By Abuja (Sundiata Post) – Power sector stakeholder, KANN Utility Company Limited (KANN), a consortium owned between CEC Africa Investment Limited and Xerxes Global Investments Limited that bought the Abuja electricity company, a consortium that bought the 60% of equity of the Abuja Electricity Distribution Company (AEDC), is being allegedly hijacked.
CEC Africa Investment Limited, one of the foreign investors in the nation’s power sector has alleged that its massive investment in Nigeria’s power sector faces a high risk.
It also explained that the emerging risk followed the alleged hijack by a powerful cabal of KANN Utility Company Limited, a consortium where it has majority shares.
It was gathered that KANN even brought the 60 percent of equity of the Abuja Electricity Distribution Company, AEDC.
Further, it was gathered that KANN is a consortium owned between CEC Africa Investment Limited and Xerxes Global Investments Limited that bought the Abuja electricity company.
But an attempt by the CEC Africa Investment Limited to enforce terms of agreement with its Nigerian partner, Xerxes Global Investments Limited, the two companies that own KANN consortium, and safeguard its investment is currently the subject of what stakeholders have described as “unnecessary and embarrassing litigation” at the Federal High Court, Abuja.
The Case reference number FHC/Abuja/CS/684/2018 explains that between 2012 and 2013, KANN’s two shareholders viz CEC Africa Investments Limited, which has over 60 years history of power operations across several southern African countries and Xerxes Global Investments Limited agreed to jointly bid for the purchase of 60% equity stake in AEDC valued at $164 million.
The two companies agreed that CECA and Xerxes would own and hold 50% each of the shares of KANN and that each of the two parties would make equal financial contribution towards the acquisition amount and costs with regard to the purchase of 60% shares of AEDC.
The two companies also agreed to fund 25 percent of the AEDC equity share ($41 million) by cash contributions in their 50%/50% shareholding interest and KANN would borrow the remaining 75% of the acquisition costs of $123 million from a third party lender, the United Bank for Africa (UBA.
However, Xerxes could not raise its equity contribution when the Bureau of Public Enterprises (BPE) demanded for the initial 25% ($41 million) upfront payment; CECA alone raised initial 25% equity payment fully in March 2013.
It was also gathered that Xerxes could not also guarantee the 75% balance of loan repayment at the UBA, thus CECA provided a mandatory Debt Service Reserve Account of $40 million as a security cover for the UBA loan thereby bringing CECA’s total, both to BPE and loan repayment to $81million.
Notably, however, to secure this repayment, XerXes pledged 25% out of its 50% shareholding in KANN to CECA thus making the later (CECA) becoming 75% equity owner of KANN in a written agreement, according to the arguments contained in the the court case.
But now, CECA, in its claim to the court with documentary evidences, is alleging that apart from the fact that Xerxes has failed to honour its agreements with CECA on equity ownership of KANN on 75% and 25% basis, Xerxes is systematically sidelining CECA, plotting takeover of AEDC by trying to change key management positions and leave CECA, the biggest investor in denial.
The parties went for arbitration of the matter at the London Court of International Arbitration (LCIA) and CECA on October 28, 2016 won the case after which CECA took a step further by going to the Federal High Court, Abuja, Nigeria, where the LCIA judgement was adopted as its judgment. Xerxes however appealed the judgement
On account of this case, it has become difficult for KANN to hold statutory meetings of the consortium as every effort to convene general meeting is allegedly being frustrated by Xerxes.
Besides, sources told our correspondent that CECA has been recently harassed by the Department of State Security but the spy agency didn’t find any substance in the issues raised against the company.
Industry players have asking why a co-investor (CECA) is left to bear the responsibility of such a massive transaction but it is not willing to accept terms of agreement it entered into with its partner because the local partners have influence in government.
“We have been following the case. It is rather very unfortunate because with this kind of case, no serious investor wants to bring his or her hard-earned money here to come and invest”, said a chief executive a leading DISCO who pleaded anonymity.
He added that, “this is economic sabotage against what President Buhari told us. We are hoping that the court will give justice to the right company because this is a bad precedence in a critical sector such as power”.