Pilotage contract: INTELS waives $193m interest on debt — NPA

The Nigerian Ports Authority (NPA) says INTELS Nigeria Ltd. has waived $193 million as part of a deliberate and conscious effort to resolve the stalemate on the pilotage contract with the Federal Government under the last administration.

The NPA said the agreement that culminated in the waiver of the $193,317,556 in accumulated interest on debt owed, which was reached with INTELS, was done in the national interest.

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It assured stakeholders and Nigerians that revenue generation would now increase as a result of the effort, even as it praised the Minister of Transportation, Marine, and Blue Economy, Adegboyega Oyetola, for working tirelessly to ensure that the crisis was resolved.

The Authority pointed out that the minister was unhappy about the needless loss of revenue as a result of the stalemate on the pilotage contract, adding that the minister’s show of concern underscored his commitment and patriotism towards resolving the protracted dispute.

Significantly, the NPA disclosed that Nigeria would save a princely $326.895 million from the agreement it reached with INTELS on the contentious pilotage contract.

The Authority said the federal government would earn a benefit to the tune of over $500,000,000.00, taking into consideration the interest waiver of $193,317,556.

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The arrangement also included the reduction in interest rate on the outstanding debt from a 6-month LIBOR rate of +6.5 percent to a 6-month SOFR rate of +3 percent, the spread of the repayment of the debt over 15 years, with the first two years interest-free, and the reduction in commission from 28 percent to 24.5 percent.

The NPA said, in a statement given to Persecondnews entitled, “Setting the Record Straight in Respect of Service Boat Monitoring Operation in Nigerian Ports Authority: Reinstatement of INTELS Nigeria Limited as Management Agent,” that there was misinterpretation in a section of the media, citing a letter issued by the Port Manager, Lagos Port Complex, Apapa, addressed to shipping companies on the matter.

The authority said: “It has become necessary to put the record straight for the benefit of the public and the generality of stakeholders in the port industry.

“This is also to avoid distortions and conjectures, which may arise by reason of the wrong interpretation of the aforementioned letter.”

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The NPA said it agreed to a waiver of the sum of $100,000,000 being part of the accrued interest as of July 31, 2023, on the indebtedness to Deep Offshore Services Limited under the Phase 4B agreement.

According to the Authority, “a further waiver of the interest accruing on the outstanding debt under the Phase 4B Agreement for the period of two years commencing on July 1, 2023, and ending on July 30, 2023, is estimated in the sum of $93,317,556.

“Reduction of the interest rate on the indebtedness to Deep Offshore Services Limited from the 6-month LIBOR rate + 6.5% to the 6-month SOFR rate + 3% effective from the date of execution of the Supplemental Agreement. The Authority will be saving a total of US$ 326,895,226 as a result of the waiver of part of the accrued interest and the reduction of the interest rate from 6.5% to 3% on the debt over the next 15 years.

“Reduction of the agency commission on pilotage collections from 28% to a lower commission of 24.5% as opposed to increasing it due to the astronomical rise in cost of operations. The proposed spread of the debt of $522,433,453.25 to be paid back over a 15-year period will, of itself, earn the Authority a huge benefit in terms of the preservation of funds to meet its other operational needs over the period.”

The NPA stated that the above facts represented the true position on the matter, adding that “the interest of the authority is to ensure that services are provided in line with international best practices and to enhance the revenue profile of the federal government.

The authority initiated a settlement initiative with INTELS and submitted it to the federal government through the Ministry of Transportation in order to lessen the ensuing loss of revenue and resolve the legal impasse that the dispute had created.

“Intels also made a proposal for settlement on behalf of itself and Deep Offshore Services Nigeria Limited. Protracted negotiations followed, and the parties eventually reached a settlement following remarkable concessions by Intel and Deep Offshore and verifiable gains by NPA and the federal government.

“The parties agreed to the following proposed Terms of Settlement: waiver of the sum of $100,000,000.00 on the outstanding indebtedness of the authority to Deep Offshore Services Limited; a further waiver of interest which may accrue on the outstanding debt to Deep Offshore Services Limited over a period of two years between the 1st of July, 2023, and the 30th of June, 2025, which is estimated in the sum of $93,317,556; reduction of interest rate on the outstanding indebtedness to Deep Offshore Services Limited from Libor+6.5 percent to SOFR+3 percent; and reduction of the agency commission on Service Boat Pilotage collections from 28 percent to 24.5%. The agreement is to be renewed for a further period of 15 years.”

The NPA added that the federal government considered the proposal and approved it on August 18, 2023.

“The federal government further directed that the withdrawal of the cases be carried out by filing Terms of Settlement by the parties and for the Court to adopt the same as the judgement of the Court. The authority was also to discontinue the unconcluded procurement process, which was in disobedience to the orders of the Federal High Court, Lagos.

“The parties executed terms of settlement on the 24th of August, 2023, and the same was adopted as the judgement of the Federal High Court in Suit No. FHC/L/CS/1058/2020 on the 21st of September, 2023, by Honourable Justice A.M. Liman. Arising from the foregoing, the authority also filed a Notice of Withdrawal at the Court of Appeal, Lagos, in respect of the appeal at the Court of Appeal, Lagos.

“Following the judgement of the Federal High Court, Lagos, the Nigerian Ports Authority and Intels Nigeria Limited executed the managing agency agreement, while a Supplemental Agreement with Deep Offshore Services Limited for the Phase 4B Port Development was also executed in view of the fact that the initial agreement was suspended.”

The NPA further stated that the federal government lost humongous revenue in the period the NPA took over the management of pilotage.

According to the NPA, after the expiration of the Service Boat Management Agreement, the authority took over the performance of the service through various departments and divisions. However, due to the constraint of not having the requisite technology to monitor the operations, the expected revenue dwindled, resulting in a drastic reduction in revenue generation for the Authority.

“An analysis of its impact on the authority’s revenue showed a sharp decline from $216 million and $209 million in 2014 and 2015, respectively, under the INTELS agency to $130 million and $99 million in 2020 and 2021, respectively, after the takeover by NPA. The situation in 2023 is even worse, as the collection up to June 2023 was only $55.3 million.”

While admitting that errors were made by the past management of the NPA, it stated, “Prior to the expiration of the Service Boat Monitoring Agreement, the authority commenced the procurement process for the engagement of Service Boat Operations Monitoring Agents.

“Several companies submitted bids, and the Parastatal Tenders Board of the authority considered the proposals and approved forwarding the four companies considered qualified for the next stage of the process to the Ministerial Tenders Board for further procurement processes in line with the requirements of the Public Procurement Act. The four companies are Pacific Silverline Limited, Nexttee Oil and Gas Trading Company Nigeria Limited, ICA Logistics Limited, and Ishasha Investments Limited.

“Shortly after the opening of the bids, Intels Nigeria Limited and Deep Offshore Services Limited instituted a suit no. FHC/CS/L/1058/2020 at the Federal High Court, Lagos, against the Authority, seeking orders of the Court to restrain the authority from engaging new service providers to carry out the monitoring of service boat operations in the Exclusive Economic Zone.

“Intels further claimed that the authority was in breach of the management agreement and sought reliefs including that the contractual status quo remains. Deep Offshore claimed that the termination of the managing agency agreement will negatively affect the process of recovering project costs from the authority.

“The Federal High Court, Lagos, per Justice Oweibo, by an Order of Interim Injunction dated July 24, 2020, restrained the authority from giving effect to the Public Notice calling for Expression of Interest for the provision of the service boat operation from interested entities in line with the Procurement Act.”

It added: “The authority notified Intels Nigeria Limited, vide its letter dated August 5, 2020, of the expiration of the Service Boat Management Agreement on August 8, 2020, and of its intention to take over the provision of the said Service Boat Operation. A public notice was equally issued to all service boat operators, requesting them to deal with the various port management issues. Intels Nigeria Limited again approached the Federal High Court, Lagos, in suit no. FHC/L/CS/1058/2020, requesting an order of the court to restrain the authority from giving effect to the Notice of Expiration served on Intels.

“At the Federal High Court, Lagos Coram Hon. Justice Aikawa granted an Ex parte Order of Interim Injunction on August 28, 2020, restraining the authority from giving effect to the Notice of Expiration of the Agreement pending the determination of the arbitration between the parties.

“By another application dated September 18, 2020, the Authority challenged the jurisdiction of the Court to entertain the suit without first issuing and serving on the authority the mandatory pre-action notice as provided in the Nigerian Ports Authority Act. The Federal High Court, Lagos Coram Oweibo J., notwithstanding the above objection, extended the lifespan of the interim injunction and thereafter referred the matter to arbitration.”

The NPA said that the orders of the Federal High Court should have effectively stalled the procurement process, adding, “However, despite the orders of the Court, the authority continued with the procurement process and forwarded the names of the companies to the Federal Ministry of Transportation. The procurement process was subsequently put on hold based on the advice from the Federal Ministry of Transportation that the authority should comply with the orders of the court.

“The authority was thereafter sued by Pacific Silverline Limited, Nexttee Oil and Gas Trading Company Nigeria Limited, ICA Logistics Limited, and Ishasha Investments Limited at the Federal High Court, Lagos, in suit No. FHC/L/CS/1772/2022, seeking declarative reliefs and an injunction restraining the Authority and the Honourable Attorney General of the Federation from awarding the contract for the Service Boat Operations Monitoring contract in the four pilotage districts to any other entity other than one that participated fully in the procurement process.

“The Federal High Court, on July 11, 2023, upheld the objection of the authority and struck out the suit. The claimants have since filed an appeal at the Court of Appeal against the ruling of the Federal High Court and also applied for an injunction to restrain the Authority from executing the ruling of the Court. The appeal is pending at the Court of Appeal, Lagos, and no date has been fixed for the hearing of the same.

“Messrs Pacific Silverline Limited recently filed another suit at the Federal High Court, Kano, in suit no. FHC/KN/CS/245/2023, challenging the approval granted the authority to settle the cases between the Authority and Intels Nigeria Limited. The Federal High Court wholly dismissed the said suit on the 30th of November, 2023.”

It continued: “In order to mitigate the attendant loss of revenue and surmount the legal impasse created by the dispute, the authority proposed a settlement initiative with INTELS, which was submitted to the federal government through the Ministry of Transportation. INTELS also made a proposal for settlement on behalf of itself and Deep Offshore Services Nigeria Limited. Protracted negotiations followed, and the parties eventually reached a settlement following remarkable concessions by Intels/Deep Offshore and verifiable gains by NPA/the federal government.”