ALSCON: Pressure on NCP to Cancel BFIG Offer
Rusal owes $100m judgement debt
By Eziuche Ubani and Cletus Akwaya in Abuja
There were strong indications in Abuja that some Presidency officials are putting pressure on the National Council on Privati-sation (NCP) to cancel the purchase of Aluminium Smel-ter Company of Nigeria (ALSCON) for what was described as adverse security and technical reports against the preferred core investor, BFIGroup of the United States.
"The Federal Government should not let such a company mess up a prized national asset like ALSCON," a Presidency source said. BFIG emerged the preferred core investor following the auction held on June 14 in Abuja. It submitted a final bid of $410 million.
The other bidder Rusal (Bratsk) Aluminium of Russia was disqualified for submitting conditional bid, a strategy the NCP has always disallowed.
The disqualification of Rusal, also said to be facing financial crisis over $100 million debt obligation in its international operation, paved the way for the victory of BFIG.
For the purpose of the ALSCON bid BFIG used a special purpose vehicle (SPV), a company known as Marintech Divino Group, with headquarters at 660 South Figueroa Street, Suite 1110 Los Angeles, California. One Dr Reuben Mietamuno Jaja, who is said to be former law enforcement official with California State Banking Commission, leads both companies.
Sources said in Abuja that some powerful Presidency officials are not very comfortable with the BFIGroup, citing lack of requisite competence to possess and run the plant.
"Considering the amount spent by the Federal Government to build the aluminium smelter plant, the government should not allow any sale that may jeopardize the strategic interests for which the plant was conceived," the source said.
In line with that, some presidency officials are said to be putting pressure on the NCP to invite Rusal back to negotiate with the Bureau for Public Enterprises (BPE). The rationale for the move, THISDAY gathered, is to ensure that regardless of the amount realized from the sale, the buyer should have the technical competence to run the business. The presidency officials are said to be making their point by using the transaction with SOLGAS, which took over the Ajaokuta Steel Complex, after dangling a huge purse before the government. Investigations by the Senate were to later reveal that the company did not have the know-how nor the portfolio it claimed to have. Coincidentally, BFIG acted as financial advisors to SOLGAS in the Ajaokuta transactions.
If the Rusal group returns to the transactions, it will be the second time it is doing so. Shortly after its disqualification, the Presidency, THISDAY gathered, directed the Russians to meet with the NCP for negotiations. Government is said to have done so after a background check on BFIG came to light. Rusal did not make much use of the opportunity, as it insisted on the conditions it posted at the auction earlier while reducing its bid offer.
Buoyed by that, the BPE wrote a letter to BFIG affirming its confirmation as the preferred bidder. But that has not assuaged the fears of some Presidency officials. Pressure is said to be mounted on the NCP to cancel the sale.
BPE officials, however, said they are unaware of any invitation to Rusal, As far as the sale of ALSCON is concerned, the matter is closed, according to Mr Charles Odenigbo, Head of Communications, Marketing and External Relations of the BPE. "If there is anything like that, may be somebody is flying a kite," he said. "It has not become policy where we are involved. Until it becomes policy issue, we at BPE do not know."
BPE dispelled insinuation that BFIG would not have passed the first stage of the bid process, had the agency conducted due diligence on the bidders.
"If you qualify from our evaluation of all the documents you are expected to submit, what is due diligence?" he asked. "We have a standard we follow for the past 12 years. We followed them."
He confirmed that there are misgivings about the sale to BFIG, which he said is part of the process, but wondered why people did not come forward if they had information on the company. "Why did people wait until the bids were opened? Why did people not raise these questions about other sales in the past?" Odenigbo asked.
The BFIG is listed by the BPE as a "capital source, investment and infrastructure development company based in Los Angeles California." It claimed it bidded for ALSCON with "Daewo International (America) Corporation. The group's net worth is put at $613 million, and over $500 million in private placement funds.
On its part, Rusal claims to be the second largest aluminium producer in the world with interests and facilities spread in places like Russia, Armenia, Romania, Guinea and Ukraine. These include four aluminium smelter companies, and alumna refineries. Rusal claims it employs 70,000 people in four continents, and earned no less than $4 billion in 2002.
Yet Rusal may be facing a financial crisis over debt obligations in its international operations.
One of such commitments is a judgement debt of $100m which a London court ordered it to pay to the Zug-based aluminium trader, Aldeco. The amount was ordered paid through its smelter unit, Krasnoyarsk Aluminium Plant for failure to honour a metal trade contract.
THISDAY checks revealed that the order, still pending since it was issued November 24, 2003 by Justice Jack of the Queens Bench Division of the High Court, resulted from moves by the Russian company to terminate a contract with its representatives in Guinea over a fee claim of $3.5 million.
According to the Russia Journal Daily in its edition of March 18, Rusal's Chief Executive Officer, Alexander Boulygin, received the "sharpest rebuke ever issued by a judge against Senior Rusal executives". The case in question involved Rusal scheme to gain control of the Friguia bauxite and alumnae complex in Guinea.
Three men - Karim Karijan, Safwat and Jack Nounou - operating under a name Tekron Resources, a Caribbean registered company, had been hired by Guinea Investment Company(GIC), then owners of Friguia refinery in November, 1999 to provide their services in " developing and procuring the execution and performance" of various provisions for the effective operation of the Friguia refinery.
When Rusal acquired the refinery in late 2002, it attempted to terminate the contract which was to have run for 25 years on grounds of non-performance, a claim it could not sustain before the court.
In the judgement copiously quoted by the Russian newspaper, the judge held that "on the evidence before me they (Rusal) have not only failed, but have secured indirect evidence that the government considers that Tekron behaved properly in its relations with the government."
The newspaper also reported that "contract revocation claims against Rusal, involving other metal trade agreements by its smelter units, are pending in Sweden, and other jurisdictions. Lawyers for the claimants say the unpaid fees and commissions total several million dollars.
Rusal in refusing to pay the money appealed against the case which is still pending in a London court.
The pending case, THISDAY checks revealed, is coming years after Rusal had in 2001 refused to pay for environmental pollution around its plant in Russia in a programme initiated by the government to resettle residents affected by pollution.
British Broadcasting Corpora-tion (BBC) had in a report on June 30, 2001 stated that Bratsk Aluminum Plant was emanating "a strong acid, hydrogen fluoride" from its 40-year old plant, adding that the gases had impact on the content of calcium in human bones and cause bronchitis.
It said the residents should have been relocated from the village in 1975 but the process began only in 1994. By 2001, 643 families had been resettled, the BBC report said.
Although the Russian Govern-ment had approved the resettlement programme to be financed equally by government and Rusal, the firm failed to meet its own side of the obligation, for lack of funds, the report added.
Considering the huge environmental problems associated with ALSCON, analysts who spoke with THISDAY doubted the willingness of Rusal to address the environmental issues had it emerged as the core investor in the plant.
"ALSCON requires a company that would take more than a passing interest in environmental issues as core investor otherwise it will draw the ire of the community," a member of the Ikot Abasi community told THISDAY on condition of anonymity.
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