest rate of double digit over London Inter-bank interest rates (LIBOR)
“The so-called AEDC stakeholders’ war is a premeditated agenda with a view to forcefully taking over majority shares in the company. It is for this reason that CEC proposed to amend the Articles of Association of KANN targeted at disenfranchising Xerxes, a development that underpinned Xerxes decision to take the matter to Court to prevent an Extra-ordinary General Meeting from taking place in 2018.
“Another issue that has contributed significantly to the crisis currently rocking AEDC is the refusal by the Board of Directors of AEDC at its meeting held recently to renew the tenure of its Managing Director in accordance with the provisions of NERC regulation on local content, which states explicitly that expatriate can only be appointed when there are no Nigerians with the requisite experience and expertise to occupy such positions.”
Xerxes also said that the Arbitral Award in London was done without any legal representation for the company and therefore unaccepted to it.
The Nigerian investors added that they blocked board meetings because “if the meeting is allowed to hold, the voting right of XERXES will presumably be outnumbered by virtue of their failure to allow the equal voting right of both parties.
The federal government has set up a committee headed by the Governor of Kaduna State, Malam Nasir El-Rufai to review the ownership structure of Discos in the country, over issues of inefficiency.