… Debts Hit Over N110 Billion
The Nigerian Electricity Regulatory Commission (NERC) is set to put up for sale the Kaduna Electricity Distribution Company (KAEDC) Plc soon for non-performance and prolonged severe liquidity challenges leading to doubts of its commercial viability and continuation as a market participant.
Already, NERC has intervened with dissolution of the Board of Directors in the exercise of powers vested in the Commission by section 75 of the Electricity Act (AE) to protect it from eminent risk of receivership by lenders.
This is even as at 1 October 2023, KAEDC owes Nigeria Bulk Electricity Trader (NBET) and Market Operator (MO) over N110 billion.
These were disclosed in NERC ORDER NO: NERC/2024/001 made available to Journalists on Monday. It was jointly signed by NERC Chairman, Sanusi Garba and the Vice Chairman, Musiliu O. Oseni. The Order took effect on January 1, 2024.
According to the Order, Dr. Umar Abubakar Hashidu has been appointed as the administrator of KAEDC further to section 75 of the EA.
“The administrator shall be the de facto chief executive officer of KAEDC and shall be responsible for the management of the day- to-day affairs of the utility pending the finalisation of the sale of the undertaking to a new core investor.
“The administrator shall work with team of special directors that shall constitute non- executive directors of the board for governance purposes.”
The members of the special directors appointed for KAEDC include: Alex A. Okoh Chairman, Kabir Adamu, Sharfuddeen Zubair Mahmoud, John Ayodele, Ratila Thomas.
Further, “The executive management team that shall work with the Administrator shall be constituted by the Commission and announced in due course.
“The Commission shall administer the sale of the undertaking in accordance with the provisions of the EA on the basis of the highest and best price offered for the undertaking”, according to the Order.
Prior to the Order dated 1st January, 2024, the Commission noted as follows that: KAEDC has consistently failed to meet its obligations to the market in contravention of the EA and the terms and conditions of its electricity distribution licence issued by the Commission.
The management, board and shareholders of KAEDC have been granted ample opportunities to address the utility’s failing performance at meetings with the Commission; and they have been unable to cure the utility’s failure.
KAEDC was issued the statutory 60-day notice to show cause on 15 May 2023 and the management, board and shareholders were unable to show cause in writing within the specified timeframe as to why the utility’s distribution licence should not be cancelled.
The Commission granted a 30-day extension, with effect from 20 July 2023, to the management, board and shareholders of KAEDC to provide justifiable cause in writing and they have been unable to do so.
The extent of non-performance was further reiterated by a letter dated 31 July 2023 from KAEDC’s Chief Finance Officer, where he confirmed unequivocally that the utility was not in a position to comply with the basic market requirement of providing a bank guarantee in favour of NBET in compliance with the Market Rules and subsisting orders.
The Commission met with Afrexim’s leadership following the expiration of the final 30-day extension and they confirmed that their transaction advisor would need 4-6 months to finalise the divestment process and that they could not provide the bank guarantees required to secure KAEDC’s market obligation.
As at 1 October 2023, KAEDC owes NBET and MO over NGN110billion and stands in the risk of direct receivership if the utility’s continued participation in the electricity market as presently constituted at management, board and shareholder level is allowed to continue without urgent regulatory intervention.
KAEDC has fulfilled the requirements for the invocation of the Commission’s powers in failing licensees with the satisfaction of sections 75(3)(a)(b) and (d) of the EA which provides as follows:
The Commission shall invoke its powers to intervene in failing licensees if it determines after an inquiry made under subsection (1) that the licensee: Informs the Commission that it is unable to discharge its obligations under this Act and its licence; Is in prolonged default in carrying out anything required of it under this Act, regulations or directives of the Commission and its licence; has insufficient assets to cover its liabilities to lenders and it is in eminent risk of receivership from lenders.
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