Tribune
For multiple defaults on a $200 million settlement agreement it willingly entered, Nigeria now faces about $500 million in penalty over the botched $5.8 billion Mambilla hydroelectric power project.
The original awardee of the contract, Sunrise Power and Transmission Company Limited (SPTCL), had accepted a settlement offer of $200 million from the Nigerian government in the course of arbitration at the International Court of Arbitration in Paris, France.
The settlement offer was to compensate for the unlawful termination of the contract and the re-award of same to a Chinese firm.
Sunrise was also expected to let go of all claims to the project which has been grounded for 14 years.
The original contract was to generate 3,050 megawatts, but later reviewed, to 1,525 megawatts and the cost cut down to $4 billion.
Judicial interventions, sought home and abroad, have made it impossible for Nigeria to make any gains from the project and the vacillation of the administration of President Muhammadu Buhari on the compensation is further hurting the country.
In the Terms of Settlement, Nigeria agreed to a sustained halt on the project until the liability to Sunris, is discharged.
The original contract signed on May 22, 2003, became entangled in judicial web following the decision of the Nigerian government to revoke the contract on May 28, 2007 and re-award it to a Chinese company, Messrs China Gezhouba Group Corporation/China Geo-Engineering Corporation (CGGC/CGC).
SPTCL subsequently launched a judicial counter to the administrative action in suit number FHC/ABJ/CS/384/2007 which brought the project to a complete halt.
The suing firm asked for $960 million in damages for breach of contract.
In a series of documents sighted by Tribune Online, the Buhari administration which showed initial resolve to follow through with the amicable settlement initiated by its predecessors-in-office has now spurned the out-of-court settlement in multiple times, with Sunrise agreeing to let go of the penalty for earlier defaults.
The government even committed itself to $200 million penalty in an addendum to the original Terms of Settlement to assure of prompt payment of the $200 million compensation.
The addendum, which is the subsisting Terms of Agreement, is dated March 25, 2020, with the Minister of Power, Mr Sale Mamman and the Attorney General of the Federation and Minister of Justice, Mr, Abubakar Malami, witnessing for the Federal Government.
Leno Adesanya, chairman and CEO of Sunrise and legal counsel, Jeremie Chouraqui, witnessed for the company.
Portions of the agreement read: “There were Terms of Settlement Agreement executed between the government of the Federal Republic of Nigeria and Messrs Sunrise Power and Transmission Company Limited on 21st January, 2020, hereinafter referred to as the “Settlement Agreement” and witnessed by the second respondent, Messrs Synohydro Corporation of China, in the ongoing arbitration between the parties.
“The need arose, before filing of the Terms of Settlement, to further review the provisions of the said Terms of Settlement agreement so as to enable the parties to fully implement the Terms of the said Settlement agreement.
“Further to the above, the parties had extensive discussions on the review as it relates to the way forward, most especially on the desire of the FGN, for Sunrise to waive the two default penalties stated in the said agreement and agree on new mode of payment.
“Sunrise, however, expressed its willingness to consider the proposed review by the FGN subject to the insertion of a monetary sanction in place of the provision for reinstatement of Sunrise as the “Exclusive Local Partner” to the Mambilla project.”
The subsisting agreement further states: “Now, it is hereby agreed as follows;
*Clauses 3 and 4 containing the payment terms and the two default penalty clauses of the Settlement Agreement, executed on 21st January, 2020, are hereby mutually waived and the waiver is incorporated as an addendum to the said Settlement Agreement.
*The parties, pursuant to the Settlement Agreement of 21st January, 2020, executed by the parties, have mutually resolved that the FGN shall pay Sunrise the net sum of $200 million in irrevocable and immediately available funds, to Sunrise’s designated bank accounts in which shall be stated in the invoice to be submitted by Sunrise within the stipulated time frame, hereunder.
*The agreed sum of $200 million shall be paid in one or two tranches within 150 calendar days (five months), from the date of execution of this Addendum, as follows; first $100 million within 30 calendar days of execution of the agreement.
“The remaining balance of $100 million shall be paid within 90 calendar days (three months) of the first payment.
*The second tranche of the payment under item c (ii) shall have a grace period of 30 calendar days (one month).
“In furtherance of the extension of time granted by Sunrise, under this Addendum, Sunrise has agreed to waive the second default penalty stated in the Settlement Agreement of 21st January, 2020, subject to the fulfillment of payment conditions, stated in paragraph (c), above and as when due.
“It is however agreed by the parties that if the FGN fails to meet its payment obligations contained in the Terms of Payment, stated in this Addendum, to the Settlement Agreement, Sunrise, will be entitled to a financial default sanction in the sum of $200 million in addition, to the unpaid principal sum of $200 million, plus interest on any unpaid sum (including of any financial default sanctions) at a compound daily interest rate of 10%, per annum, until the full payment is received, by Sunrise, in irrevocable and immediately available funds, in its designated bank accounts.
“Such full receipt by Sunrise, shall discharge the FGN from any further extraneous liability to Sunrise in respect of the Settlement Agreement and this Addendum and Sunrise shall then, have no further recourse to the Mambilla project.
“This addendum, varies the executed settlement agreement of 21st January 2020, only to the extent expressly stated herein and is the irrevocable understanding of the parties mutually agreed.
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