…DisCo’s operations not affected – KANN
By Etuka Sunday
KANN Utility Company Limited which bought Abuja Electricity Distribution Company (AEDC) for about $164 million (nearly N1billion) in the 2013 power sector privatization exercise may be enmeshed in investment issues.
AEDC is one of the eight DisCos whose licence is being mulled for revocation by the Nigerian Electricity Regulatory Commission (NERC), for not meeting the minimum requirement for bulk energy payment to the Nigerian Bulk Electricity Trading Plc (NBET) in July 2019.
NERC in a recent published notice insisted that the affected DisCos including AEDC must defend their operations of the electricity distribution business latest December 7, 2019 or have their licences cancelled.
The spokesman of NERC, Dr Usman Abba-Arabi confirmed the notice saying all the documents and defences to be submitted by the DisCos will be verified by the Central Bank of Nigeria (CBN) and the Federal Inland Revenue Services (FIRS).
Enquiries from sources privy to the operation of KANN and AEDC said, the parent investor firm may not have held the shareholders meeting since 2017.
Issues bothering on investors’ relations may be responsible for that. However, the board meetings for AEDC of which the shareholders/investors are part of, have continually held.
The development is coming six years after KANN won the bid and took over AEDC on November 1, 2013.
KANN is an abbreviation for Kogi, Abuja, Nasarawa and Niger States (KANN) which are the franchise areas served by Abuja Distribution Company (DisCo).
AEDC was among the 11 DisCos which the federal government sold off 60 percent of its stakes in them and retained 40 percent.
KANN during the privatisation process was a joint venture comprising CEC Africa Investments Limited (CECA) and a local firm registered as Xerxes Global Investments Limited (Xerxes).
KANN acquired Abuja DisCo for about $164 million. While CECA has the Chairman as Mr Siyanga Malumo, Xerxes has Ambassador Shehu Malami as its Chairman.
Both firms had agreed to fund the purchase of the 60 percent stake in the DisCo, with an initial 25 percent payment to the Bureau of Public Enterprises (BPE) and another 75 percent payable in August 21, 2013, about three months before the assets were finally handed over to the private hands.
However, records show the present row between the investors may be due to several issues including equity contributions, hiring of management staff, among other issues.
KANN through CECA raised the 25 percent initial equity payment that was about $41 million. It also solely provided a Debt Service Reserve Account of $40m as guarantee for the 75 percent balance taken as loan from the United Bank for Africa (UBA), in agreement with Xerxes.
It was also learnt that CECA paid for the licence and every other thing during the privatisation process in 2013.
The Parent Company Performance Agreement, a part of the privatisation document seen by this paper, was solely signed by CECA and submitted to BPE to close the transaction to acquire the DisCo.
If the shareholders’ issues are not resolved, decisions of operating AEDC may be affected especially at a time when NERC is wielding its stick on DisCos.
When contacted on phone, the Secretary and contact person for KANN Utility Limited, Mr Solomon Danladi said, he was not authorized to speak on the matter but confirmed that there has been a shareholders’ issue which has not affected the operations of AEDC.
“The only problem I have is that I’m not authorized to speak on this issue. But I can say that the issue does not affect AEDC operations. Remember, AEDC has increased its revenue generation from N1.2billion as at take over to about N5billion to N6billion monthly. So you wouldn’t say the company has not really improved,” he said.
According to him, AEDC board meeting always held and that the last AEDC board meeting held on October 2nd, 2019 and that the next meeting would be held on the November 14th, 2019.
“The board is sitting on 14th November, the Committees are beginning from tommorow (Today), but not KANN. KANN will meet after the AEDC Board and the issues would be looked at,” he said.
On the current notice by NERC to the DisCo to give reasons why its licence should not be cancelled, the official noted that eight DisCos were involved and not just AEDC in isolation. He said the DisCo has made a response to NERC on that basis.
“The reality is that they launched the new order (New Tariff) on the middle of the year, June, July I think, then it was backdated to January and payments were expected to meet up with 100% of the bill that was given. Something just came out so you needed to strategize.
“On the government and regulator side as far as they are concerned there was a shortfall, but on our side, the bill is not even up to half of the debt owing by the Ministries Departments and Agencies (MDAs), so they are issues around that, that should be technically discussed,” he said.