N1bn consultancy fee, other expenses raise dust at Abuja Disco
At the Abuja Electricity Distribution Company (AEDC or Abuja Disco) Plc, seven directors, including the Chairman, earned over N183m as salaries and got another N33.3 million as board expense in 2014, a report has revealed.
The Abuja Disco was among the 10 power distribution companies privatized in November, 2013. It is now owned by KANN Utility Company Limited (60 per cent), BPE (32 per cent) and Ministry of Finance Incorporated (8 per cent).
The AEDC Chairman is Amb. Shehu Malami while the directors are Benjamin Ezra Dikki (Director-General at the Bureau of Public Enterprise, BPE), Felix Ohiwerei, John Albert Jones, Michael Tarney (British), Siyanga Malumo (Zambian) and Neil Croucher, a South African who is the Managing Director.
AEDC generated N36bn in 2013, N48bn in 2014 yet declared losses
A KPMG Professional Services audit report obtained exclusively by the Daily Trust reveals that the Disco raked in N36.025 billion in 2013, a 42 per cent increase from the N25.345bn realized in 2012, the pre-privatisation year.
Despite the increase in revenue, the Disco declared a loss of N13.789m in 2013, a 32 per cent decrease from the N20.216m loss in 2012 after the firm took over the Disco for two months before declaring the financial status for December 31, 2013.
The revenue rose to N48.097bn by December 2014 and about 34 per cent higher than that of the first year. Still no profit was declared as its loss rose to N25.971m, signifying an 88 per cent loss increase.
Board meetings gulped N33.3m in 2014
Between November and December 2013, the Disco board members (the chairman and six directors) had meetings four times. While the federal government (BPE) representative, Mr. Dikki was represented by his alternate Director, Mr Audu Mohammed Uba all through, Malumo attended only the last meeting held on November 29. Another Director, Ohiwerei was not present but only attended the last two meetings by proxy.
The absence of directors syndrome surfaced again in the 2014 report. Out of the six meetings, two directors defaulted significantly. While Mr Malumo attended that of May by proxy and was absent in November, Jones attended both October and December meetings by proxy.
In 2014, despite the loss status of AEDC, a new expense sheet surfaced for the directors, as ‘board expenses’ amounting to N33.323m spent in the year. There was no such expense in the 2013 report when the board sat four times in two months.
How administrative expenses rose by N11m in 1 year
Abuja Disco’s administrative expenses stood at N12.933m in 2012 but rose slightly to N13.668m in 2013 after privatisation. The federal government had funded the Disco with N1.662bn in 2012 before privatizing it. The previous administrative cost almost doubled in 2014 as it shot up to N24.927m.
In 2014, the Disco paid N42.158bn to purchase and distribute energy across Kogi, Abuja, Nasarawa and Niger states. It had spent N31.511bn for the same energy cost in 2013.
KPMG, consultants collect N1bn in 2 years
The Abuja Disco has spent hugely on consultancy services after takeover. While it paid N355.450m as consultancy fees in 2013, it spent another N52m as auditor’s remuneration. The auditor’s (KPMG) fee in 2012 before the PHCN handed over was about N8m.
The consultancy fees further rose to N560.602m in the second year, while the auditing firm got N46.607m.
Workforce downsized, 1,358 on contract
Staff and related spending reduced from N9.389b from the 2012 figure to N8.573bn in 2013 after the firm excised ex-PHCN staff and engaged 3,601 employees as contract staff. These workers got N8.2bn as salaries and N371.8m as pension remittance.
The spending was further reduced to N7.128bn in 2014 from the N8bn spent in 2013. This is because it retained 2,243 employees as full staff whose performance it deemed satisfactory after the six months contract elapsed in April 2014. They got N6.849bn as salaries and N279.808mn pensions.
Statistics show that in 2014, 779 employees (the lowest cadre) received between N200,000 and N1.2m annual salary each, another 609 workers got N2.2m to N3.2m, while the two highest paid employees received N17.2m to 20.2m. Only 15 employees among the over 2,000 workers each got above N8.2m for the year.
Chairman, 6 Directors got over N183m in 2014
The Chairman and other directors received N24.556m for the two months of November and December after the AEDC took over in November 2013. The highest paid director, Amb. Malami got N5.667m, while five other directors received between N3.5m and N4m. One other director, who could be the BPE representative, Mr Dikki or his assistant, Mr Uba received no salary in 2013.
The same officials received N183.983m for the 12 months of 2014, the report said. The breakdown indicates that Mr. Malami had N36.330m penned to his name in 2014.
The highest paid director got N24.220m in 2014, as stated in the report sent to the Nigerian Electricity Regulatory Commission (NERC) recently.
The exact earning nature, in Abuja Disco, of the DirectorGeneral of the BPE, Mr. Dikki, who is always represented by the alternate Director, Uba is not clear. Dikki earn salaries at the BPE as director, but the AEDC seat entitles the occupier to an annual salary range of over N24m.
Liabilities on accrued assets in AEDC operations
In the 2014 report, Abuja Disco’s assets rose by 10 per cent from N96.028bn when it took over to N105.530bn. In contrast, its liability exploded by 645 per cent. The liability, which was pegged at N3.030m at take-over stood at N22.590m in 2014.
Salaries gap, poor networks upset union
In its proposed 10-year tariff plan submitted to the NERC recently, the Disco said it had spent only N2.3bn to improve its networks. But under the privatization terms, it is expected to have invested N39.8bn in strengthening its networks within five years (by 2017). But the proposed tariff plan would seem to address the lag in the investment requirement in the privatization terms, as it shifts a N73.3bn spending forecast to 2024.
The Nigeria Union of Electricity Employees (NUEE), especially the workers of the Abuja Disco, last Tuesday protested poor remuneration and welfare issues at the AEDC headquarters in Abuja, local news agency reported.
The Deputy President, Northern zone of the union, Mr Isaac Abegye, said the privatisation of the sector had brought untold hardship to the electricity employees. He took to Facebook to post reactions on an online report of the salary disparity shortly before the union’s protest.
“The exposition of the fraud being perpetrated by the 'new owners' of the AEDC cuts across the country. From the Yola Company through to P/H, Lagos to Kano, etc, if investigated, will unearth the sordid and mind-boggling happenings in these privatised power utility companies,” Abegye posted.
As the reactions swell on the social media, another NUEE member, Northern zone, Adamu Naallah posted, “Not only that, the companies are paying three different types of salaries to the company workers. Example: the inherited PHCN workers salaries were slashed by more than 50 per cent, while those recruited by the companies are being paid between N750,000 and N1.2m.
“While workers are working just like slaves, the electricity consumers throughout the nation are paying for what they did not consume. I think it is high time the federal government did something to arrest the situation.”
Daily Trust’s analysis shows that while the highest paid low to middle cadre employee at the AEDC gets about N1.6m monthly, the highest paid director takes home N12m monthly, indicating over a N10m disparity in salary level in its staffing structure.
Other issues raised by the union beside the huge disparity in salary structure include poor medical care, and lack of work tools like vehicles and ladders. Electricity customers kick The National Electricity Consumers Advocacy Network (NECAN) recently scolded Abuja Disco for “inefficient” operations and allowing heavy collection losses while seeking tariff increase.
Speaking through its Assistant National Secretary, Mr Obong Eko, NECAN said, “We noticed that privatization will lead to efficiency but we are here in Abuja and we conducted a survey where we discovered that AEDC is not doing enough.
"Because of inefficiency in the Disco, they have NEPA II engaged to work even when they are not on their payroll and these people invade communities to collect monies and defraud customers,” Eko said.
The Daily Trust learnt that the Presidency has ordered an audit of the 11 Discos to determine their efficiencies before the next tariff increase by January 2016.
We are investigating high pay, operational conflicts AEDC
The management of the Abuja Disco said the alleged pay disparity, especially on the directors’ emoluments, and conflict of interest by a consulting firm rendering services to the company were misleading.
The board and management, in a statement obtained by the Daily Trust and published last Friday said, “No member of the AEDC Board of Directors and management staff receives N36m remuneration as quoted in the story.”
The Disco said it would immediately start investigations on that, “We will, with immediate effect, institute investigations through independent auditors on the allegations of conflict of interest of the consultancy firm mentioned in the article.”
On issues raised by employees on poor work tools and others, an official accused the union officials of peddling allegations. He accused officials of the company’s union chapter of delaying the endorsement of staff rules and regulations the management drafted to ensure the workers were always taken care of.
He argued "the protest was uncalled-for as the union is aware of our efforts to improve work conditions."