ALSCON: FG Signs Renewed Share Purchase Agreement With UC Rusal
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….agreement ends decade of legal tussle with BGI Group
…..Russian firm now core investor of smelting company
The Federal Government has given official recognition to Messrs UC Rusal, a Russian Company, as the core investor of the Aluminium Smelter Company of Nigeria (ALSCON) Ikot Abasi, Akwa Ibom State, following the signing of the Renewed Share Purchase Agreement between Government and the Russian company in Abuja, on Friday.
The Renewed Share Purchase Agreement, was signed during a brief ceremony at the Ministry of Mines and Steel Development, Abuja, witnessed by the Minister, Dr Kayode 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.
Director General BPE, Alex Okoh, signed for the Federal Government, while CEO/Member of the Board of Directors UC Rusal, Vladislav Soloviev signed on behalf of the company, thus ending the protracted litigation that has made the aluminium smelting company unable to operate for almost a decade.
The Federal Government, however, still retains 20 per cent equity in the company.
Government took the decision to intervene and end the protracted dispute at the meeting of the National Council on Privatization (NCP) held in August, 2017 under the chairmanship of the Vice President, Prof Yemi Osinbajo, where 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.
Speaking at the event, Dr Fayemi stated that President Mohammadu Buhari is keen on seeing that this agreement is reached and resolved as soon as possible so that the company can get back on its feet and Nigeria and Russia can strengthen the historical partnership btw the two countries.
The DG of BPE, Okoh, in his remarks commended the efforts of the Minister of Mines and Steel Development, Dr Fayemi, and his commitment in ensuring the success of the negotiation.
The BPE boss said he is 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 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.
BACKGROUND
The Aluminium Smelting Company of Nigeria (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 in order to utilize and enhance the country’s gas reserve and to discourage gas flaring in the Niger Delta. The company was established with the following objectives;
To establish a self reliant Aluminium factory
Provide employment to Nigerians
Impact technical and develop trained technical manpower
Conserve and earn foreign exchange by meeting our Aluminium demands
Aid the development of Aluminium downstream industries.
The company 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 which was designed to produce 197,000 metric tonnes of Aluminium ingots and billets per annum, commenced production on 15th October, 1997 . However, operations stopped on 6th June, 1999 due to irreconcilable differences between Ferrostaal and Reynolds, lack of working capital, insufficient gas supply and non-dredging of Imo River among others.
ALSCON was listed in the 2nd phase of the privatization programme in the Privatization and Commercialization 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 FGN shares.
Available records show that five (5) companies expressed interest, viz: 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 disqualified by BPE for submitting conditional bids.
This left UC Rusal as the only qualified bidder and the process was therefore aborted.
In 2004, BPE again invited interested companies to bid for ALSCON majority stake of which, only BFI Group and UC RUSAL satisfied the initial pre-qualification requirement.
BFI Group emerged as the preferred bidder with a bid price offer of 410 Million Dollars, 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 Privatization. BPE subsequently handed over ALSCON to UC Rusal at a bid price of 250 Million Dollars. 120 Million Dollars out of the total sum was set aside for the dredging of Imo River.
In September, 2004, 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.
Meanwhile, 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 amongst 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 valid preferred bidder for ALSCON.
The Supreme Court ordered inter alia:
i) “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% 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.”
BPE provided the SPA as approved by National Council on Privatization to BFIG for execution in compliance with the order by the Supreme Court and ask BFIG to provide a business plan as required in the SPA and execute the SPA within a period of six weeks. But BFIG refused to execute the SPA, instead BFIG drafted and signed an SPA at variance with the copy issued by the BPE as ordered by the judgment of the Supreme Court. BPE rejected the BFIG version of the SPA and gave BFIG a deadline of March 18, 2013 to either execute the SPA as ordered by the Supreme Court or consider the transaction a nullity.
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% 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 minimize losses.
Arising from this protracted legal tussle, the BPE recently sent a memo to the Vice President, Prof Yemi Osinbajo, to invite the parties with a view to reconciling them. Several mediatory meetings have been held, some at the Ministerial level to explore both administrative and political approaches to resolving this impasse to enable ALSCON realize and optimize its potentials to the benefit of the nation, to no avail.
At the meeting of the National Council on Privatization (NCP) held in August, 2017, 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 closed of business on Tuesday, 3rd October 2017 (thus making it the 3rd time the company has failed to meet terms of this transaction) thus indicating lack of good faith to resolve the impasse.
Accordingly, the Ministry apprised the Presidency of this development and got the President’s approval, to go ahead with the decision of the National Council on Privatisation.
