N670 million withdrawn illegally as Kano DISCO accused of money laundering as BPE sale gets messier

by Godwin Akanfe
It appears there has been some money laundering attempt at the Kano Electricity Distribution Company, KEDCO, managed by Sahelian Energy.
Last month the Nigeria Electricity Regulatory Commission probed Sahelian Energy for purportedly diverting N670 million of the company’s money to the Fidelity bank account of their sister firm Northwest Power. Incar Power, a member of Board of Directors of KEDCO and a major shareholder at the company, also wrote a query to the KEDCO management regarding the purported diversion.
In the letter, Incar claimed that the transaction was “an illegal transaction that was executed without [their] knowledge and consent whatsoever”, and they demanded an explanation from the management.
We learned that Northwest Power used the money to pay the Bureau of Public Enterprises 25% of the buy-over sum for Kaduna Electricity Distribution company.

Letter regarding the query sent over an illegal N670 million withdrawal from KEDC.

Northwest Power, as the preferred bidder for the Kaduna disco, entered the Share Sale Agreement with the BPE last December and paid 25% of the agreed sum as down payment. The deadline for the 75% balance was set to June 2014. However, Northwest failed to beat that deadline and the BPE postponed the deadline for this payment instead of cancelling the contract and awarding the purchase to the next bidder in line.
BPE extended the deadline again to August 6, but Northwest still failed to pay up. Then BPE gave a final 60-day grace period, which expired this week on October 6. But the firm again failed to meet up.
It looks like the government agency has been purposely extending the deadline in order to favour Northwest and try to save them from forfeiting their 25% initial payment. But Section 15 (139) of the RFP for the Privatization of PHCN Successor Companies states, “Within fifteen (15) business days after signing of the Share Sale Agreement, or at a mutually agreed earlier time, the Bidder shall make a down payment of twenty five per cent (25%) of the Share purchase price.
“Failure to make this payment will result in the automatic draw down of the full amount of coverage of the Preferred Bidder’s Bank
Guarantee. Upon receipt of the down payment, the Preferred Bidder’s bank guarantee will be returned to the Bidder within a maximum of two (2) weeks.”
Section 15 (140) also states: “Within six (6) months after signing of the Share Sale Agreement, or at a mutually agreed upon time, the Bidder will be required to pay the outstanding seventy five per cent (75%) of the share purchase price to complete the transaction. Failure to complete the transaction within a mutually agreed time frame will result in the forfeiture of the down payment as per the terms of the Share Sale Agreement.”
Both Northwest and BPE haven’t reacted about this controversy, but analysts say the act undermines the privatisation process.
It is not clear if the BPE will extend the payment deadline in favour of Northwest for the third time or if they will cancel the contract and award a new contract of purchase to the bidder next in line. However, analysts are concerned about the way Sahelian Energy purportedly financed Northwest’s 25% part payment to BPE. They believe the BPE is complicit and that the agency’s representative on the Board of KEDCO allowed the money transfer to happen.
To prevent fraud and inappropriate transactions, the Privatisation Act states that a representative of BPE must sit on the Board of every preferred bidder. The EFCC is also represented in the various privatisation committees to keep an eagle’s eye on the sources of investors’ funds.