Presidency Source Lied — Azura $1.2bn Deal Was Signed In August 2015

An unnamed presidency source told reporters on Sunday that the Azura Power deal was signed by the government of President Goodluck Jonathan in 2013 — but TheCable can report that this is an attempt to confuse the issues.

The Azura power generation deal has placed Nigeria under heavy financial burden as the country’s transmission capacity cannot take all the power being generated.

Regardless, Nigeria will have to keep paying at least $30 million a month under the “take or pay” deal and risks a fine of $1.2 billion if government decides to exit from the agreement.

Although various agreements were signed with Azura-Edo Indepentent Power Project Ltd and Azura Power West Africa by Jonathan administration to facilitate the construction of the 461mw plant in Edo state, they were not activated before he left office on May 29, 2015, TheCable can report.

The bone of contention, according to documents seen by TheCable, was federal government’s reluctance to sign the World Bank partial risk guarantee (PRG) which would place the $1.2 billion liability on the country.

A SET OF AGREEMENTS

The Jonathan administration signed the power purchase agreement (PPA) on April 22, 2013 — as disclosed by the anonymous presidency source — as well as the put call option agreement (PCOA) on October 22, 2014.

The PCOA “direct agreement” was executed on December 18, 2014.

However, the deal could not proceed because Mohammed Bello Adoke, then attorney-general of the federation (AGF), said the PCOA was injurious to the interest of Nigeria and that a sovereign guarantee would put the country’s foreign assets at risk.

His letter to Ngozi Okonjo-Iweala, then minister of finance who signed the PCOA on behalf of Nigeria, was dated July 24, 2014.

Adoke raised a series of objections to the provisions of the agreement which he said were not in the country’s interest.

On December 1, 2014, Adoke also wrote to Jonathan, complaining that the PCOA was signed without the legal advice of his office, and that a circular from the office of the secretary to the government of the federation, dated August 11, 2014, had already said the federal government must be indemnified in all contracts and agreements, especially with foreign entities.

This, he said, was to protect the federal government and some of its separate legal entities such as the Central Bank of Nigeria (CBN), the Nigerian National Petroleum Corporation (NNPC) and the Nigeria Sovereign Investment Authority (NSIA) whose assets might be “attached” in enforcement of proceedings in foreign jurisdictions.

NEBO’S LAST-DITCH MOVE

However, Chinedu Nebo, then minister of power, later wrote a five-page memo to Jonathan, dated January 12, 2015, seeking that the “indemnity clause” be waived for Azura so that the country could give the sovereign guarantee.

Nebo wrote that “in the context of the Azura transaction, the application of this Specimen Indemnity Clause would prevent Azura from drawing down on any of the loan agreements that it has signed with its lender group (comprising 15 banks from 9 different countries) because these banks all require an unconditional waiver of the Government’s sovereign immunity”.

He asked Jonathan to grant a “special exemption” to the requirements of the circular because of the “heavy involvement of the World Bank” and that the Azura transaction was “critical to investors’ confidence in Nigeria”.

Nevertheless, Jonathan did not grant the waiver because the office of the AGF did not change its legal opinion.

As of the time Jonathan left office on May 29, 2015, the agreements were inchoate.

THE MAKING OF A GUARANTEE

After President Muhammadu Buhari came to office, Azura began to pile fresh pressure on the federal government to give the guarantee.

For the World Bank PRG to be activated, Nigeria needed to execute the guarantee instruments — the indemnity agreement, the support agreement, and the PCOA.

These are the instruments that needed to be activated for a drawdown on the letter of credit (LC) in the event of default by the federal government.

With Adoke out of the way and no AGF in place (Buhari did not appoint a cabinet until November 2015), TheCable understands that Abdullahi Ahmed Yola, who, as the solicitor-general of the federation acted as the AGF, came under pressure from senior presidency officials to upturn Adoke’s memo.

Yola eventually changed the legal opinion in July 2015 and on August 21, 2015, Nigeria executed the set of agreements that activated the deal, with the liability of $1.2 billion incorporated.

The senate has called for the cancellation of the contract — which has been likened to the P&ID failed deal for which Nigeria is currently fighting to escape a $9.6 billion arbitration award.

-Cable.