EXCLUSIVE: Accugas issues new deadline to FG — after receiving N13.6bn arrears

Federal government has settled N13.6 billion of outstanding invoices Accugas Ltd for gas supply to the Calabar Generation Company Limited, TheCable can report.

But the company has immediately given a new deadline to the government to clear outstanding invoices, otherwise it could issue another “notice of default”.

This is a first step in activating the World Bank partial risk guarantee (PRG) signed by the federal government under the gas supply agreement (GSA).

Nigeria’s credit rating will not only be at risk with the cost of foreign borrowing likely to go up, the $118 million sovereign guarantee could be called in by JP Morgan Chase Bank, the bankers.


This could put the nation’s foreign assets at risk.

The Nigerian government is committed to paying Accugas for gas supply to the Calabar power plant owned by the Niger Delter Power Holding Company (NDPHC) Ltd.

Under the GSA signed in May 2017, Nigeria is obliged to pay Accugas over $10 million monthly with or without gas supply to the Calabar GenCo as stipulated in the “take-or-pay” clause.


However, Calabar has not been able to produce at full capacity because the Transmission Company of Nigeria (TCN) does not have the capacity to evacuate the power generated.

Nigeria has a similar deal with Azura Power, which the country is committed to paying at least $30 million monthly whether or not TCN is able to evacuate the power generated.

As a result, other power plants are forced to step down their capacities as the federal government tries to justify the huge outlay on Azura.



In May 2020, Accugas had issued a “notice of non-payment” over outstanding invoices to the tune of $15.8 million, TheCable reported.

Earlier, in December 2019, Accugas had issued a notice of non-payment of $66 million unpaid invoices in respect of the gas supply to Calabar GenCo, owned by Niger Delta Power Holding Company (NDPHC) Ltd.

Accugas’s parent company, Seven Energy, was acquired by Savannah Energy in November 2019.

In a letter to Zainab Ahmed, minister of finance, dated August 31, 2020, Andrew Knott, chief executive officer of Savannah Energy Plc, said the outstanding amount due to Accugas from Calabar GenCo stands at $53.7 million.


“We would like to appreciate the immense efforts that went into ensuring we received the sum of N13,610,340,772.09 (US$35.8 million) from the Ministry of Finance intervention via the Central Bank of Nigeria (CBN) on Friday 28 August 2020,” Knott wrote.

“Consequently, the outstanding receivables due to Accugas from Calabar NIPP is expected to be US$53.7 million as at 9 September 2020 as relates to the March to July 2020 invoices (which encompasses US$45.6 million of already outstanding invoices and US$8.1 million of outstanding invoices which become past due on 9 September 2020).


“We are grateful for your intervention in ensuring the referenced payment above was received last week. However, unfortunately due to the passage of time between our meeting on 11 June 2020 and today, the Calabar NIPP receivable bill is almost identical to what was outstanding at the date of that meeting. Further, as we have highlighted in our previous letters and interactions with the MOF team, given the current FX market issues, we currently have an aggregate balance of N24.2 billion sitting with Nigerian banks, which we have been unsuccessfully seeking to convert to US dollars to enable repayment of our dollar debts to our largely Nigerian banking syndicate.

“The minimum additional FX true-up loss we expect to incur in relation to this conversion is US$6.4 million (i.e. the spread between the CBN rate of payment and the NAFEX rate at which we will convert). Therefore, including the expected minimum FX loss, our outstanding receivable bill is effectively US$60 million, a significantly worse balance than at the time of our June 2020 meeting.”



Accugas stated it has agreed not to issue more notices of default following the recent payment, while the firm set a new deadline for settlement of due balance at September 14.


“The monies that we have received are simply not sufficient to enable us to service our debts, pay our ongoing operational costs and conduct the essential, but already much delayed, capital projects that are required for us to continue to supply the gas to over 10% of Nigeria’s installed power generation capacity. Neither are they sufficient for our auditors to maintain our going concern status. Our business therefore remains in an extremely challenged position,” Accugas said.

“Over the course of the weekend, we held a series of meetings with core financial stakeholders regarding the issuance of the Demand Notice on the ‘IDA Guarantee LC’ (International Development Association Guarantee Letter of Credit). They have agreed, after much discussion and following receipt of the N13,610,340,772.09 for us not to issue these notices and instead have set a new deadline for us to receive settlement of the due balance to Monday 14 September 2020.

“We would again reiterate that these monies are required to make urgent debt repayments, fund essential capital expenditures to enable us to continue to supply over 10% of Nigeria’s power generation capacity and to meet our auditor’s standards for going concern.

“Requirement for a dedicated payment mechanism: We believe that, in the absence of any other alternative, it is essential that a dedicated payment mechanism is set up to ensure significant progress is made on netting off the constantly accruing Calabar NIPP receivables.”

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