Battle over Kaduna DISCO: Reserved bidder threatens to sue BPE

The reserved bidder for the Kaduna DISCO, Leda Consortium Nigeria Limited, has threatened to sue the Bureau of Public Enterprises [BPE] for breach of extant rules governing the bid process.

This followed a further 60-day extension granted the preferred bidder, Northwest Power Limited, NPL, to pay the remaining 75 per cent of its bid price after failing to meet two previous deadlines.

The BPE had violated its own regulation when it initially extended the deadline given to NPL to complete the Share Purchase Agreement, SPA, from June 23 to August 6.

After the company failed to meet the August date, BPE further granted it up to October 6.

In a letter to the Director General of BPE, dated August 15, Leda Consortium, through its lawyers, Anachebe & Anachebe demanded that, in compliance with the privatisation rules and extant laws, it should be invited to complete the Share Purchase Agreement of the Kaduna DISCO or else it might “institute appropriate legal proceeding” against BPE.

“In a brazen violation of set contractual obligation, we are instructed that the said preferred bidder woefully failed to pay up this mandatory 75 per cent balance as at June 23, 2014 and even till date, while our clients are yet to be invited to pay and take over the said enterprise till date despite repeated demand,” the letter read. “On the contrary, we are awfully briefed that your agency unilaterally and surreptitiously altered the terms of the bid process by purportedly extending needless moratorium to the preferred bidder covering up to August 6, 2014, by which date the latter failed to pay up, while our client is equally yet to be invited to pay the purchase price.

“Given the reprehensible desecration of integrity, transparency and due process as conveyed herein, our final instruction is to formally demand your agency’s compliance with agreed process comprised in your privatisation rules and extant laws by inviting our clients forthwith for negotiation and completion of the Share Purchase Agreement for said Kaduna Disco.”

According to the privatisation guideline, a preferred bidder stands the risk of forfeiting its initial 25 per cent mandatory payment if it fails to complete its payment obligation on the set deadline and the right to buy the asset would be transferred to the reserve bidder.

Section 15 (138) of the Request for Proposals (RFP) for the Privatisation of PHCN Successor Companies states: “The designated Preferred Bidder will be invited for negotiations with BPE. Failure to enter into negotiation will result in the forfeiture of the Preferred Bidder’s Bank Guarantee of the Bidder, and BPE will invite the first (1st) Reserve Bidder for negotiation.”

“Greying” the rules
Although BPE’s decision to deliberately violate its own rules in the case of the sale of the Kaduna DISCO is brewing controversies, PREMIUM TIMES investigation revealed that the agency illegally extended the deadline in at least three instances in the bid process of PHCN successor companies.

The Chairman of the National Council on Privatisation, Atedo Peterside, while trying to justify the extension of the deadline granted to NPL, unwittingly revealed that the entire privatisation process was characterised with a violation of the rule.

In an angry email sent to an online group and seen by PREMIUM TIMES, Mr. Peterside, said, “The National Council on Privatisation, NCP, has the powers to grant extensions/waivers to bidders who have paid 25 per cent and ask for an extension of time to pay the balance of 75per cent.”

He revealed that the extensions were granted to three other companies.

“This was done for Interstate (Enugu Disco) and Eurafric (Sapele Genco). Even the guys who paid for Shiroro were also a day or two late,” he revealed.

Billionaire businessman, Emeka Offor, is the promoter of Interstate Electrical Limited.

Though Mr. Peterside admitted in the email that he kicked against the granting of such extension because it would create a “dangerous precedent”, he says it was not a case of “black and white” but “grey”.

“The brouhaha over these extensions became public knowledge because I argued publicly against them and some reserve bidders joined the same argument, but it was an argument that I lost at the NCP. I was arguing against granting waivers of this type because you set a dangerous precedent. I guess the owners of North West (whoever they are) are now seeking to benefit from that same precedent.

“I have explained before that the Request For Proposals (the bidding rules) clearly grant the authorities powers to grant waivers of this type. Granting a waiver is like granting a pardon. If an authority has the powers to grant a pardon, you can argue that a particular pardon was ill advised, but that does not make the granting of the pardon illegal. There is “white” and there is “black”. This one is “grey” and so the authorities can do as they please,” he said.

Mr. Peterside said while the extension posed a “moral hazard,” this did not not mean that it was illegal.

A source involved in the privatisation process, who asked not to be named as he was speaking unofficially, said no matter how hard Mr. Peterside tried to justify what the BPE did, it would not change the fact that it was illegal and enmeshed in irregularities.

He said the issue of extension of deadline was included in the draft regulation but was rejected by stakeholders and their foreign partners.

“The draft RFP that was circulated to industry stakeholders prior to the commencement of the bidding process for electricity Discos contained toxic clauses that gave government and NCP sweeping and unfettered powers to unilaterally grant waivers and extensions to defaulters. Stakeholders and their foreign partners and financiers kicked against this primitive veto power and it was promptly expunged from the final RFP which is the one on which the privatisation process is premised,” he said.

“Consequently, it is stated with supreme confidence that no section of the prevailing RFP and the entire Privatisation Laws empowers government and by extension BPE and NCP unlimited powers to grant waivers and/or extensions to a defaulting preferred bidder no matter how highly placed or connected.”

He said that it amounted to pure impunity if government agencies were allowed to make laws and at the same time allowed the liberty to flout the same laws at will.

“Government should not make rules and deliberately flout same just to please its cronies. That era of impunity is gone forever. Arguing that government can do as it pleases is also untenable and an attempt to stand logic on its head. Why make the rules in the first place if the maker of the rules is at liberty to breach these rules?” he asked.

He also wondered the need for a reserved bidder if the preferred bidder was going to be given unlimited extensions to complete its payment obligations.

Cooking up Excuses
In a statement dated August 19, BPE’s head of Public Communication, Chigbo Anichebe, excused the extension given to Northwest based on the inability of the company to secure financing for the transaction due to a question raised by a foreign bank with regards to the insecurity in Northern Nigeria.

“For Northwest Power Limited, the preferred bidder for the Kaduna Electricity Distribution Company, it had on July 25, 2014, requested an extension of transaction timeline by 60 days due to the recent security challenges experienced within the Kaduna Electricity Distribution Company which made its offshore financiers to postpone disbursement of bank facilities already obtained. The company explained that though it had secured financing for the transaction from a foreign bank, the bank had requested for additional time to review the transaction in the aftermath of the security challenges in Kaduna to ensure the safety of its funds,” the statement reads.

However, our source said the BPE was merely cooking up excuses to justify its flagrant violation of the rules. He said Northwest has been making a killing from the Kaduna DISCO since it was handed over, enough to pay up the balance if it wanted to.

“Kaduna has been very safe since the last unfortunate bombing instance. The Kaduna Disco is currently making monthly cash collection of a billion naira. Our investigations revealed that Afri Exim Bank has given an offer in Principle with very stringent financial pre-requisites of which Bombings is not part of it. Kaduna is only one city in four geographically vast land mass including Sokoto, Zamfara and Kebbi which are relatively very safe compared to other areas.

“Investigations further revealed that the failure of Northwest may not be unconnected with the lukewarm attitude of our local banks to issue Northwest local Bank Guarantee in favour of Afri Exim due to perceived heavy financial exposure to other local banks in the course of their Kano Disco transaction.

“How can a loan whose approval has been granted be stalled at the point of disbursement in this era of EPayment? Is the cash physically being transported in containers? What is going to change in 60 days that will aid the disbursement? There is more than the issue of security in this issue,” he said.


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