The Nigeria Electricity Regulatory Commission, NERC, has issued a strong worded query to Sahelian Energy, owners of Kano Electricity Distribution Company over “prudential issues” in the transfer of over N1 billion out of the company.
Following an open book review of the company by the NERC, the Commission in a letter dated September 25th directed the Managing Director/Chief Executive Officer of Kano Electricity Distribution company to explain the purpose of the transfers.
A Report submitted by the Commission’s team that conducted an open-book review of the company’s accounting and financial records for the period 1st November 2013 – 30th April 2014 uncovered some irregularities, a copy of the query made available to PREMIUM TIMES revealed.
According to the NERC, on 5th February, 2014, N670 million was paid to Northwest Power from the Kano Electricity Distribution Company, KEDC, central collection account with Fidelity Bank Plc.
Sahelian Energy also made a payment of US$2,740,000 (about N430 million) to KCETAS Africa Power as Technical Service Agreement, TSA, fee in addition to US$150,000 paid in cash for technical support.
The NERC also requested explanations for the expenditure of N10 million for a two day board meeting (consisting of N8 million sitting allowances for Chairman, six directors and Company Secretary, and N2 million for accommodation).
“These transactions raise prudential issues that are of interest to the Commission as the regulator of the NESI,” stated the query, signed by Steven Andzenge, Commissioner, Legal, Licensing, and Enforcement.
“Accordingly, you are by this letter required to promptly submit to the Commission the following:
a. Written explanation of the purpose of the payment made to Northwest Power (not being a market participant in the NESI) and the conditions for the payment;
b. The resolution of the Board of directors of KEDC authorizing the payment;
c. Minutes of the meeting where such resolution was taken and the directors present;
d. Minutes of meeting where allowances for directors were fixed and the directors present at such meeting.”
The letter also requested the company to submit a copy of the approved Management and Technical Service Agreement with KCETAS Africa Power for which US$2,890,000 had been paid for the Commission’s perusal.
There have been series of allegations that Sahelian Energy had diverted monies from the Kano Distribution Company into Northwest Power, a sister company which was declared preferred bidder of Kaduna Disco without the legal authority to do so, a source familiar with the privatization process told PREMIUM TIMES.
“These monies where allegedly used by Northwest power to make the down payment of 25 percent for Kaduna DISCO to the Bureau for Public Enterprises in contravention of all known guidelines and laid down rules and regulations of such a sensitive transaction which had earlier consumed a Minister of Power in the person of Prof. Barth Nnaji for a much lesser infringement,” the source, who did not want to be named because of the sensitivity of the matter, said.
Although it entered into a Share Sale Agreement (SSA) with the BPE on December 23, 2013, Northwest Power Limited is yet to complete the payment for the Kaduna DISCO, one of the last successor companies from the defunct Power Holding Company of Nigeria (PHCN) to be sold.
Last August, the BPE announced the federal government’s approval of the extension of payment deadline by Northwest Power by 60 days.
According to the BPE, the decision to extend, rather than cancel the sale of the firm, was because the government did not meet some of the agreements made during the transaction.
“Kaduna Disco said it could not afford making the payment because its offshore financiers postponed the disbursement of funds already obtained, due to the recent security challenges experienced in Kaduna State,” the BPE said.
“The company explained that though it had secured financing from a foreign bank, the bank had requested for additional time to review the transaction in the aftermath of the security challenges in Kaduna,” it added.