Lagos said it did not terminate the concession agreement.
The Lagos State Government, Wednesday, stated that it had neither terminated nor cancelled the Concession Agreement it entered into with the Lekki Concession Company Limited (LCC) to reconstruct and expand the 49 kilometre Lekki-Epe Expressway.
In a statement signed by Ade Ipaye and Ayo Gbeleyi, Commissioners for Justice and Finance respectively, the state government said that it only engaged in buying back of the concession rights ahead of the 30-year period stipulated in the Design, Build, Operate and Transfer (DBOT) Concession Agreement.
This, according to the state government, is to be achieved by purchasing all the shares in LCC.
Media reports had been awash that with the Lagos State House of Assembly approving a N7.5 billion supplementary budget, that the acquisition of the concession effectively means its termination.
But the State Government stated that its decision to “buy back” the concession rights was due to several developments not envisaged in the 2006 Concession Agreement.
According to the statement, with the devaluation of the Naira and increased costs of construction, the underlying assumptions and market indicators under which the transaction was concluded had drastically changed in a manner that it can no longer be sustained in its current form.
“The LCC, which is the special purpose vehicle representing the investors, formally brought it to the attention of the State Government that given the rapid rise in interest rates on local loans, and other cost parameters, it is compelled to raise tolls currently being charged at Toll Plaza One from N120.00 to N144.00 per Car.
“The Concessionaire also brought it to the attention of the State Government, that as provided for under the agreement, tolling would have to commence at Toll Plaza Two.
“In addition, the Concessionaire indicated that unless it realised more income from increased rates at Toll Plaza One and commence tolling at the same rate per Car at Toll Plaza Two, it would not be able to meet its commitments to investors in the project and continue to fund completion of the remaining sections of the road.
“Furthermore, the LCC stated that Toll Plaza Three, as contained in the Agreement, must be built and tolls collected for the continued viability of the project.”
The Lagos State Government said that it felt obliged to buy out the interests of the LCC in advance of the hand-over date of 2038 under a mutual settlement option also expressly provided for in the Concession Agreement.
“This is after due consultation with all major stakeholders including the Lagos State House of Assembly based on various feedback and agitation made to the Government,” the statement said.
“Contrary to the misleading reports by some sections of the media on Wednesday, August 27, 2013 from the State House of Assembly’s consideration and approval of the 2013 Supplementary Budget, the buy-back is not and does not amount to a ‘termination’ or ‘cancellation’ of the concession of Eti-Osa, Lekki-Epe Expressway.
“The significance of the buy-back, for which the State Government deserves commendation, is that it allows the Government to take full control over the determination of the toll rates in order to continue to make it affordable for road users.
“The LCC shall therefore continue to operate as a fully commercial entity for the benefit of taxpayers and the larger society,” the commissioner said.
The Lagos State government urged the public to continue to cooperate with LCC’s officials and operatives as it continues the expansion and construction works on the 49.36 kilometre Lekki-Epe Expressway and the operations of the toll collection systems.
“In addition Lagos State government wishes to reaffirm its unflinching commitment to the adoption of PPP Model as a complementary policy thrust for the acceleration of infrastructure delivery towards improving the living standards of the populace.
“More importantly, it would also preserve the ability of the Government to complete and deliver the infrastructure by direct budget funding, which was also one of the reasons for the presentation of the Year 2013 Budget Re-Ordering to the State House of Assembly,” it said.
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