Greenville LNG, a production and distribution company, has cleared the air on the allegation of breaching the gas supply contract with BUA cement, saying that the prevailing situations in the country, such as collapsed road infrastructure, flooding of upstream gas infrastructure, lack of access to foreign exchange and others, has forced the company to engage its customers with a Contractually permitted price review exercise.
The company’s chairman, Mr Eddy Van Den Broeke, disclosed this yesterday in his reaction to a report alleging that BUA plans to file a multi-million dollar lawsuit against Greenville over a contract breach.
According to Van Den Broeke, He stated that out of 45 customers engaged on the same Contractual provision, only BUA cement disagreed with the contractual process.
He further dismissed the claim of alleged contract breach, saying price review is permissible under the Contract, given the prevailing business and financial circumstances in Nigeria.
Van Den Broeke explained that the contractual agreement between his company and BUA gave room for a price adjustment based on the contractual provisions agreed.
He further urged Nigerians to disregard the allegation that the company has a history of reneging on contractual agreements and being involved in Panama paper scandal.
He emphasised that he was never involved in the Panama paper scandal because he does business within lawful means and honesty.
He said Greenville LNG hopes to settle the disagreement with BUA in a meeting slated for December 5th, 2022.
He says, “It is not a breach of contract because not only are we continuing the gas supply to BUA plant in Sokoto but also because we are discussing in good faith on the mutated business and economic conditions that afflict both Companies”.
“We have a clause in the contract which gives room for a price adjustment on account of the nation’s prevailing situations. In this case, we only activated that clause. We cannot explain how it is possible that social media misrepresented so grossly the present circumstances and the conditions of our contract which were not reflected at all. ”
“Without a contractually permitted price adjustment, we would then supply BUA at unrealistic prices for the remaining duration of the Contract and go bankrupt. Of course, every Businessman desires to contain and reduce its costs; in reality, Business works to keep alive. ”
“Greenville has been heavily hit by damaged road infrastructures after the rain season and unprecedented flood: this is a well-known fact to all Nigerians who are similarly affected. Thus, there is an increase in the turn-around time of the truck transportation from South to North. For a supply which takes 5 days we now take 10 days. It means that to provide the same service, we must deploy a double number of trucks on the roads. Also, the non-availability of the primary financial market of foreign exchange for the importation of spare parts for maintenance of trucks and equipment necessary to produce LNG, for importation of consumables not produced in Nigeria and other raw materials sold in foreign currency are the determining factors leading to the increase in gas supply costs.”
“It is completely illogical for foreign investors to get bad press and been thrown in the mud, after the Government policy of attracting foreign capitals in Nigeria; how do you want more foreign investors if anybody could publish anything in the papers? Freedom of speech is sacred, but laws must be respected.”
“I cannot intervene myself; the Government is responsible for policy implementation. I cannot be involved in the decision of the President or Central Bank of Nigeria regarding Foreign Exchange. Of Course, we have a clause in the contract which says we can adjust the prices in such circumstances. It is up to private partners in Business to make them continue to operate. If you have no access to US Dollars, what do you do? Produce our spare parts here, make our banking in Europe in Naira: but no, you cannot! So, if you don’t understand this in Business, something is wrong. It means you want to take exclusive advantage of your political support. This happens in Russia with Oligarchs, and you see the consequences: it should not happen the same in Nigeria!”
“Moreover, I must tell you that 100 percent of our other customers have agreed with the price adjustment except for BUA”.
“Every industry has this problem, no matter whether the industry is in the energy sector or not, it’s the same. What I read in the press of what BUA wants us to do till the end of the contract in 2026 is to keep supplying at fixed price: that means that very soon, we will supply at Sokoto for free. Good press for BUA, but according to my principles in Business, it does not work that way.”
“BUA should embrace us, not criticize us. In the last 10-months, we have received 20 per cent of our feedstock capacity but delivered 50 percent to BUA without changing the price.
“We are the first LNG for the domestic market in Nigeria; this is the first LNG trucking in the Country. That means we have reduced the price of logistics all over the country. Six months from now, LNG will be available in all the country so that all truckers can get LNG from us. In the transport sector, we will have hubs all over the country.
There are CNG stations in the south, but they cannot come to the North because of the transportation cost. We reduce Energy costs to the North and revive moribund industries there: is this why press called us crooks?”We want a contractual situation where simply both partners act reasonably; considering the case in the last year, there have been costs increases in all of our investments: most of the equipment come from China; transportation by sea freight to Nigeria has increased by over 300 percent, the equipment price has increased by 20-30 per cent. Here we have a huge problem. Truck pipelines: we are completely dependent on the state of the roads, so in the rainy period, the road from Rumuji to Warri has been completely flooded and it is no longer available for heavy load transportation by truck. Though now being reinstated by Setraco, but it will take time. So you have to understand that a turnaround time of 5 days to Sokoto is now 10 days. So, if your buyer doesn’t understand that, what do you do? And then, Cement has increased the price from N40,000 to N80,000 per Ton long before we asked for any price adjustment. Not only BUA, everybody. This price of N80,000 doesn’t even include delivery price to the customers which has also increased astronomically because of the collapsed road infrastructures.
“Moreover, we cannot get US Dollars but we need US Dollars to work; the only thing we have to do is access foreign exchange from the parallel market. So, what do we have to do, supply to BUA for two years and die? The question is, both Parties must be reasonable. And again, this is not a breach of contract as we are continuing the supply”. “If the disagreement continues, we will jointly appoint an expert who will have to evaluate the situation and decide. This is what the contract says.”
Earlier, some media had reported that BUA is eyeing an N50 billion naira legal suit against Greenville LNG for allegedly breaching a contract to supply gas and arbitrarily increasing prices despite contractually agreed on oil-indexed pricing for any price change. Media reporting on contractual provisions is inaccurate, erroneous and misleading.
The offensive campaign of calumny against Greenville did not reckon with the Greenville’s huge investments in Nigeria as a pioneer business which has firmly laid robust foundation for Nigeria’s development in oil and gas sector. Greenville’s business objective notwithstanding crippling economic odds is to make gas available and rescue moribund companies all over the country and aid economic development of the country. This avowed business objective is the more reason why Greenville refused to interfare or increase prices for BUA Cement since the consumation of the contract or invoked any clause therein whose application was even made imperative by the the changing economic dynamics of the country.
The entirety of these obvious factors cannot be suppressed by political pressure now being foisted on the company by BUA Cement. This is neither good for business nor good corporate relationship.