30th April, 2015
Kazeem Ugbodaga
The Lagos State Government is still owing consortiums N40 billion as a result of the cancellation and buying back of the Lekki-Epe Expressway from the Lekki Construction Company, LCC.
The government also announced the cancellation of toll on the third toll plaza as it formally took full control of the construction of the road after meeting its obligation to LCC by paying N15 billion in two tranches to the company.
Despite that, obligations to big consortiums which signed agreement with the LCC on the project must be met, which amounts to N40 billion, said Ayo Gbeleyi, Commissioner for Finance, at a ministerial press conference on Wednesday.
The consortiums being owed are African Development Bank, Standard Bank, UK; IBTC Stanbic, First Bank, Zenith Bank, Diamond Bank, Fidelity Bank and UBA.
Explaining the rationale behind the cancellation of the project, Gbeleyi said the state government got the approval of the Lagos State House of Assembly for the buy-back of the Lekki-Epe expressway and that the negotiated price for that transaction was N15 billion.
He said the transaction came to closure in June last year, saying that the payment for the transaction, which is N15 billion, was done in two tranches of N7.5 billion each, explaining that “we paid the second tranche last year December. And from that date, government took effective control of the project.”
He added that “after listening to the demand of the residents, the government decided to cancel the initial planned third toll plaza on the road. For the purpose of the PPP project finance, one will not find two sources of finances that is, debt and equity. The equity is provided by promoters of the ventures. The debt is provided by various members-commercial banks and other financial institutions.
“On the road, we have about N40 billion outstanding to these consortium of senior lenders which include eight financial institutions such as the African Development Bank, Standard Bank, UK; IBTC Stanbic, First Bank, Zenith Bank, Diamond Bank, Fidelity Bank and UBA. Thus, even though the state bought out equity interest in the transaction, the debt exposure must still be honoured over agreed contract terms and conditions.
“We must send the right signal to the community of investors and we must respect the sanctity of contract, rule of law and predictability of investment is something that is sacrosanct if we must continue to attract the right investors to the state.”
According to him, close to $20 billion had been spent on other Public-Private Partnership, PPP, transactions ranging from the Lekki Deep Sea Port, the five Independent Power Plants, IPPs, and various Real Estate, including the Eko Atlantic City and others across the state.
“If we failed to respect sanctity of contract, those investors will not bring their money into the country anymore,” he said, adding that government’s policy options were open and “now that we have the equity interest and in consultation with other major investors in that road, the new administration will evaluate the various policy options that are open to the administration and they will decide how long within the residual life of the concession which terminates in 2038.”
Gbeleyi also said government had fine-tuned its financial strategy to ensure that funds it borrowed in the quest of realizing its objective of turning the state to Africa Model Mega city were repaid, saying N100.73 billion has been reserved in the state’s sinking fund reserve.
He stated that N225 billion is currently outstanding in its debt issuance programme, while government had over N100.73 billion in its coffers as at March 2015 to pay part of the debt once the maturity date for the bond is reached.
He said, “15 percent of monthly IGR is transferred to a Consolidated Debt Service Account (CDSA), managed by independent Trustees, with N100.73 Billion accrued in Sinking Fund reserve for repayment of outstanding issues, while coupons are serviced regularly
“The State has accumulated over N100.73 billion in the CDSA for the redemption the outstanding three tranches of Bonds, of which the next redemption comes up in April 2017.”