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After dissolving AEDC board, FG claims DisCo unable to meet $122m obligation

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THE Federal Government, on Wednesday, explained why it constituted an interim team to manage  the affairs of the Abuja Electricity Distribution Company (AEDC).

This explanation came 24 hours after the government had dissolved the board of the DisCo in which it is only a minority shareholder.

The government expressed concerns over  the inability of the company’s investors to meet a $122 million obligation to its lenders.

The media had, on Tuesday, reported the sack of the management of the AEDC, a report that generated discussions on whether the government with  40 per cent minority stake could exercise such powers.

However, in a clarification statement, the Nigerian Electricity Regulatory Commission (NERC) and Bureau of Public Enterprises (BPE) explained that the action  to appoint   an interim  team  to manage the AEDC was not done  on the directive of the Federal Government.

The statement explained that action from the government side was based on legal  processes  arising from the failure  of the core investor  in the company to meet its obligations  to a lender.

The NERC and the BPE, in a joint statement on Wednesday, signed by Sanusi Garba and Alex Okoh, heads of the respective agencies, stated that there had been an ongoing dispute amongst competing factions of AEDC’s majority shareholder/core investor (i.e. KANN Utility Company Limited).

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The joint statement explained that the dispute eventually spilled over with the lender that provided the acquisition loan to KANN  during the  privatisation exercise  in 2013 – over KANN’s inability to service its debt to the bank.

On the back of this concern, the United Bank for Africa (UBA) acted as Mandated Lead Arranger, underwriting the entire facility of $122million, about N20 billion then for Kann Utilities’ acquisition of the AEDC.

“During the course of the intractable crisis, AEDC not only struggled to meet its obligations to the market under the terms and conditions of its licence but was also unable to meet its obligations to key stakeholders in the organisation, including staff culminating in the industrial action by members of the Nigerian Union of Electricity Employees (NUEE).

“Eventually, this resulted in a total service disruption on 6th December 2021 for over 14 hours in AEDC’s network area.  The provision of electricity supply in AEDC’s  network area was only restored after the intervention of the Minister of Power, NERC and BPE following an agreement with the union on the terms for the suspension of the industrial action on 6th December 2021.

“The general public should note that arising from KANN’s inability to service its acquisition loan and the ensuing dispute over the servicing of the loan from UBA Plc, the lender exercised its rights by appointing a Receiver/Manager over KANN. Stakeholders including NERC,Central Bank of Nigeria (CBN)  and BPE had on several times worked to broker an amicable resolution between the contending parties.

“The protracted resolution of the dispute exacerbated the state of affairs at AEDC  resulting  in an industrial  action  and a total blackout  in the service  area for over 14 hours.

According to the statement, it then  became  apparent  that decisive  steps were  required  to address  the matter. The  BPE agreed with the lender’s  request to exercise its powers as receiver/manager    over  KANN  by exercising  its powers  over  the  60 per cent  equity  in AEDC as a means  to recovering  the acquisition  loan granted  by the bank, it noted.

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“The  action   to appoint   an interim  team  to manage  AEDC  was  not done  on the basis of a directive   from the Federal  Government  as being falsely   reported  in the press but on the basis of legal  processes  arising  from the failure   of the core investor  in  AEDC to meet its obligations   to a lender.

“The   Receiver/Manager    has  agreed   to  the   appointment    of  an  interim management   team  in conjunction   with  BPE  as  part  of  measures   designed   to address   business   failure   events   and  ensure  continuity   of  service  to  end-use customers.”

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