By Michael Effiong
While Nigerians are still astounded by the $9billion judgement debt that the Federal Government has been ordered to pay a UK firm over breach of contract, we have another issue that may cost us $2billion!
Interestingly, the two cases are very similar. They are both related to the epileptic power sector, they were both occasioned by gross abuse of office and impunity by officials of the Nigerian government and also because all channels of amicable out-of-court settlement had been rebuffed.
In the $9billion case for example, Process and Industrial Development (P&ID) had signed a contract to process wet gas to power Nigeria’s generating plant. The company then signed a Gas Supply and Processing Agreement (GSPA) in 2010.
According to a press statement, the GSPA failed because the Nigerian government did not uphold its commitment to the contract.
In August 2012, it initiated arbitration proceedings, and a tribunal was formed in January 2017.
The Tribunal ordered the FG to pay P&ID $6 billion in damages plus $2.3 in uncollected interest.
The figure has since been attracting interest at the rate of $1.2m per year to the present staggering sum of $9billion.
The contract if it was executed would have provided additional 2000 megawatts of electricity; now we have to pay for absolutely nothing.
It is in the light of this that Nigerians must be further alerted to a similar matter that is likely to cost us big time, and it has do with the much talked about Mambilla Hydropower project.
In our report, we revealed that the nation may lose a minimum of $2 billion for another clear case of impunity.
The crisis began with the unceremonious removal of Sunrise Power and Transmission Company Limited, an indigenous company with Mr. Leno Adesanya as its Chief Executive Officer, in favour of three Chinese companies: Sinohhydro Corporation of China, China Ghezouba Group Corporation of China and China Geo-Engineering Group Corporation.
Mr. Adesanya’s efforts to rectify the situation was frustrated including even a letter to the Vice President.
This was the story we served you…
While top Presidency officials have been mentioning the takeoff of the Mambilla Hydropower Project as one of President Buhari’s achievements, we now have incontrovertible evidence that the project will not start anytime soon.
A petition written by businessman , Leno Adesanya, exclusively obtained by The Boss Newspapers revealed that the project has been stalled because of a breach of contract matter that had led to international arbitration in Paris, France.
It is obvious that until this matter is settled, the dream of turning the Mambilla into a power generating plant will remain a mirage.
In the petition, Mr Leno Adesanya revealed how his company, Sunrise Power and Transmission Company Limited was removed as a local content partner to the project and how Chief of Staff to the President, Mallam Abba Kyari ignored both the Attorney-General of the Federation and the Vice President to take a unilateral decision on the project.
Mallam, the petition alleged, invited three Chinese companies: Sinohhydro Corporation of China, China Ghezouba Group Corporation of China and China Geo-Engineering Group Corporation to the presidency and instructed them to form a joint venture for the execution of the project. He then awarded the $5.8m contract to them.
Mr Adesanya also stated that the FGN Nigeria lost an eye-popping $9billion in damages for breach of contract to Process & Industrial Development Company Of the UK in 2017, and will lose another $2.3billion if there is no amicable resolution as agreed by the Chinese company Sinohydro.
According to Mr Adesanya, Mr President can save the project from being enmeshed in another controversy as it occurred during the government of President Yar Adua where a Presidential adviser allegedly took millions of dollars in bribes, and eventually led to the removal of the official and the termination of the $1.46b civil works contract.
This is a riveting story of high wire politics and influence peddling that completely negates the anti-corruption stance of the Buhari administration.
The petition addressed to President Buhari and dated November 18, 2018, titled Re: Proposed Amicable Resolution in respect of ongoing $2.3 billion ICC Arbitration in Paris between Sunrise, Federal Government of Nigeria (the “FGN”) and Sinohydro Corporation states:
“As a result of numerous attempts to fraudulently divert billions of dollars from the 3050MW Mambilla hydropower project (the “Project”) to a 1500MW solar power project, the execution of the 3050MW Mambilla hydropower project has refused to take-off the ground. The reason being, China Exim bank’s insistence of compliance with due process, and terms of the November 2017 EPC contract signed with the Chinese JV Partners.
“Ironically, this fraudulent multi-billion dollar solar power project was rejected by the Federal Executive Council (the “FEC”) on the 16th of August 2017 when it was fraudulently packaged with the Mambilla hydropower project as one project. While the Solar Power project was submitted without any Feasibility studies, Environmental Impact Assessment (EIA) reports, NASS budget approvals, and without any bid process (due process) in the selection of the proposed EPC contractor(s) for both the 3050MW Mambilla hydropower project and the 1500MW Solar Power project.
“Your Excellency’s commitment to expeditiously execute the Project in June 2015 was communicated by the Honourable Attorney-General of the Federation, Mr. Abubakar Malami SAN (the “HAGF”) to the Honourable Minister of Power, Works and Housing (the “HMOPWH”) Mr. Babatunde Fashola SAN on the 20th of May, 2016; when the HAGF directed the HMOWPH to comply fully with all existing agreements between the Federal Government of Nigeria (the “FGN”) and Sunrise; basically the out-of-court Settlement, and the General Project Execution Agreement(s) of November 25th 2012.
“However, on the 25th of May 2016, Your Excellency’s Chief of Staff, Mallam Abba Kyari (the “COS”) invited three Chinese companies, Sinohydro Corporation of China (the “Sinohydro”), China Ghezouba Corporation of China (the “CGGC”), and China Geo-Engineering Group Corporation (the “CGCOC”) to the Presidency, and instructed them to form a joint venture for the execution of the Project. Sinohydro, CGGC and HMOPWH informed the COS of existing agreements with Sunrise, and recent directives from Your Excellency, as communicated by HAGF. The COS insisted on his earlier instructions and threatened to deal ruthlessly with Sunrise, or anyone who interferes in the Project.
“In view of the Presidency’s invitation for CGCOC (formerly CGC) participation in the Project, we petitioned Your Excellency, HMOPWH, and HAGF in April 2017 with evidence of previous corrupt practices CGC in May 2007 when they paid millions of dollars to a very senior Presidency official to enable CGGC/CGC sign a $1.46 billion Mambilla Civil Works contract on the 28th of May, 2007, as one of the $16 billion Nigerian Integrated Power Project (the “NIPP”) power projects. CGC made this confession to then President Umaru Musa YarAdua GCFR in February 2008 while on a State visit to China, while the senior presidency official admitted to then President YarAdua of collecting the bribe, which led to the termination of the contract, and removal of the official from the Presidency in 2008.
“On the 22nd of May, 2017, Your Excellency’s COS instructed the HMOPWH to “remove Sunrise from the Mambilla hydropower project, and instructed that CGGC, CGCOC and SINOHYDRO would execute the Project”.
“Bearing in mind that Your Excellency was on medical vacation in the UK, and Professor Yemi Osinbajo SAN GCON was the Acting President, we petitioned then Acting President, and the HAGF in respect of the constitutionally powers of the COS to approve N2 trillion or $5.8 billion contract in your absence, and without Due Process.
On the 24th of July, 2017, the HAGF reacted to our petitions by advising then Acting President Professor Yemi Osinbajo SAN GCON to totally ignore the instructions of the COS, and advised that the HMOPWH should sign the $5.8 billion EPC contract with Sinohydro and CGGC (50/50), with Sunrise as the Local Content Partner to the Project.
On the 10th of November, 2017, the HMOPWH signed the $5.8 billion Mambilla hydropower EPC contract with CGGC, CGCOC and SINOHYDRO.
“As a result of this illegality, we commenced arbitration proceedings against the FGN and SINOHYDRO Corporation of China at the International Chamber of Commerce (the “ICC”) in Paris.
In February 2018, Sinohydro (owned by the Chinese Government with over $3 trillion in foreign reserves) filed a request for an amicable resolution with Sunrise.
In light of the recent, irreversible arbitration ruling delivered against the FGN in the UK and the United States for Nigeria to pay at least $9 billion in damages to Process and Industrial Development Company in the UK (the “P&ID) for breach of contract. Our lawyer, Chief Femi Falana SAN held discussions with Your Excellency in July 2018 to explore avenues for an amicable resolution, and prevent another $2 billion in damages against the FGN.
“ As a result, Your Excellency expressed your full support and approval for expeditious settlement of the dispute with Sunrise, and if possible, “in line with Your Excellency’s directive to HAGF in 2016”.
In light of the above, and the need to urgently communicate a settlement to the Paris Arbitral panel, we hereby seek Your Excellency’s approval for the following Prayers:
A: Compliance with the 24th July legal recommendation of HAGF to then Acting President Professor Yemi Osinbajo SAN GCON, with the signing of a new $5.8 billion EPC contract between SUNRISE/CGGC 50%, SUNRISE/SINOHYDRO 50%, with SUNRISE as the exclusive Local Content Partner to the Project.
B1: Immediate release of 15% ( US $870,000,000.00) Counterpart funds to China Exim bank on behalf of SUNRISE, CGGC and SINOHYDRO.
C: Approval for the Nigerian Sovereign Investments Authority (the “NSIA”) to immediately negotiate our Paris arbitration claims, and make payments on terms and conditions that are mutually acceptable.
D: A meeting with Your Excellency, and respectfully, the Vice President, HAGF, NSIA HMOPWH, ICPC, EFCC, and the Chinese JV Partners, and the Chinese Ambassador to Nigeria, to discuss the corruption and fraudulent practices delaying the execution of the Project, bearing in mind the Chinese zero tolerance on corruption, and Your Excellency’s strong and against corruption.
This letter was copied to Professor Yemi Osinbajo SAN GCON, Vice President, Federal Republic of Nigeria and Mr. Abubakar Malami SAN
Honourable Attorney General of the Federation and Minister of Justice Federal Republic of Nigeria
Interestingly, it is not only Mr. Adesanya that has frowned at this breach by the Nigerian government. On September 29th, 2018, the three Chinese companies writing through the Project Manager, He Younjun stated that they disagreed with the tripartite financial agreement and that the changes would affect the project seriously.
According to the letter which was copied to Mr Babatunde Fashola, the Honourable Minister, FMPW&H, Permanent Secretary (Power Sector) FMPWH, Director (Energy Resources, FMPW&H and Director, (Legal), FMPW&H, “The Tripartite Agreement (hereinafter referred to as The Agreement) is inconsistent with the subject matter. The subject matter is a financial agreement but the essence of the agreement is the Employer assigns the EPC Contract of 3050 MW Mambilla Hydroelectric Power Project (Hereinafter referred to as the EPC Contract) to MHDC owned by the NSIA (Nigeria Sovereign Investment Authority).
“This kind of agreement is absolutely unacceptable. The reasons are as follows:
.The agreement is deeply against the EPC Contract. For example, the change of the Employer, the change of the scope of work of the contractor, the definition of the ER here do not list respectively
.The EPC Contract signed by the Employer and the contractor has been submitted to China Financial Institutions for review and had been accepted by them. The Agreement involves changes in the signing of the EPC Contract. The Chinese Government and financing institutions will re-evaluate the financing due diligence of the legality of the financing entity of the project. The process of evaluation will be protracted and affect the financing of the Project seriously.
3 The Employer has the right to choose any suitable financing method for pre-commencement activities. The Contractor has no objection to it. However, the financing method should not affect the legality and validity of the EPC Contract
- In response to the Employer’s request to launch the PCA as soon as possible. The Contractor suggests the Employer to sign an additional agreement with the Contractor to define the work scope, duration and payment method of the PCA in order to promote progress as scheduled.
- Your urgent instruction is expected, the Contractor will promote the process according to instruction.
Mr Uche Orji, the MD/CEO of the Nigeria Sovereign Investment Authority ( NSIA ) on October 25th 2018 on receipt of the letter from the Chinese companies convened a meeting at his office.
He noted that at the meeting ‘The EPC Contractor informed NSIA that the Tripartite Agreement (The Agreement) issued by NSIA was not acceptable stating that the Agreement goes against the EPC Contract agreed with Ministry. They claimed that the Agreement involves changes in the signing parties of the EPC Contract and therefore would affect the financing of the project.
“To this end, NSIA requested an all parties meeting immediately, consisting of the EPC Contractors and the Ministry. We have also requested all correspondences between the Ministry and the EPC Contractors in relation to the project to better understand the challenges to their objection of the Tripartite Agreement.
“As the Honourable Minister may recall, the Agreement is a key condition precedent for NSIA to proceed with the implementation of the Project”.
Mr Orji then requested a meeting to be held in his office with the Ministry, the EPC Contractor and any other interested parties.
From all indications the Mambilla Hydro Power Plant Project is entangled in a web of controversies that is so thick that it will take a miracle to get it up and running before the present government concludes its first term.