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Seven Energy has debunked allegations of perceived improper management of corporate resources saying that its current challenges are functions of certain macro-economic developments which include the non-payment for gas by power sector customers, the disruption to oil production due to the continued shut-in at Forcados, and the foreign exchange challenges making it very difficult to convert from Naira into dollars to satisfy dollar obligations.
“These are not mis-management issues, but macro-economic issues that are outside of the control of the company”, Seven Energy stated in response to BusinessDay enquiries, adding that the company is working “pro-actively with all of its stakeholders, including its lenders towards a restructuring plan that it remains confident will allow the business to continue with an appropriate and sustainable balance sheet”.
In an April 10 liquidity update on its website, Seven Energy stated amongst other things that its short term liquidity has been “severely affected by delay in the finalisation and effectiveness of the World Bank Partial Risk Guarantee which will indemnify Seven Energy for up to $112 million of invoices for gas supply to Calabar NIPP, the Group’s principal gas off-taker”.
Nigeria has been plagued by huge gas debts which recently led to some gas producers and suppliers threatening to cut off supplies to power generating stations (GENCOs) if urgent steps were not taken to address the nearly N1 trillion aggregate debt threatening to obliterate the entire gas-to-power value chain.
“Gas suppliers are being owed significant amounts of money for gas supplied to the power sector even before the completion of the privatisation. Since 2014, after the privatisation, new gas debts have arisen with no payments to gas suppliers by the GENCOs, simply because the government, through NBET has been unable to pay GENCOs for power generated”, said Odion Omonfoman, energy analyst and chief executive, New Hampshire Capital.
The revenue gap in the industry has grown too large and needs an urgent solution. There is a case of a single gas supplier that is being owed as much as $32 million according to sources.
“The debts are now so much that it has become unbearable for the gas producers to continue supplying gas for which they are not being paid and where payments are being made, a significant portion is in Naira”, said Dolapo Oni, Head, Energy Research, Ecobank Development Company (EDC) Nigeria Ltd.
The federal government announced the approval of N701 billion fund for power sector but clarified that it would not be used to settle legacy debts, which have now been estimated to cross the N1 trillion mark. However, the fund would be used in making payments for gas consumed by power generation companies (GENCOs) beginning from the month of January 2017 so as to guard against liquidity challenges previously experienced that are now threatening to shut down the entire Nigerian electricity supply industry.
Seven Energy also clarified the appointment of Manish Maheshwari as Chief Executive Officer who succeeded Phillip Ihenacho.
“Ihenacho, who was the Chairman of Seven Energy, agreed to serve as interim chief executive until such a time as a permanent chief executive who would be resident full-time in Nigeria could be found. This was supposed to be for a six month to one year period, but Phillip ended up serving over five years.
The recruitment for a new chief executive has been on-going for over a year, and Ihenacho was involved throughout in the process and has worked actively to support the transition, which he firmly believes is in the best interest of the company. He has stepped off the board temporarily so as to avoid any potential conflict of interest whilst the restructuring/recapitalisation of Seven Energy is completed, as he is actively involved in the recapitalisation as a potential investor”, according to the company statement.
Manish Maheshwari has over 22 years’ experience in the oil and gas sector, most recently as Chief Executive Officer of Essar Exploration & Production, and prior to that as Managing Director of Hindustan Oil Exploration Company Limited, a subsidiary of Eni SPA.
FRANK UZUEGBUNAM
