Monday, April 21, 2014

ALSCON asset base devalued by 90% in five years- audit report

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Photo: businessnews.com.ng

 BFI group worries about the depreciated value of ALSCON.

The total asset base of the $3.2 billion Aluminium Smelter Company of Nigeria, ALSCON, Ikot Abasi, in Akwa Ibom State has been devalued by about 89.47 per cent since 2006, the summary of the company’s financial statement since 2006 has revealed.

Ownership of the plant was transferred by the Bureau of Public for Enterprises, BPE, to the Russian firm, UC Rusal, in controversial circumstances in 2006 following the annulment of the bid won by the American-Nigerian consortium, BFI Group Corporation in 2004.

Prior to the bid, the company’s fixed asset as at December 31, 2003 stood at about N127.7 billion, while the figure dropped marginally to N127.3 billion at the beginning of 2004, according to a report published by the audit firm, PriceWaterHouseCoopers Limited.

But no sooner had UC Rusal effectively took over the control of the plant in early 2007, its management carried out a comprehensive re-evaluation of the assets and marked down their value by over 76 per cent, from N129.9 billion at the end of 2006 to N30.98 billion.

Detailed review of the report shows that the value of the company’s different departments, including land and building at the beginning of 2007, stood at N7.9 billion; plant, machinery and equipment, N2.9 billion; household equipment and furniture, N79 million; motor vehicles, N330 million; while construction in progress was N120.6 billion, representing the amount the Federal Government gave the company for the purpose of dredging the Imo River channel.

The figures at the end of the year declined significantly to about N14.7 million; N15.7 million; N9.9 million; N321.4 million; and N571.5 million respectively.

Indications are that the company’s asset base suffered massive devaluation by over N101.2 billion within just one year of the takeover of the plant by UC Rusal under what the report called “revaluation surplus/deficit”.

The certified true copy of the audit report by an audit firm, KPMG, obtained from the Corporate Affairs Commission by PREMIUM TIMES on Monday in Abuja shows that since 2006 the asset base of the company under the Russian managers underwent consistent depreciation and decline in value.

From N30.98 billion in 2007, the company’s net asset value went down to N25.2 billion in 2008; N19.4 billion in 2009 and N14.9 billion in N2010. The report for 2011 is yet to be published.

PREMIUM TIMES gathered yesterday in Abuja that the startling revelations contained in the company’s financial statement may have dealt a fatal blow to UC Rusal’s quest at the International Court for Arbitration for compensation by the Federal Government based on the Supreme Court’s annulment of the controversial transfer of the ownership of the plant to it by the BPE.

The apex court had in July stripped UC Rusal of the ownership of the plant after a long legal tussle by BFI Group, the original winners of the bid. The latter was initially declared the preferred bidder by the National Council on Privatisation, NCP, at the end of the financial bid in 2004, but was upturned in controversial circumstances.

BFI Group had offered $410 million for majority stake in the company, as against the $205 million by the Russians.

Though the Supreme Court had ordered the BPE and the NCP to take immediate steps to retrieve the plant from UC Rusal and hand over to its rightful owners, BFI Group appears worried that the value of the plant may have depreciated far below the level that attracted its initial interest in the company in 2004.

When contacted, BFI Group Chairman, Reuben Jaja, said its legal and technical teams are scheduled to join BPE and NCP officials on a formal official visit to the plant during the week to conduct detailed inspection and evaluation tour of the components to determine their present condition.

“I have no detailed comment on the state of the plant at the moment, because the current value of the plant cannot be determined until our team has visited the plant to confirm that it is in the same condition we bided for in 2004.

“Available information with regard to the audited financial statements by KPMG, which audited ALSCON as a public limited liability company, is frightening. This has raised serious concern among members of the Board of ALSCON that the true state of the plant must be established before any further action,” Mr. Jaja said.

He said the company’s decision is to visit the plant to review all the fixed assets and determine the cause of such a drastic reduction in the asset base.

“We don’t want to speculate or join issues with anybody at this point. But, we cannot fault the assessment and report of one of world’s leading audit firms, KPMG, on the company’s health.

“Our visit to the plant would provide us with the solid facts to take a decision on what our next line of action will be. We owe our shareholders a responsibility to ascertain the true value of the plant before any further decision is taken,” he said.

He dismissed the reported action by UC Rusal to drag the Federal Government to the International Court of Arbitration to seek compensation over the voided bid, describing it as a wrong move. He said UC Rusal should have made efforts to join other parties to discuss and determine how to amicably resolve the issues and move forward.

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