On Sunday, an unnamed ‘top presidency official’ told journalists in Abuja that the government of former president, Goodluck Jonathan, signed the power agreement with Azura to generate 450MW of electricity in Nigeria.
The unnamed official, who did not want to be identified, said this was because the Power Purchase Agreement (PPA) became ‘operational’ in April 2013 before the Muhammadu Buhari government came to power.
The Azura power deal has become a subject of controversy in recent weeks.
Details showed that the nation will have to pay Azura $1.2 billion if it decides to exit the Pull Call Option Agreement (PCOA).
Already, Nigeria is obligated to pay between $30 million and $33 million monthly to Azura for power generated, even if not “dispatched” – transmitted through the national grid by the Transmission Company of Nigeria (TCN).
Nigeria also reportedly pays roughly N700 million monthly as the exchange rate differential in the deal with Azura.
The Senate, in its intervention, considered the signing of the agreement dangerous for the fiscal survival of Nigeria.
The government’s attempt to attribute the deal agreement to Mr Jonathan, therefore, comes against the background of these developments.
According to newspaper reports, the presidency official said that “records show that the Power Purchase Agreement for the transaction in question was signed on April 22, 2013, during the tenure of Mr Jonathan.”
He added that ‘top federal government officials’ would be communicating with the Senate to clarify this misconception.
“It is fairly standard, especially where, as in this case, the plant is a huge one requiring enormous set-up cost and the country is in dire need of the power. Nobody would build a power plant, which is a very costly and capital-intensive venture, and no lender would put money in one, unless someone had committed to pay for the power,” he claimed.
The claims were made in reaction to the call by the Senate, asking the federal government to pull out of its PPA with Azura power plant and allow the company to pull $1.2 billion from the foreign reserves.
The Senate committee on power, in its report presented by its chairman, Gabriel Suswam, had last week described the agreement as a drain on the country’s treasury and called for its immediate termination.
Many phases, Jonathan’s involvement
The Azura power deal had many phases, the preliminary parts of which the government of Mr Jonathan initiated and signed.
First, on April 22, 2013, the Nigerian Bulk Electricity Trading Plc under Mr Jonathan signed the PPA with Azura Power West Africa Ltd, at the Presidential Villa, Abuja.
This was also confirmed by the “presidential source” in the claims made on Sunday.
BusinessDay in its reports at the time said the company is investing about $700 million to develop a total of 1000 megawatts power plant facility and create direct jobs for 1,000 Nigerians during the first phase expected to take off in 2016.
In October 2014, the Jonathan government also signed the Put Call Option Agreement (PCOA), executed in December of that year.
However, documents obtained by PREMIUM TIMES showed that the entire power agreement could not be completed under the Jonathan presidency because the then Attorney General, Mohammed Adoke, objected to the content of the PCOA.
In letters written to Mr Jonathan and Ngozi Okonjo-Iweala, the then minister of finance, obtained by PREMIUM TIMES earlier on Monday, Mr Adoke declined to give legal assent to the PCOA deal.
He argued that it was injurious to the interest of Nigeria and that a sovereign guarantee would put the nation’s foreign assets at grave risk.
In the first letter dated 24th July, 2014, addressed to Mrs Okonjo-Iweala, Mr Adoke rejected some of the clauses included in the PCOA agreement, including “certain events that ordinarily ought not to be under force majeure or this type of force majeure” that were included in the PCOA.
He also raised concerns about a number of “provisions which have to be reviewed because of the financial obligation that government may have to bear if the agreement is enforced.”
On the December 23, 2014, Mr Adoke again wrote to Mr Jonathan explaining why he chose to decline to write a legal opinion on the PCOA deal. In the letter, Mr Adoke said he was responding to another letter dated December 1, 2014 directed at him by Mrs Okonjo-Iweala, requesting his legal opinion on the PCOA.
He, however, told Mr Jonathan that he was unable to reply Mrs Okonjo-Iweala because the PCOA was executed without due regards to his legal opinion of July, among other reasons.
Mr Adoke said that, for one, no significant change was made to his recommendation on a number of clauses, adding that in the PCOA, radioactive contamination was not treated as a local political force majeure event, but still attracted Buyer Default Purchase Price.
Also, Mr Adoke said his counsel that clause 13.1.2 of the PCOA should be deleted was ignored.
The clause, he explained, provides that the Nigerian government irrevocably waives its immunity over its assets or revenue from suits, execution, attachment or other legal processes.
“In view of the foregoing, I wish to respectively inform Your Excellency that I am unable to write the legal opinion to the effect that the Acura PCOA conforms to the extant laws and policies of government,” Mr Adoke told Mr Jonathan. “This is because of the liability issues that may attend the execution and implementation of the PCOA if necessary precautions are not taken to safeguard the interests of government.”
He finally advised Mr Jonathan to direct Mrs Okonjo-Iweala to effect the recommendations to make the PCOA compliant with “extant laws, policies and circulars of government.”
However, PREMIUM TIMES investigations revealed that the power deal remained at this stage until the expiration of Mr Jonathan’s tenure, despite pressure from officials of the government to have the final phase of the deal completed.
For the World Bank Partial Risk Guarantee to be activated, Nigeria needed to execute some key guarantee instruments.
A guarantee instrument is a type of financial backstop offered by a lending institution, which means that the lender will ensure that the liabilities of a debtor will be met. The guarantee enables the customer, or debtor, to acquire goods, buy equipment or draw down a loan.
In the case of the Azura power deal, the guarantee instruments included, among others, the indemnity agreement and the PCOA.
The activation of these instruments are essential for a drawdown on the letter of credit (LC), should the Nigerian government default on the agreements.
These instruments were not signed until Mr Jonathan left office in May 2015, effectively rendering the agreement inconclusive and inactive.
Buhari activates agreement
On May 29, 2015, Mr Buhari was sworn in as president after he defeated Mr Jonathan in a fiercely contested presidential election.
PREMIUM TIMES understands that shortly after the new government came to power, there were pressures on the Nigerian government to assent to the guarantee instruments.
However, Mr Buhari did not appoint ministers into the various ministries until November 2015 and no adjustment was made to the PCOA as recommended by the immediate past attorney general.
On August 21, 2015, three months after Mr Buhari assumed power, the Nigerian government finally completed the signing of the World Bank Partial Risk Guarantees (PRGs) in support of the 450 megawatts Azura-Edo Independent Power Plant (IPP).
The Guardian reported that “parties to the agreement included the Federal Government represented by the Ministry of Finance and Nigerian Bulk Electricity Trading Plc (NBET); the World Bank in its role as the provider of the guarantees; the project sponsors represented by Azura Power West Africa Ltd (Azura); and various lenders represented by JP Morgan, Standard Chartered Bank, Rand Merchant Bank, Standard Bank; and Siemens Bank.”
Similarly, a copy of the indemnity agreement dated August 21, 2015, obtained by PREMIUM TIMES, showed that signatories to the agreement included Anastasia Mabi Daniel-Nwaobia, Permanent Secretary of Federal Ministry of Finance and Indira Konjhodzic, IBRD’s acting Country Director for Nigeria.
Based on these findings, the claim by the presidency that the Azura power deal was signed by the Jonathan government, and not Buhari’s, is FALSE.
The senate committee, headed by Mr Suswam, confirmed this in its presentation last week.
The activation of the guarantee instrument at the final phase of the power deal was signed on August 21, 2015, three months after the Buhari government was inaugurated on May 29, 2015.
In effect, the Buhari government signed the Azura power deal.
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