- As FG rejects N105bn debt conversion deal
- BPE demands 25% payment tomorrow
There are indications that Transcorp Power Consortium, one of the leading power generating companies in Nigeria may lose its bid to acquire majority stake in the newest and biggest power generating plants recently built by the federal government.
The company has been given up to tomorrow, Thursday, November 26, to pay 25% of the N105.3 billion winning price it offered to acquire the Afam power plants, failing which the reserve bidder in the transaction will be invited to make the same payment and take over the company.
Transorp Power, led by renowned business mogul, Tony Elumelu, won the bid to acquire Afam Power Plc and Afam 3 Fast Power Limited at N105.3bn being the winning bid price.
Speaking at the signing of the Share Sale and Purchase Agreement (SSPA) between the federal government and Transcorp on November 5, 2020, Vice President Yemi Osinbajo said the Afam Power Plc and Afam Three Fast Power Limited plants have a combined capacity of almost 1,000 megawatts (MW) but that the operational capacity is 240MW (Afam III) and 100MW (Afam Plc).
In line with the National Council on Privatisation (NCP) guidelines for the bidding processes, Transcorp Power ought to have effected payment of 25% of the offer price within 14 days of the signing of the SSPA.
However, Transcorp had in a letter to the Director-General of the Bureau of Public Enterprises (BPE), who is the Secretary to the NCP, requested for the conversion of N111 billion electricity market debt being owed it by the federal government into its equity for the acquisition of Afam Power Plc and Afam 3 Fast Power Limited.
Many analysts believe that accepting such a debt-to-equity conversion proposal by Transcorp will run counter to the provisions of the Public Enterprises (Privatisation and Commercialisation) Act of 1988. And the federal government has rejected such proposition, as confirmed to Daily Trust yesterday by the BPE.
Responding to Daily Trust inquiries, BPE said the proposal was rejected and that Transcorp has until tomorrow to pay the 25 per cent of the price for the plants’ acquisition, while a later date will be determined for Transcorp to pay the 75% balance.
But just as we were about to go to press last night, Transcorp issued a statement sounding optimistic about its capacity to effect payment of the initial deposit of the 25% winning price and the subsequent 75% balance.
How Afam privatisation began
The procurement process for the sale of the federal government’s ownership of the Afam power plants began by the BPE in 2018 with invitation for Expression of Interests (EoIs) from any core investor – that is a firm that has already invested in the power sector.
By March 15, 2019, 19 firms had expressed interest to acquire Afam GenCo and Afam 3 Fast Power Limited.
BPE evaluated the EoIs and pre-qualified 11 of the applying companies for the next stage, which is the submission of Technical/Financial Proposals.
It was learnt that five firms emerged from the 11 who were technically qualified. The list was later cut to three firms in the final process. They are Diamond Stripes Consortium; Transcorp Power Consortium and Unicorn Consortium, who were tops in their technical presentations.
By October 2019, the NCP chaired by the Vice President gave approval for the BPE to proceed with the financial bid opening from the three firms.
At this stage, BPE declared Transcorp Power Consortium as the preferred bidder for the acquisition of Afam GenCo and Afam 3 Fast Power Limited with a bid price of N105.3 billion.
Diamond Stripes Consortium, which was first in the technical stage, was declared the Reserved Bidder with a price of N102.3bn.
According to the provisions of the Request for Proposals (RFPs) issued by the BPE, the preferred bidder, which is Transcorp Power Consortium, ought to sign the SSPA before November 5, 2020, about one year after the financial bid was opened.
However, it was gathered that although Transcorp had bidded N105.3 billion for the two plants but wants its accrued debt in the electricity market to be converted by the federal government through the Nigerian Bulk Electricity Trading Plc (NBET) to pay for the acquisition of the plants.
It was also gathered that the Reserved Bidder, Diamond Consortium had called on BPE to allow them to pay for the plants since the preferred bidder was apparently failing to pay.
Daily Trust recalled that this was the case in 2013, between the preferred bidder of Enugu DisCo – Chief Emeka Offor’s InterState Electric and Eastern Electric, the reserved bidder.
While Interstate failed to meet the August 2013 payment deadline, BPE appeared reluctant to declare Eastern Electric the winner of the bid afterward against the extant provision of the RFB, an issue that attracted a lawsuit.
Why Transcorp opted for debt conversion
According to a letter addressed to Mr. Alex Okoh, the Director-General of the BPE, Transcorp Power initiated the Debt-to-Equity Conversion process.
In the letter dated July 16, 2020, Transcorp wrote: “As part of the resolution of the highlighted issues, we are proposing the conversion of the current debt owed Transcorp Power Limited by Nigeria Bulk Electricity Trader (NBET), which stood at N111 billion (N83bn principal and N28bn interest) as at June 30, 2020 into equity, by applying and treating same as full payment of the combined acquisition price of the state companies.”
However, this process of ‘Debt to Equity’ conversion completely negates the guidelines of the Request for Proposal (RFP) issued by the BPE to the firms during the transaction process.
With the seeming indication that Transcorp may not meet its payment obligation, BPE was expected to disqualify Transcorp, and then called on the Reserved Bidder, Diamond Stripes Consortium for payment, to close the transaction.
According to documents sighted by one of our reporters, BPE had in February 2020 committed to raising N266.8 billion in privatisation proceeds to fund the N10.5 trillion 2020 budget from 20 transactions. But the offer brought by Transcorp suggests that BPE will be running short of N105 billion in its contribution to funding the budget.
When contacted, the Managing Director, Transcorp Power Consortium, Mr Christopher Ezeafulukwe did not respond to a text message enquiring on this; neither did he respond to calls put through to him.
The Head, External and Media Relations at UBA, Ramon Nasir who had spoken for the Transcorp group after he was contacted by Daily Trust, said an opinion on this issue was first published (in Daily Trust) “on November 21st without any recourse to the views of Transcorp. However, after publication, you now want to ask for their position?”
He did not respond to the issues especially on why Transcorp Power opted for the Debt-to-Equity conversion deal, and if Transcorp will meet up with the 25% payment dateline of tomorrow.
Transcorp has tomorrow to pay 25% of bid price – BPE
In the BPE’s response to our inquiries, the agency said the deadline for payment of 25 per cent of the bid price for the plants by Transcorp is Thursday, November 26, 2020.
The Head of Public Communications, BPE, Amina Tukur Uthman, said: “As at the time of this response, Transcorp Consortium is yet to pay the N105 billion equity for the two plants.”
BPE however said based on the terms of the Share Sale and Purchase Agreement (SSPA) executed between BPE and Transcorp on November 5, 2020, Transcorp is required to pay 25% of the combined acquisition price (N105bn) for the two plants on or before business days after the signing of the SSPA.
“Please note that the last day of the 15 business days is Thursday, November 26, 2020. In addition, Transcorp will be required to pay the balance of 75% as approved by the NCP”.
Clarifying FG’s stance on the debt-to-equity proposal from Transcorp, the BPE spokesperson confirmed that Transcorp Consortium had asked that the Bureau addressed several industry and economic issues, which had manifested glaringly during the lockdown in its favour. Transcorp listed such issues to include the difficulty to raise acquisition finance, and thus resulting in its request that the amount being owed Transcorp Ughelli by NBET be used to offset the payment for the two plants.
“This request was rejected by the National Council on Privatisation and Transcorp was asked to proceed with the transaction as approved by Council”, BPE said.
On why BPE did not disqualify Transcorp after failing to pay for the power plants over a year after winning the bid, BPE said there was no breakdown in the negotiation process.
It further said Transcorp won the bid on October 14, 2019; but NCP gave nod for BPE to negotiate the SSPA and Performance Agreement, which were concluded in March, 2020.
“The parties involved in the negotiation (BPE and Transcorp Consortium) had fixed April 6, 2020 for the signing ceremony of the SSPA.” However, due to the COVID-19 lockdown, the signing ceremony was suspended.
In a statement from Transcorp, the President/CEO, Transcorp Plc, Owen Omogiafo, said, “Transcorp Consortium acquired Afam Fast Power and Afam Plc, collectively known as “Afam GenCo” at an acquisition cost of N105bn.
“According to the terms of the SSPA, we are required to pay 25% of the acquisition cost on or before 15 business days post the signing of the SSPA, with the balance, 75% paid in line with the approval granted by the NCP,” the group further said.
Transcorp Group had acquired the Ughelli Generation Company (GenCo) in 2013 during the holistic privatisation of the power sector when 11 Distribution Companies (DisCos) and six GenCos were privatised.
