Nigeria’s largest independent power plant (IPP), Azura Edo Power Plant, exposed for suspicious use of offshore funds, is allegedly enjoying preferential treatment from the Nigerian government.
In the Paradise Papers global investigation, the firm was found to be moving millions of tax-free dollars through a network of Mauritius-incorporated offshore shell companies to a number of trusts and private equity firms. Azura has since denied any wrongdoing, saying it violated no law.
A new law suit by older power generating companies in Nigeria, however, accuse the firm of enjoying unfair advantage.
The suit filed by the Power Generation Companies in Nigeria, GENCOs, accuse the Nigerian government of conferring preferential treatment on Azura Power West Africa Limited, owner of the power plant, as well as Accugas Limited, to the detriment of the Nigerian Electricity Supply Industry (NESI) and the power sector as a whole.
Phillip Iheanacho, Nigerian investor and a close ally of Edo State Governor Godwin Obaseki, has stakes in both Azura and Accugas, a subsidiary of Seven Energy.
The suit filed at the Federal High Court, Abuja, has the GENCOs represented by Mainstream Energy Solutions Limited (“Mainstream”), Transcorp Power Limited (“Transcorp Power”), Egbin Power Plc (“Egbin”) and Northsouth Power Company Limited (“Northsouth”) who are all Plaintiffs in the suit.
Sued as defendants in the suit are the Federal Government of Nigeria (1st defendant), Central Bank of Nigeria (2nd defendant), Minister of Power, Works & Housing (3rd defendant), Nigeria Bulk Electricity Trading Plc, NBET, (4th defendant), Azura Power West Africa Limited (5th defendant) and Accugas Limited (6th defendant).
According to the suit, the GENCOs are contending that the Nigerian government and its agencies have treated and intend to continue treating the GENCOs, their investors and suppliers unfairly and in a discriminatory manner.
This, the plaintiffs said, was despite the fact that the GENCOs have been bending backwards to continue generating electricity for the national grid.
They said they had been bearing the huge burden of not being paid for electricity generated and sold to Nigerian Bulk Electricity Trading Plc. (NBET), and facing the risk of going under due to their huge indebtedness to banks and financiers who provided the foreign currency-denominated acquisition loans with which the power plants were acquired from the FG during the privatization exercise in 2012.
HOW GENCOS CAME ABOUT
On November 1, 2013, after the disintegration and privatisation of the state-owned power company, PHCN, its separate pieces consisting of 10 power distribution companies (DISCOS) and four generation companies (GENCOS) were handed over to new owners in a coordinated exercise.
The development, considered the biggest event that changed the course of the power sector in Nigeria, began earlier in 2012. The power utilities acquired by various investors with foreign and local partners were part of the 18 core electricity asset grouped into Discos and Gencos of the Power Holding Company of Nigeria (PHCN).
In 2012, the privatisation efforts in Nigeria were heightened beginning with how the preferred bidders made a 25 per cent advanced payment of about N73 billion ($469.032million) to the Bureau of Public Enterprise (BPE).
Following the success recorded in payment earlier, former President Goodluck Jonathan handed over the 25 per cent share certificates to the preferred bidders for Geregu, Sapele, Ughelli, Shiroro, Kainji Gencos.
The Discos, including Benin, Enugu, Kano, Ibadan, Yola and Abuja, Ikeja, Jos, Eko, Port Harcourt, also received the certificates having paid the 25 per cent.
The preferred bidders received heavy pressure in August that year, following a deadline issued by the BPE handling the privatization exercise to pay up the 75 per cent balance of about $3 billion (N480 billion) before they could take over the plants.
Meanwhile, the handover of the power utilities was officially done by Mr. Jonathan amidst strikes and kicks from the National Union of Electricity Employees (NUEE) over unpaid severance benefits to the workers.
This was, however, tackled with the signing of an agreement in late October 2013, to pay all such benefits and other claims of the workers before the end of November.
THE N701 BILLION INTERVENTION FUND
In its determination to ensure improved electricity supply, the Nigerian Government in July 2017 announced disbursement of N701.9 billion intervention funds to the GENCOs.
The N701 billion was approved for NBET under the Power Purchase Guarantee Funds to enable it pay for power purchased. In other words, the GENCOS would receive the money for power generated whether or not the power was transmitted or distributed by other appropriate firms.
According to the Minister of Works, Power and Housing, Mr. Fashola, the payment was part of various measures being taken to address liquidity crisis in the power sector.
But in their suit filed before the court, the GENCOs claimed that NBET has consistently defaulted in paying them for all electricity generated and put on the national grid, in breach of its contractual obligation, which required that the GENCOs be paid fully not later than 45 days of invoice submission, and in the event of delay in payment, be paid with interest at the agreed rate.
By reason of the failure of NBET to pay the GENCOs, they said they have in turn been forced to default in meeting their obligations to their lenders.
The GENCOs put the amount owed them for electricity generated and supplied by them at approximately N800 billion, adding that together with capacity and interest payments due to them, they are owed in excess of N1 trillion.
The suit alleged that while the GENCOs are getting very close to a point where their plants may not be able to generate power again and be shut down, the federal government entered into certain engagements with Azura and Accugas.
Under the agreement, they said, the firms were given the preferential treatment of having a World Bank Partial Risk Guarantee supported by the Sovereign Guarantee of the FG securing all payments due from NBET to Azura for power generated by the new Independent Power Plant and to Accugas for gas supplied to the Calabar NIPP, a facility government did not provide for GENCOs at the inception of the privatisation exercise when the risk was enormous.
In 2016, Seven Energy International Limited, signed a $112 million World Bank, partial risk guarantee (PRG) with the Federal Government for the supply of natural gas, to be delivered by its wholly owned subsidiary, Accugas.
The PRG is a financial instrument that would secure the supply of up to 130 million cubic feet per day (“MMcfpd”) of natural gas to the NIPP, thereby enabling the consistent generation of an additional 560 MW of electricity to the national grid, approximately 10 per cent of current power generation in Nigeria.
The arrangement, which guarantees payments to Accugas for gas supply, was backed by the Federal Government of Nigeria and the World Bank and reputed as the first of its kind for gas supply in Nigeria.
Commenting on the agreement, Vice President Yemi Osinbajo described the initiative as a very “significant” event that will encourage investment in gas infrastructure and result in positive multipliers.
Mr. Iheanacho, then Chief Executive Officer of Seven Energy, said the initiative was the first gas-to-power guarantee that the World Bank has provided for encouraging investment in the gas sector in Nigeria.
In December 2017, Azura first turbine was synchronized to the national grid and began producing electricity for distribution across the country. The development signalled a positive omen for the country’s first large-scale, project-financed, independent power plant.
The Edo State government reacting to the development said the Azura Edo Independent Power Project (IPP), which begun generation of electricity seven months ahead of schedule, attracted investors to the state.
Special Adviser to Governor Godwin Obaseki on Media and Communication Strategy, Crusoe Osage, in statement, said that the influx of investors and the “outstanding success” recorded by Azura-Edo Power, is a testament to the numerous reforms undertaken by the government.
Similarly, while inspecting the Azura project earlier this year, Mr. Fashola described the plant as a proof of the federal government’s commitment to improving power generation and experience for the purpose of diversifying the nation’s economy.
The minister also described the project as a statement about the commitment of the administration “to do everything it can to enable the Private Sector to deliver on its own specialty which is to make investments such as this.”
Earlier in November 2017, an investigation by PREMIUM TIMES and the International Consortium of Investigative journalist (ICIJ) revealed that Acura Edo Power plant might be a huge suction pipe set up to siphon millions of tax-free dollars through a network of Mauritius-incorporated offshore shell companies to a number of trusts and private equity firms.
The Paradise Papers global investigation revealed that Azura Power West Africa, owner of the plant, has two undated organisational charts. One of the charts, which appeared to be the original structure of the company, shows that Azura Power West Africa was wholly owned by Azura-Edo Limited, a Category 1 Global Business Company (GBC1) incorporated in Mauritius.
Azura-Edo Limited is further completely owned by Azura Power Holding Limited, a Category 2 Global Business Company (GBC2) also incorporated in Mauritius.
Azura Power Holding is then jointly owned by two GBC2 companies – Amaya Capital Limited (86.23 percent) and Hollyhock Limited (13.77 percent). Hollyhock Limited is the GBC2 subsidiary of the private equity firm, American Capital Limited.
Amaya Capital is jointly owned by The Principal Investment Trust (40 per cent) belonging again to Mr. Iheanacho, the co-founder of Investment firm, Afrinvest, and an ally of the governor of Edo State, Mr. Obaseki, with whom he co-founded Afrinvest.
The Rasa Trust, on the other hand, owns 40 per cent of Amaya Capital. The trust belongs to Sundeep Bahanda, a former top executive at Deutsche Bank, London, while David Ladipo, the founder of Lintstock, a corporate advisory company and a former adviser to the Nigerian government on energy, owns 20 percent of Amaya Capital.
The second ownership chart, showed that the Edo State government was also brought on board as marginal co-owner of the company with 2.5 percent stake.
The company explains on its website that the 2.5 percent equity was given to Edo State for providing 1100 hectares of land on which the company is built.
It is unclear whether the ownership structure of the company had any influence in the preferential treatment it allegedly receives from the Nigerian government.
When contacted, Edu Okeke, Deputy Managing Director at Azura Power West Africa Limited, said the company had little time to react to such allegations as it is committed to completing its power project.
“Building a large-scale electricity power plant is a challenging undertaking and we are currently in the final stages of the plant’s commissioning,” he said.
“All our energies are currently focused on this activity. Accordingly, it would be a poor use of our time to comment on the merits, or demerits, of any alleged claims made by other generating companies against the Federal Government or agencies thereof.”
Mr. Okeke also argued that a number of media outlets have published articles mentioning the Azura-Edo IPP, saying the facts and dates cited therein are occasionally incorrect or misleading. He, however, did not comment further on the allegations.
WHAT THE GENCOS WANT
Meanwhile, in the suit filed by the GENCOS, they want the court to stop any payment to Azura And Accugas that would be more than what the GENCOS themselves are paid.
The generating companies are asking for an interim Injunction and the hearing has been fixed for April 16 by Justice Binta Nyako of Federal High Court, Abuja.
When contacted, Hakeem Bello, spokesperson to Mr. Fashola, said what is expected is that the government and the minister will be served and will respond when the time comes.
Mr. Bello explained that there have been consultations with the GENCOs on different platforms, aside that they attend the monthly power sector stakeholders meeting. He hinted that a power sector stakeholders’ meeting has been scheduled to hold in Uyo on Monday and they (GENCOs) will be there. He, however, said that if there are additional updates, he will get back to our correspondent.
“If they sue the minister and the government, I think they will respond as appropriate,” he told PREMIUM TIMES in a telephone interview.