REPUBLIC OFTHE GAMBIA
MINISTRY OF FINANCE AND ECONOMIC AFFAIRS
THE QUADRANGLE, BANJUL, THE GAMBIA.
MF/C/16A /Part 6(32)
8 December, 2014
The Secretary General &
Minister for Presidential Affairs
Office of The President
ENERGY SECTOR REFORM
As part of the Energy sector reform by Government, the financial position of NAWEC was identified as a key challenge that requires urgent attention. An audit exercise carried out revealed that the Company’s liabilities as at 31st October 2014 stands as follows:
Local Bank loans and Overdraft D1.1 billion
Creditors (Mainly heavy fuel supplies D2.9 billion
Long term loans (due Installments) D5 million
Tax liabilities (VAT and Corporate) D580 million
Total current liabilities D4. 585 billion
It should be recalled that currently NAWEC is enjoying grant facility from ECOWAS to finance heavy fuel costs which constitute about 60% of total operating costs and this grant will phase out in February/March 2015. It is critical that this facility is extended or a new source of grant financing is available for NAWEC otherwise the company will not be able to meet its obligations. We are already working with the World Bank and the African Development Bank for continued grant support.
MANDINARY FUEL DEPOT (Gam Petroleum Storage Facility Company limited)
The fuel depot in Mandinary is a strategic infrastructure for the energy sector and any reform for the sector must take into account the role of this asset. Currently the share holdings for the depot, is as follows:
Social Security and Housing Finance Corporation (SSHFC) 31 %
Gambia Ports Authority (GPA) 10%
Gambia National Petroleum Company (GNPC) 7 %
Mohammed Bassy (Private Sector) 30.8 %
Fadi Mazegi (Private Sector) 10.3 %
Premier Investment Group (PIG) (Private Sector) 1 %
It has come to our attention that by the existing storage agreement signed between Gam Petroleum Storage Facility Company and Total International, the depot is used as collateral. It has further come to our attention that the Management of Gam Petroleum Storage Facility Company had supplied NAWEC out of the stock own by Total International without authority from Total International. The value of these supplies is put at $24,188,951.05 and Total International are demanding full and immediate payment without which they will exercise their rights under the storage agreement that means attaching and selling the depot and if this happens, all shareholders including Government will lose their shares and ownership.
The Private Sector shareholders who control the Management and are therefore responsible for the stocks of Total International have indicated that the said stocks were supplied to NAWEC and the amount of $24,188,951.65 is part of NAWEC’s total liability with Euro Africa Group, estimated $64,000,000. They expressed their willingness to dispose of their shares and use the proceed to settle the liability with TOTAL.
One other option for the valuation of the shares in Gam Petroleum storage Facility Company is to base it on nominal value or historical cost which was €350 per share.
Another share valuation option is “Revaluation”.
Finally, there is currently an audit exercise going on for the activities of the depot and any findings could be linked with the debt settlement between NAWEC/Government and Euro African Group.
Against the background of the above information, the Ministry of Finance and Economic Affairs after due consultations with the Ministry of Energy, The Central Bank and NAWEC, hereby put forward the following recommendations for your consideration and directives.
In our considered view, this would be the most prudent way to move forward.
- It is hereby recommended that the local bank loans and overdrafts of NAWEC be restructured over a five (5) year period at an interest rate not exceeding 15% per annum. This will require engaging all the banks with a restructuring proposal guided by these parameters. This option will safe NAWEC from the current expensive charges of 20% or more. They are right now simply working for the banks.
- Considering that the depot is a strategic asset for the country and indeed for the energy sector, it would be desirable for Government through its Agencies to take control of the depot before it is forfeited to Total. In this regard, it is hereby recommended that Government through its Agencies (SSHFC, GPA and GNPC) buy out the Private shareholders who are willing to use the proceeds to settle the liability with TOTAL International.
- To engage NAWEC’s creditors and agree on payment terms similar to that of the Banks. In the reform process of NAWEC, it is important to clean up their balance sheet so that it puts them in a position to be able to meaningfully negotiate Power Purchase Agreements. In the past, many proposals by private sector investors in power generation have been stalled by NAWEC’s inability to provide guarantees. But restructuring their balance sheet will overcome this challenge.
- After entering into repayment agreement with banks and creditors, NAWEC’s total revenue receipts to be domiciled in a Central Bank account from where due installments, salaries, operating costs etc. will be paid.
- To enhance NAWEC’s cash flow and to reduce its operating deficit, it is strongly recommended that the already assessed tariff increase of 12% be implemented with effect from 1st January 2015.
KEBBA S. TOURAY Dr. EDWARD SANNEH
MINISTER, FINANCE & ECONOMIC AFFAIRS MINISTER OF ENERGY
Editors note: For the past forty eight hours, we have been trying to reach the shareholders listed in the said report for comment but without much success.