BPE seems to be favouring Northwest Power Limited, the Preferred Bidder for the Kaduna DISCO.
In a flagrant violation of privatization guidelines it drafted, the Bureau of Public Enterprises, BPE, unilaterally extended the deadline for the completion of the Share Purchase Agreement, SPA for the Kaduna Electricity Distribution Company, Kaduna DISCO, PREMIUM TIMES has learnt.
The privatization bureau appears to have set a precedence never seen in its privatisation history by surreptitiously shifting the goal post in favour of Northwest Power Limited, NPL, declared the preferred bidder for the Kaduna DISCO.
Having signed the SPA with the BPE in December last year, Northwest Power Limited, one of the 17 PHCN successor companies put up for sale in December 2010, had until June 23, 2014 to make the 75 per cent balance payment.
However, when it became clear that the company may not meet the deadline, and in order not to lose the mandatory 25 per cent initial down payment it made for the acquisition of the assets of the power distribution company, the BPE, against set privatisation rules, unilaterally extended the deadline to August 6.
The privatization guidelines demands that failure by the preferred bidder to discharge its payment obligation before the stipulated deadline, it should mandatorily forfeit its 25 per cent initial payment and the right to buy the asset to the reserve bidder.
Section 15 (138) of the Request for Proposals (RFP) for the Privatization 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.”
It is not immediately clear why the BPE seemed hell-bent to award the DISCO to Northwest Power Limited. Kaduna DISCO was one of the last successor companies from the defunct Power Holding Company of Nigeria (PHCN) to be sold.
It is also unclear if the company had paid the 75 per cent balance payment for the DISCO before the August 6 deadline it was given to do so.
A source close to the privatization however told PREMIUM TIMES that as at the close of business on Wednesday, Northwest Power Limited was yet to pay the outstanding 75 per cent balance, despite the shift in the payment deadline.
“It was further confirmed that Northwest Power had no intention of meeting August 6 deadline from the outset because it had written BPE about four weeks ago requesting for additional two months extension to enable them raise the money. The additional extension contravene privatization guidelines,” the source said.
According to the source, the letter requesting for the additional extension was submitted to the National Council on Privatization on August 6.
“This means that the integrity of the entire privatization process has been undermined by this illegality and deliberate inconsistencies. This is nothing but grand deceit on the part of BPE who misled both local and foreign investors into believing that the process is real,” the source added.
An e-mail to the Head of Public Communications at BPE, Chigbo Anichebe, was not responded to. Calls and text messages to his telephone were equally not responded to.
Flouting privatisation rules
Northwest Power Limited emerged top bidder for the Kaduna DISCO in late 2013 having offered the highest Aggregate Technical Commercial and Collection, ATC & C, percentage loss reduction figure of 29.26.
Following a fresh date fixed by BPE for the completion of the Share Sale Agreement, SSA, Leda Consortium Limited, the reserve bidder in the process, had its bid bond and post-qualification security guarantee totaling about $15.815 million withheld beyond the validity period, against the privatisation guideline.
Section 14.3 (137) of the Request for Proposals, RFP for the Privatisation of PHCN Successor Companies, states: “The Second (2nd) ranked bidder will be required to maintain both its bid bond and post-qualification security valid for the duration of the proposal validity period or the extended proposal validity period that the bidder has agreed to in order to maintain its status as the first (1st) reserved bidder.”
“By unlawfully sustaining the status of Northwest Power as the Preferred Bidder of Kaduna Disco until now, BPE has demonstrated a flagrant and reckless breach of the iron-cast and inviolate provisions of the Request for Proposal, RFP.
“By implication, the bid bond and post-qualification security of the reserved bidder shall not be held beyond the extended validity period, which in this case is April 2014,” the source said. “For want of better expression, BPE more or less confiscated the Reserved Bidder’s Bid Bond and Post Qualification Security beyond April 2014, until it was compelled to release it in July 2014, three months later,” the source added.
With the failure of the Preferred Bidder (Northwest Power Limited) to beat the deadline for the 75 per cent balance payment, according to privatization guidelines, the Reserve Bidder – in this case Leda Consortium Limited – will be invited to take over the power asset.
PREMIUM TIMES gathered that Northwest Power Limited, as the Preferred Bidder for the Kaduna DISCO, entered the Share Sale Agreement (SSA) with the BPE on December 23, 2013, making June 23, 2014, the deadline for the conclusion of the transaction.
Section 15 (139) of the RFP for the Privatization of PHCN Successor Companies stipulates, “Within fifteen (15) Business Days after signing of the Share Sale Agreement, or at a mutually agreed earlier time, the Bidder shall make a down payment of twenty five per cent (25%) of the Share purchase price.
“Failure to make this payment will result in the automatic drawdown of the full amount of coverage of the Preferred Bidder’s Bank Guarantee. Upon receipt of the down payment, the Preferred Bidder’s Bank Guarantee will be returned to the Bidder within a maximum of two (2) weeks.”
Furthermore, Section 15 (140) stipulates that, “Within six (6) months after signing of the Share Sale Agreement, or at a mutually agreed upon time, the Bidder will be required to pay the outstanding seventy five per cent (75%) of the Share purchase price to complete the transaction. Failure to complete the transaction within a mutually agreed timeframe will result in the forfeiture of the down payment as per the terms of the Share Sale Agreement.”
But contrary to its much publicised claim of transparency, BPE unilaterally extended the ‘mutually agreed time’ to August 6, 2014, the source told PREMIUM TIMES.