Preferred bidders for Enugu, Shiroro power assets to pay18.5% fine daily for late payment

Following the late payment of the 75 percent balance of the bid price of two of the unbundled assets of the Power Holding Company of Nigeria (PHCN) by the preferred bidders, the fine to be paid by the defaulting bidders is about 18.5 percent daily on the amount outstanding after the payment deadline expired, BusinessDay has learnt.

The fine, which is at the Nigerian Inter-Bank Offered Rate (NIBOR) plus 5 percent, is to be paid by Interstate Electrics Limited, buyers of Enugu Electricity Distribution Company, and North South Power for Shiroro Power Plc. Call or overnight NIBOR is at 13.5 percent as at September 23.

“The primary document in this respect is the Share Sale Agreement executed between the Bureau of Public Enterprises (BPE), the Ministry of Finance Incorporated and each respective purchaser and in my view, the relevant provisions are clauses 4 and 5 of the Share Sale Agreement,” said Ayodele Oni, an energy law and policy expert and senior associate in top law firm, Banwo & Ighodalo.

He noted that under the template, Share Sale Agreement, where there is a termination of the share sale agreement before the completion of the relevant transaction, as a result of a default by the relevant purchaser, 5 percent of the consideration amount would be payable as liquidated damages by the relevant purchaser. “Other than that provision, I am not aware that the BPE is contractually empowered to enforce any penalty.”

It would be recalled that Interstate Electric, North South Power and CMEC/Eurafric Energy Limited, preferred bidder for Sapele Power Plc, all failed to meet the August 21, 2013 deadline for the balance payment.

Eight days after the expiration of the deadline, Interstate paid $12 million out of the $93 million bid balance. It eventually paid up a week later. North South Power also paid up the balance.

Last week, the National Council on Privatisation (NCP) approved the payment of the remaining 75 percent by 12 preferred bidders for the acquisition of the PHCN successor companies.

It also approved the late payments by North South Power and Interstate Electric Limited for Shiroro Power Plc and Enugu Distribution Company Plc, respectively, but subject to the late payment penalty as provided in clause 12.20 on interest for late payment and clauses 5.5, 5.5.1 and 5.5.2 of the Share Purchase Agreement (SPA).

But the sale of the Sapele Power Plc was put on hold, since the preferred bidders failed to pay up the 75 percent balance.

The NCP referred the case of CMEC/Eurafric, which had paid $119,887,156 of the $201,000,000 bid consideration to the Office of the Attorney General of the Federation and Minister of Justice for advice as there were legal issues which needed to be resolved.

According to the Bureau of Public Enterprises, PHCN successor companies would be handed over to their new owners as from October 1, 2013.