…Claims could reach $440m plus 10% interest
…FG reneged on out-of-court $200m settlement
…China Eximbank loan of 85% project cost at risk
…To date, Mambilla Hydropower stalled
Ben Eguzozie, in Port Harcourt
Nigeria faces another P&ID contract gone awry saga as an energy company, Sunrise Power & Transmission which was awarded contract to build the Mambilla Hydropower project, has filed claims at the International Chamber of Commerce (ICC) Paris, asking an ICC tribunal to order the Nigerian government to pay it $400 million plus a 10% interest.
About two years ago, it was an English Court which awarded a $9.6 billion cost against Nigeria over its improper handling and reneging on a gas development project by P&ID. This time, a new cost that would rattle the central government like the P&ID’s would come from the ICC tribunal in Paris, France under its “ICC’s expedited procedure rules,” and should be adjudicated within six months, Femi Falana, counsel to Sunrise Power & Transmission Company told Bloomberg.
Sunrise Power & Transmission accuses the Nigerian Federal Government of reneging on a settlement consensus it (Nigeria) agreed with it (Sunrise Power) in March this year, which was supposed to have resolved a long-running dispute over the rights of Sunrise Power to construct the Mambilla Hydropower, at a cost of $4 billion, a facility targeted to deliver 1,525 megawatts (MW) to the national power grid and provide power to some 3 million homes.
Like the P&ID matter, the Buhari administration has shown unwillingness to honour its agreement to pay Sunrise Power $200 million out-of-court settlement, which would have offset the power contractor’s initial claims of between $960 million and $2.4 billion damages for the improper contract cancellation or, so it seems, of the Mambilla power facility.
Sunrise Power filed a case at the International Chamber of Commerce in Paris on May 11, asking a tribunal to order President Buhari administration to honour its agreement it duly entered in March this year to pay $200 million, Falana told Bloomberg by phone.
But Aaron Artimas, media aide to the Minister for Power Saleh Mamman, denied any additional court case. “There is no reason for an additional arbitration or court case. The government is working to find an amicable solution with Sunrise.”
He also said fleetingly that the “government is on course, and remains committed to the project.”
Sunrise Power was awarded the Mambilla hydropower project in 2003, a contract the then Federal Executive Council declined to approve. But in 2017, the Buhari administration reopened plans to get the power facility off the ground.
Former Minister of Power Babatunde Fashola announced then in 2017 that China Export-Import Bank (Eximbank) would finance 85 per cent of the cost of Mambilla Hydropower. He said further that the power plant would be built by three Chinese companies: Sinohydro Corporation, China Gezhouba Group Company, and China Geo-Engineering Corporation.
The Mambilla Hydropower, if completed, will bolster the 13,000 megawatts of installed electricity-generating capacity in Nigeria’s economy by 12 per cent, energy experts said. Plans to build the $4 billion, 1,525-megawatt plant on the Donga River in Taraba State began in early 1970s, but the project witnessed multiple false starts. Initially, the power project was intended to be a 3,050-megawatt facility that would cost $5.8 billion, but the Ministry of Power told Bloomberg that it decided to scale down the project’s scope to improve its “bankability.
Issues with Sunrise Power erupted when Fashola finalized arrangement with the three Chinese firms to build the plant, leaving out Sunrise. Surprised at the government’s sudden detour, the company began proceedings against the Federal Government. It secured claims at a federal high court. But later proceeded to the ICC, demanding between $960 million and $2.4 billion in damages.
In September 2019, two years down without any progress, the Chinese contractors wrote to the Power Minister, Mamman Saleh, stating that China Eximbank cannot enter “substantive financing negotiations” on the Mambilla facility while the development is encumbered by legal disputes.
Yang Jiechi, China’s top diplomat, notified President Buhari the same month to the effect that the project’s funding cannot be disbursed until the tussle with Sunrise ends.
Meanwhile, Sunrise Power was made to suspend its case to participate in a settlement talks encouraged by Yang Jiechi, also a member of the Chinese Politburo.
Prior to Sunrise filing its case at the ICC, the Power Ministry reached a preferred financing option as a bilateral sovereign loan from the China Eximbank.
Last year, amid Covid-19 knock-on effects on Nigeria’s oil industry, Minister of Power Mamman and Attorney General of the Federation Abubakar Malami concluded two agreements with Sunrise that committed the Federal Government to pay $200 million to the company, which is registered in Nigeria, in return for it to drop all claims relating to Mambilla project.
The agreement, in a second accord signed in March this year, stated further that Sunrise Power would be entitled to an additional $200 million plus interest, if FG failed to pay the agreed sum within 180 days.
President Buhari’s administration decided it couldn’t pay the settlement sum, following a memo sent by Malami in August last year. The government claims no resources to meet the payment it duly agreed with Sunrise months earlier.
Malami’s August 2020 memo to Buhari conceded that Sunrise is “in a strong legal position to pursue a successful claim,” having not been “duly disengaged as contractor.” Further delays caused by the dispute could also have “major negative political implications” because Mambilla is a “signature project” for the President’s administration.
Today, Sunrise has yet to receive any money, “despite numerous commitments from the involved ministers and a surge in oil prices,” Falana said. He said, the company’s request for an award of $400 million plus interest of 10% has been initiated under the ICC’s expedited procedure rules, as specified in the agreements, and should be adjudicated within six months.
Additionally, the President in February last year, set up a Mambilla project delivery committee to advance the project.
Mamman, Power Minister, said on his Twitter account in April that: “Despite financing problems, activities such as land acquisition and public awareness raising are underway.”
As it stands today, China Eximbank, which had initially agreed to fund 85 per cent cost of Mambilla project, says, it would not release the money until the legal logjam ends.
Frontpage August 16, 2019