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AEDC investors disagree over CECA’s $164m privatization funding

Electricity, TCN…Fail to hold meeting in two years

By Chris Ochayi

A major crisis is brewing at the Abuja Electricity Distribution Company, AEDC, over disagreement between the investors over the control and management of the $164 million asset the company acquired six years ago.

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Recall the Abuja DISCO was among the 11 Distribution Companies, DISCOs whose 60 percent shares were sold to private investors by the Federal Government during the power asset privatisation exercise in 2013.

There was a recent media report that the shareholders of the DISCOs who are CEC Africa Investments Limited CECA and XerXes Global investment Limited (XerXes) had not held their meetings under the parent company KANN Utility Company Limited since 2017.

But reacting to the report the Managing Director of CECA, Mr Emmanuel Katepa said in a statement issued in Abuja that “Our attention has been drawn to certain recent reports making the rounds  regarding shareholders’ dispute at KANN Utility Company Limited (KANN), the majority shareholder of the Abuja Electricity Distribution Company (AEDC).

“We will like to be clear that we do not wish to contend any matter that is currently the subject of legal proceedings. We are only addressing the specific issues raised in the various media reports to set the records straight for the benefit of the public and stakeholders of the Nigerian Electricity Supply Industry (NESI).

CECA bore the DISCO’s privatization financial burden alone. CECA first paid $41m to the Bureau of Public Enterprises (BPE) as 25% and provided mandatory Debt Service Reserve Account of $40m security cover for the $123m UBA loan to pay 75% balance to BPE by August 2013.

“CECA funded $81m; XerXes did not fund any part of these payments. To secure this repayment XerXes pledged 25% out of its 50% shareholding in KANN to CECA, which resulted in CECA becoming owner of 75% of the shares of KANN whilst XerXes shareholding reduced to 25%.

“Xerxes was given the opportunity to re-acquire the 25% shares if it was able to raise its own share of the funds by January 2014. XerXes failed to raise the said funds,” CECA noted.

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He explained further that, “KANN’s two shareholders viz 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% equity stake in AEDC between 2012 and 2013.

“Both firms executed a Joint Development Agreement dated 31st July 2012 to incorporate and become shareholders of KANN in the acquisition of the 60 percent shareholding of AEDC. The Chairman of CECA is Mr. Siyanga Malumo and the Chairman of Xerxes is Ambassador Shehu Malami.

“Ultimately it was agreed that both CECA and Xerxes would own and hold 50% 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% shares of AEDC.

“The purchase price of AEDC was $164 million and it was agreed by XerXes and CECA that this would be funded 25 percent ($41 million) by cash contributions from Xerxes and CECA (in their 50%/50% shareholding interest) and KANN would borrow the remaining 75% of the acquisition costs ($123 million) from a third party lender (which ended up being the United Bank for Africa (UBA).

“When the initial 25% ($41 million) was demanded by the Bureau of Public Enterprises as an upfront payment, Xerxes could not raise its equity contribution, leaving CECA to wholly fund the initial 25%

equity payment. CECA paid for that portion of the acquisition amount in full being $41 million in March 2013. XerXes did not fund any of this equity payment.

“By August 2013, the 75% balance payment of $123 million (to be funded through a loan from UBA) was due but Xerxes could still not guarantee the equity loan repayment at the UBA.

“Because of this, CECA provided a mandatory Debt Service Reserve Account of $40 million as a security cover for the UBA loan. At this point, CECA had funded $41 million paid directly to the BPE and an additional $40 million for the UBA Debt Service Reserve Account.

“The $40 million was utilized for the payments to UBA and, accordingly, CECA funded $81 million. XerXes did not fund any part of these payments. To secure this repayment XerXes pledged 25% out of its 50% shareholding in KANN to CECA.

“This pledge was with the agreement of Xerxes enforced just before the conclusion of the acquisition which resulted in CECA becoming owner of 75% of the shares of KANN whilst XerXes shareholding reduced to 25%. Xerxes was given the opportunity to re-acquire the 25% shares if it was able to raise its own share of the funds by January 2014. XerXes failed to raise the said funds.”

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Contacted for his response, the Chairman of XerXes Limited, Amb. Shehu Malami said his company is getting the statements on the issue and will deal with them. “We will deal with the matter at the appropriate time,” Amb. Malami noted

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