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FG Backs Fidelity Bank’s Takeover Of Benin, Kano, Kaduna Discos Over Insolvency

First Bank Nigeria

The federal government has announced the takeover of three non-performing electricity distribution companies, namely Kano Disco, Kaduna Disco and the Benin Electricity Distribution Companies (BEDC) by Fidelity Bank over the power investors’ poor financial performance.

The Nigerian Electricity Regulatory Commission (NERC) and Bureau of Public Enterprises (BPE) effected the takeover based on the statutory responsibilities given to them by the government.

The NERC and BPE in a statement issued yesterday, equally announced the sacking of the managing directors of two of the three Discos and also announced their replacements with immediate effect.

The three firms were considered to be technically incapacitated, and financially insolvent after their inability to meet their loan obligations with Fidelity Bank Plc.

The two agencies named Ahmad Dangana as the new Managing Director of Kano Disco; and Henry Ajagbawa for Benin Disco.

They replaced Funke Osibodu formerly of Benin Disco, and Dr. Jamil I. Gwamna, Kano Disco.

However, the Managing Director of Kaduna Disco, Yusuf Yahaya was not affected by the development as he was re-appointed under this new takeover regime.

According to the statement jointly signed by the duo of the NERC Chairman, Mr. Sanusi Garba, and Director General of BPE, Mr. Alex Okoh, the action became necessary as Fidelity Bank had informed the government that it had activated the call on the collaterised shares of the three companies and, “that they have initiated action to take over the boards of these Discos and exercise their rights on the shares.”

This latest takeover brings the number of Discos taken over by the government to six, as Yola, Ibadan, and Abuja Discos had earlier lost their initial management to the government.

Also, in a statement, the Minister of Power, Abubakar Aliyu, through his Media Adviser, Isa Sanusi, disclosed that he had been briefed by NERC and the BPE on the matter.

The minister confirmed that the Discos were unable to repay loans taken from Fidelity Bank to acquire their asset during the 2013 privatisation, and the bank had activated its right to take over the firms.

“The changes announced were as a result of the receivership of the core investors in Kano, Benin, Kaduna and Ibadan Discos whereas the actions in Port Harcourt are sought to provide much needed liquidity and prevent the insolvency and risk of collapse of the utility.

“In implementing the changes, the ministry shall ensure that the changes in corporate governance do not impact on the service and stability of the Discos,” it stated.

It reaffirmed that while the government continues to hold a 40 per cent equity stake in all the Discos, the utilities are still private sector-led and going concerns, falling under the provisions of the Companies And Allied Matters Act (CAMA) and subject to regulation by NERC.

“The ministry has received a confirmation from the BPE and the Central Bank of Nigeria (CBN) that in exercising the rights of lenders to the core investors, the financial institutions do not retain the ownership of the shares and management of the Discos in perpetuity.

“It is therefore expected that clear timelines for exit of the banks would be prescribed by the regulators as and when appropriate,” it noted.

The government reassured electricity consumers in Nigeria that the recent changes in the governance of the Discos would not adversely impact on the ongoing reform initiatives including the National Mass Metering Programme (NMMP)

The majority equity in the firms are expected to be sold to qualified private sector investors who will re-capitalise and effectively operate the entities.

Meanwhile, electricity consumers in the country have commended the government for taking over the three Discos for technical incapacitation, and financial insolvency.

The President, Nigeria Consumer Protection Network, Kunle Olubiyo, in a statement, said the three Discos failed in their review of key performance indices.

He said, “Ordinarily, the licensees had a ten years tenor. The mid-term review ought to have taken place five years into the post privatisation exercise. This was not done across board.

“The Open Book Review, Service Level Agreement, Mass Metering, Investment in Network Improvement and overhaul, Aggregate Technical, Commercial and Collection (ATC &C) losses, governance structure.

“The so-called failed in all benchmarked global best practices and key performance indicators. As against investment in immediate, medium and long term, what we had is rent-seeking, profiteering and lack fiscal responsibility and much needed discipline.

“No sector can survive if and where there are no sanctions for impunity and no consequences for infractions. In the prevailing circumstances, we are on the same page with relevant stakeholders in the present efforts to clean up the mess and free the economy held by its jugular by the non-performing utilities.”

Meanwhile, the former management of BEDC has reacted to the action of the regulators, saying there was no legal basis for the takeover of the company following the purported activation of the call on its collateralised shares by Fidelity Bank.

The company said in a statement released in Benin yesterday, added: “The referenced report also alleges that certain parties have been appointed as Board Members, Independent Directors and Managing Director of BEDC Electricity Plc.

“We understand these appointments have been communicated to the BPE and the NERC.”

However, the management of BEDC stated unequivocally that, “There is no contractual, statutory or regulatory basis for such.”

The statement added that, “For the avoidance of doubt, the shares of BEDC have not been given as security to Fidelity Bank or to any other party.

“As we understand it, Vigeo Holdings Limited (VHL – a non-shareholder of BEDC) obtained credit facilities from Stanbic IBTC Bank Limited, Fidelity Bank Plc, and Keystone Bank Plc (the VHL Lenders).

“We further understand that the said credit facilities (and any enforcement action in relation thereto) have in the meantime become subject of litigation in a Court action instituted by VHL and other plaintiffs (the VHL Action) with Suit No: FHC/L/CS/239/22 – Vigeo Holdings Limited and 4 Ors v. Stanbic IBTC Bank Limited, and therefore, subjudiced.”

The management of BEDC Electricity Plc warned that, “Any attempt by Fidelity Bank and/or BPE to intervene in BEDC in the manner being reported will be illegal, unlawful and will be resisted.”

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