Lagos Debunks State Assembly Takeover Report Of LCC

…Says approval was for loan conversion

Lagos State Government, Tuesday, debunked the reports that the
State House of Assembly granted it the go-ahead to take over the
Lekki Concession Company LCC.

The State Commissioner for Information and Strategy, Mr. Gbenga
Omotoso, who debunked the statement, described it as “wrong.”

According to Omotoso, “The government did not make such a
request. Its request was to convert the African Development Bank
loan from a private sector (commercial) loan to a sovereign (public
sector) loan, which attracts a lower interest rate. This will
enable the company to make some savings.

“The government, in fact, acquired the full shares/equity of the
former owners of the company in 2014. There was no need to take
such a request to the House.

“Following the Lagos State Government’s full ownership of LCC in
December 2014, the loan became eligible for conversion to a
Sovereign facility with an attendant significant lower interest
rate of LIBOR plus 80 basis points and extended tenor.

“In the recent past, there have been discussions amongst
LCC/LASG, AfDB and the relevant Federal Government Ministries and
Agencies concerning conversion of the loan to a Sovereign facility.
Upon the completion of the conversion, there will be a significant
reduction of applicable interest rate and extended tenor.

“The sovereign loan conversion will also lead to a crash of the
applicable interest rate on the facility to circa 1.8 per cent p.a
compared to the current interest rate of circa 4.12 per cent
p.a.

“Besides, the conversion will increase the tenor of the facility
from the current five years to 15 years. This has the impact of
spreading the cash flow impact by an additional 10 years.

“One of the requirements stipulated by the Federal Ministry of
Finance for the loan conversion is the approval of the Lagos State
House of Assembly. This is the approval given by the Lagos State
House of Assembly on August 5, and NOT an approval for taking over
of LCC, as reported. As stated earlier, LASG took over the shares
of the previous private shareholders of the company since December,
2014.

“Therefore, the State Government, after due consultation with
all major stakeholders, entered into an Amicable Settlement Option
with the shareholders of LCC with a view to bringing the project
back on the path of long-term sustainability, acquired the full
shares/equity of the previous owners, thereby assuming full
ownership of LCC in December, 2014.

“This approach would particularly allow the Government to take
full control over the determination of toll rates in order to
continue to make them affordable.”

LCC is a Special Purpose Vehicle set up specifically to execute
the Eti-Osa/Lekki-Epe Toll Road Concession Project. The project is
designed to deliver essential road infrastructure and services
along the Lekki Peninsular of Lagos.

The Lekki Toll Road Concession was conceptualized as a
Public-Private Partnership (PPP) scheme, and uses the
Build-Operate-Transfer (BOT) model of Infrastructure delivery. The
Concession is for 30 years, following which the assets will be
transferred to the Lagos State Government.

According to Omotoso, “The Project, given its pioneering nature,
had some underlying assumptions and market indicators upon which
the transaction was concluded and which have since drastically
changed in a manner that can no longer be sustained in its previous
form.

“The initial Financial Model contemplated three (3) Toll Plazas.
This is the basis for the initial lending and repayment in the
Model. Given the non-tolling of the Conservation Toll Plaza (around
Chevron) and the complete cancellation of the third Toll Plaza
(proposed to be located around the Lagos Business School), the
financial sustainability of the project suffered a setback.”

…Says approval was for loan conversion

Lagos State Government, Tuesday, debunked the reports that the
State House of Assembly granted it the go-ahead to take over the
Lekki Concession Company LCC.

The State Commissioner for Information and Strategy, Mr. Gbenga
Omotoso, who debunked the statement, described it as “wrong.”

According to Omotoso, “The government did not make such a
request. Its request was to convert the African Development Bank
loan from a private sector (commercial) loan to a sovereign (public
sector) loan, which attracts a lower interest rate. This will
enable the company to make some savings.

“The government, in fact, acquired the full shares/equity of the
former owners of the company in 2014. There was no need to take
such a request to the House.

“Following the Lagos State Government’s full ownership of LCC in
December 2014, the loan became eligible for conversion to a
Sovereign facility with an attendant significant lower interest
rate of LIBOR plus 80 basis points and extended tenor.

“In the recent past, there have been discussions amongst
LCC/LASG, AfDB and the relevant Federal Government Ministries and
Agencies concerning conversion of the loan to a Sovereign facility.
Upon the completion of the conversion, there will be a significant
reduction of applicable interest rate and extended tenor.

“The sovereign loan conversion will also lead to a crash of the
applicable interest rate on the facility to circa 1.8 per cent p.a
compared to the current interest rate of circa 4.12 per cent
p.a.

“Besides, the conversion will increase the tenor of the facility
from the current five years to 15 years. This has the impact of
spreading the cash flow impact by an additional 10 years.

“One of the requirements stipulated by the Federal Ministry of
Finance for the loan conversion is the approval of the Lagos State
House of Assembly. This is the approval given by the Lagos State
House of Assembly on August 5, and NOT an approval for taking over
of LCC, as reported. As stated earlier, LASG took over the shares
of the previous private shareholders of the company since December,
2014.

“Therefore, the State Government, after due consultation with
all major stakeholders, entered into an Amicable Settlement Option
with the shareholders of LCC with a view to bringing the project
back on the path of long-term sustainability, acquired the full
shares/equity of the previous owners, thereby assuming full
ownership of LCC in December, 2014.

“This approach would particularly allow the Government to take
full control over the determination of toll rates in order to
continue to make them affordable.”

LCC is a Special Purpose Vehicle set up specifically to execute
the Eti-Osa/Lekki-Epe Toll Road Concession Project. The project is
designed to deliver essential road infrastructure and services
along the Lekki Peninsular of Lagos.

The Lekki Toll Road Concession was conceptualized as a
Public-Private Partnership (PPP) scheme, and uses the
Build-Operate-Transfer (BOT) model of Infrastructure delivery. The
Concession is for 30 years, following which the assets will be
transferred to the Lagos State Government.

According to Omotoso, “The Project, given its pioneering nature,
had some underlying assumptions and market indicators upon which
the transaction was concluded and which have since drastically
changed in a manner that can no longer be sustained in its previous
form.

“The initial Financial Model contemplated three (3) Toll Plazas.
This is the basis for the initial lending and repayment in the
Model. Given the non-tolling of the Conservation Toll Plaza (around
Chevron) and the complete cancellation of the third Toll Plaza
(proposed to be located around the Lagos Business School), the
financial sustainability of the project suffered a setback.”