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News & Press Releases

August 26, 2009

The Central Bank Advertorial on:

The Debt Portfolio of Intercontinental Bank Plc and Rockson Engineering Company Limited

We are Counsel to Rockson Engineering Company Limited [RE] named as one of the debtors to Intercontinental Bank Plc, a facility described as “non-performing” in the Central Bank of Nigeria advertorial of Wednesday the 19th of August 2009. It is our client’s instruction that we put on record the entire circumstance of the facility to situate the said publications in its proper perspective. In this respect, cognizance must be taken of the attendant loss of confidence, locally and internationally, by credit providers with whom obligations have been created particularly as commercial instruments have been issued and may not be honored as a direct consequence of the bad faith generated by the publication.

It is on record that the Federal Government of Nigeria in an attempt to meet the ever-increasing power demand in the country, decided in 2005 to boost the generating capacity of the nation to 10,000 MW. In order to meet this target various contracts in the power sector were awarded to different companies including Rockson Engineering Company Limited. The projects to which this facility relates are the NIPP Alaoji, Egbema, Omoku, Gbarain Power Stations, Lot 6 330KV substation and ancillary works for the generation and transmission of a total of 1822 MW of power.

Reason for the Loan and the Nature of Security

At the signing of the contract in March of 2005 and in order to commence the project, an Advance Payment (AP) was to be made immediately to enable RE to commence the civil works and to place orders for the turbines and the balance of plants. This AP was not completed until February 2007. In the belief that the Federal Government and its agencies were committed to the projects, RE proceeded to procure these facilities from Intercontinental Bank Plc and other banks for the purpose of funding the importation, construction and installation of the works. This was done in a sincere effort to deliver the project on time.

It was from this facility that RE loaned PHCN money to acquire the land and pay the agreed compensation to the Alaoji community before clearing of the land, pilling, foundations and associated civil works were executed. RE additionally ordered four (4) Frame 9E Gas Turbine generators and two (2) Steam Turbines from General Electric Co.; GSUs and Auxiliary Transformers for both Open-cycle and Combine-Cycle phases of the Project; 330KV Circuit Breakers to cover requirement for both Open-Cycle and Combined-Cycle; engaged Burns & McDonnell of Kansas City to procure Balance of Plant and detailed engineering services for the Project; conducted Factory Assessment Tests (FATs) for four (4) Gas Turbine Generators, GE Frame 9E, four (4) GSU Transformers and four (4) Auxiliary Transformers.

The loan facilities were secured, and guaranteed with the assignment of proceeds from the various letters of credit established by the Central Bank of Nigeria as bankers to the Federal Government of Nigeria. ALL the foreign procured equipment for the projects were CONSIGNED to the order of the Central Bank on behalf of Power Holdings Company of Nigeria and NIPP.

The Status of the Facility

We cannot pretend to know what type of loans CBN classifies as “non-performing”. It must however be put on record that RE funded the said facility as and when they are paid by the Government on the NIPP projects in accordance with the loan repayment terms. Any sum outstanding and unpaid on the said account is as a direct result of the fact that the NIPP projects were not funded between May 2007 and June 2009. We note that while the CBN claimed in their advertorial that RE owed N36.9 billion, the attached letter from Intercontinental Bank Plc certified that the current balance of RE’s account in Intercontinental Bank Plc is N15.03 billion! (Download pdf of the letter)

In addition to the non funding of the projects, we are once more invited to recall the controversy as to what was spent by the previous administration in the funding of power projects in the country which led to the ‘power probe’ by the Ndudi Elumelu led Power Committee of the House of Representatives. This created more delays and loss of confidence by our clients’ international suppliers.

The Federal Government’s Initiative

It was therefore reassuring when the Federal Government of Nigeria, ostensibly in an effort to determine the actual status of the projects under the NIPP, set up the Steering Committee on the National Integrated Power Projects headed by His Excellency Dr. Goodluck Jonathan, GCON; the Vice President of the Federal Republic of Nigeria. The committee visited the various project sites and with technical inputs from the team of professionals in their entourage, were able to assess the performance of each project. In the case of RE the committee recommended immediate payment of all outstanding invoices in March of 2009, within two weeks. It is on record that only a part of that money was paid in July and August 2009, which were passed on to the RE account in Intercontinental Bank. A substantial portion of the payment due to RE is still outstanding and unpaid.

Loan Liquidation and Prosecution

Borrowing is not a crime in our statutes. We however state for the benefit of the Nigerian Public, and our credit providers that a substantial amount of certified works for which this facility was obtained has not been paid by the Federal Government. It is also appropriate to state that the projects are ongoing and a call for the liquidation of the facility, MUST also include an undertaking by the Federal Government to pay on all certified jobs as and when due.

From December of 2006 RE has been subjected to various investigations by the Economic and Financial Crimes Commission, on spurious and unsubstantiated allegations of non-performance of contracts and money laundering and this morning raided the offices and guest houses of our clients in Port Harcourt seizing all the projects documents, engineering drawings, manuals and contracts. It will serve no useful purpose for the Federal Government to owe our clients on jobs executed by them through one of its agencies and resort to the use of another of its agencies to harass and intimidate them. This derogates the Rule of Law and the immutable principles of Natural justice.

The President’s effort at power generation can yield results, if and only if all agencies of Government are sensitive to what can derail it.

Chief Assam E. Assam
[Senior Advocate of Nigeria]

General Counsel to Rockson Engineering Company Limited.

Lex Fori Partners
Barristers at-Law, Solicitors & Legal Consultants.