The signing of Share Purchase Agreement (SPA) between Bureau of Public Enterprises (BPE) and UC Rusal, which recognised the latter as the core investor in aluminum smelter firm, ALSCON, has ended a decade of deadlocked litigation that crippled the Akwa Ibom-based firm. ABDULWAHAB ISA reports
Save for the recent amicable resolution, Akwa-Ibom-based Aluminium Smelter Company of Nigeria (ALSCON) located in Ikot Abasi was a thorn in the flesh of Bureau of Public Enterprises (BPE).
Its nightmares were shared by other stakeholders, the host community and feuding core investors locked in legal battle with the Federal Government over ownership dispute. To them, ALSCON was a burden that must be expeditiously resolved.
ALSCON was incorporated in 1989 with the Federal Government of Nigeria, Ferrostaal of Germany and Reynolds Incorporated of America as shareholders on an equity holding of 70 per cent, 20 per cent and 10 per cent respectively.
The company was established with clear cut objectives to utilise and enhance the country’s gas reserve and discourage gas flaring in the Niger Delta.
Its broad terms include establishing a self-reliant aluminium factory, provide employment to Nigerians and impact technical and develop trained technical manpower, to conserve and earn foreign exchange by meeting local aluminium demands, and aid the development of aluminium downstream industries.
Hitherto, the firm was under the purview of Ministry of Industries until 1991 when it was handed over to the then Ministry of Mines, Power and Steel to manage.
The plant, designed to produce 197,000 metric tonnes of aluminium ingots and billets per annum, commenced production on October 15, 1997.
ALSCON enjoyed uninterrupted production, hitting production target before a snap on June 6, 1999. The major factors that accounted for production pack up included irreconcilable differences between Ferrostaal and Reynolds, lack of working capital, insufficient gas supply and non-dredging of Imo River among others.
To break the jinx and restart production, ALSCON was listed in the 2nd phase of the privatisation programme in the Privatisation and Commercialisation Act of 1999.
In September 2002, the Bureau of Public Enterprises (BPE) commenced the privatization process and requested for core investors to express interest in acquiring the Federal Government’s shares. Five companies expressed interest in acquiring the firm. They were ALCOA Inc. of America; Glencore AG of Switzerland; UC Rusal of Russia; ALCAN of Canada and Ferrostaal AG of Germany
After the due diligence, only UC Rusal and Ferrostaal submitted technical and financial bids. Ferrostaal was, however, disqualified by BPE for submitting conditional bids.
This left UC Rusal as the only qualified bidder and the process was therefore aborted.
The process was restarted in 2004. BPE invited interested companies to bid for ALSCON majority stake of which only BFI Group and UC RUSAL satisfied the initial pre-qualification requirements.
BFI Group emerged the preferred bidder with a bid price offer of $410 million, while UC Rusal was disqualified for submitting a conditional bid.
However, BFI Group failed to meet the deadline of July 8, 2004 for the payment of 10 per cent of the bid and was therefore disqualified. Consequently, BPE reopened negotiations with UC Rusal on the basis of a negotiated sale strategy (otherwise known as willing-buyer-willing-seller).
UC Rusal won the FGN equity as core investor and the transaction was approved by the National Council on Privatisation. BPE subsequently handed over ALSCON to UC Rusal at a bid price of $250 million with $120 million out of the total sum set aside for the dredging of Imo River.
In September 2004, the core investor-BFI Group, dragged BPE before an Abuja High Court for overturning its victory and handing over ALSCON to UC Rusal.
The Federal High Court decided the case in favour of BPE, but BFIG appealed and also lost at the appeal court. BFI Group then took the case to the Supreme Court.
However, in between the period, UC RUSAL commenced production in 2008, but insufficient gas supply to the smelter as well as staff agitation due to non-payment of the balance of their terminal benefit amounting to N2.3 billion constituted a major challenge among others to the smooth operation of the plant.
On July 6, 2012, the Supreme Court revoked the sale of ALSCON to UC Rusal and reinstated BFI Group as preferred bidder for ALSCON.
The Supreme Court ordered inter alia (1) “An order of specific performance is hereby decreed directing the Defendant/Respondent (BPE) to provide the mutually agreed Share Purchase Agreement for execution by the parties to enable the Plaintiff/Appellant (BFIG Group) pay 10% of the accepted bid price of US$410 Million (i.e. the sum of US$41Million) within 15 working days from the date of execution of SPA in accordance with the agreement dated 20/5/2004 and 90% bid price shall be paid within 90 calendar days.”
ii) “An order for the Defendant/Respondent to accept payment of the 10 per cent of the bid price from the appellant within 15 days from the date of signing the Share Purchase Agreement (SPA).”
iii) An order of Perpetual Injunction restraining the Defendant/Respondent (BPE), its servants, agent, privies, management or howsoever called from inviting any further bidding for the sale and acquisition of ALSCON in violation of the contract between the Plaintiff/Appellant and the Defendant/Respondent and/or from negotiating to sell, selling, transferring or otherwise handing over ALSCON to any person or persons in violation of the contract between the Plaintiff/Appellant and the Defendant.”
The transaction for the core investor sale of ALSCON to BFIG was terminated after the expiration of the deadline of March 18, 2013 given to them to sign the SPA and pay 10 per cent of the bid price as ordered by the Supreme Court. BPE reinstated UC RUSAL again as the core investor in ALSCON.
Meanwhile, BFI Group has again gone back to court to compel BPE to reinstate them in ALSCON and the court has ruled in their favour, but BPE has filed an appeal and the case is yet to be determined.
As a result of the uncertainty created by the Judgment and the delay to resolve the case, UC Rusal and ALSCON has been suffering grave damages, as most developmental projects at the smelter have been put on hold. ALSCON/RUSAL is incurring enormous losses having to maintain the plant and staff without being in operation. Consequently, the company retrenched most of the workforce in order to minimise losses.
Finding a solution
To navigate the firm from the shores of protracted crisis, Minister of Mines and Steel Development, Dr. Kayode Fayemi, and the BPE worked assiduously to bring the firm back to its feet. BPE sent a memo to the Vice President, Prof Yemi Osinbajo, to invite the parties with a view to reconciling them. Several mediatory meetings were held, some at the ministerial level to explore both administrative and political approaches to resolving this impasse to enable ALSCON realise and optimise its potential to the benefit of the nation.
At the meeting of the NCP held in August 2017, the council approved an out of court settlement to resolve the lingering dispute between the FGN, BFIG AND UC Rusal through mediation with the active collaboration of Ministry of Mines and Steel Development.
Subsequently, BPE provided the SPA to BFIG for execution in compliance with the order of the Supreme Court and asked BFIG to provide a business plan as required in the SPA and to execute the SPA within a period of seven days as contained in the judgment of the Supreme Court.
Again, BFIG failed to execute the SPA as ordered by the Supreme Court and could not meet the terms of the transaction by close of business on Tuesday, October 3, 2017 (making it the 3rd time the company has failed to meet terms of this transaction), indicating lack of good faith to resolve the impasse.
The renewed Share Purchase Agreement was signed during a brief ceremony at the Ministry of Mines and Steel Development, Abuja, witnessed by Fayemi; Minister of State, Hon Abubakar Bawa Bwari; Director General, Bureau of Public Enterprise (BPE), Alex Okoh; Russian Ambassador to Nigeria, Nickolai Udovichenko; CEO/Member of the Board of Directors UC Rusal, Vladislav Soloviev; Managing Director ALSCON, Dmitry Zavyaiov; and Head of Legal, UC Rusal, Piter Maxsimov.
Speaking at the event, Fayemi said President Mohammadu Buhari was keen on seeing to the conclusion of the agreement as soon as possible so that the company could get back on its feet and Nigeria and Russia can strengthen the historical partnership between the two countries.
The Drector General, BPE, Alex Okoh, in his remarks, commended the efforts of Fayemi and his commitment in ensuring the success of the negotiation.
The BPE boss said he was optimistic that the remaining issues would be resolved both on the legal side as well the technical and production issues, adding that government still retained 20 per cent equity in the firm.
Ambassador Nickolai Udovichenko, who led the Russian Government delegation to the event, thanked the Nigerian Government for resolving the impasse, while also lauding the efforts of the minister. He described the development as a new beginning for the two countries.
On his part, The traditional ruler of Ikot Abasi, His Royal Majesty, Edidem U.J Ntuk Obom XII, urged the Federal Government to do everything possible to ensure that ALSCON is revitalised so that economic prosperity of the town could return.
The monarch said ALSCON was the life wire of the community, stressing that the company gave the community 24-hour power supply, employments and awarded scholarships to its students.
ALSCON’s journey has been a tortuous one, no doubt. However, it is reassuring to know it ended on a pleasant note with the hurdles, hitherto, stalling production uprooted, a new dawn sets in for ALSCON .
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