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).
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.
“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.”