Fortune News | Jan 23,2021
The Ethiopian Petroleum Supply Enterprise (EPSE) is in a bid to recoup a share of over a quarter of a billion Birr in accounts receivable from a businessman with ties to two local oil companies that have failed to make due payments on petroleum products received three years ago.
Judges at the Federal High Court have ordered the seizure and auction of assets belonging to Tewodros Tewolde, owner of Bilen Petroleum, a major shareholder of Zagol Petroleum and an executive at Genet Petroleum. On February 5, 2021, judges ruled in favour of the Enterprise and ordered the seizure of assets registered under Tewodros. The Judgment Execution Directorate of the High Court issued a public notice on July 28, 2021, announcing the auction.
Tewodros owes the source of his wealth to his family; his father was a sesame trader in Humera, where he was born. Tewodros allegedly owes 370 million Br in accounts payable to the Enterprise, a claim he rejects, claiming that much of the payment has already been settled.
Until September 2020, Tewodros spent over a year under arrest for alleged corruption involving oil supply company officials, including Tadesse Hailemariam, its CEO, and Abayneh Awol, fuel supply manager. Judges at the Federal High Court dropped the charges brought against all defendants in November 2021, after an appeal from the Attorney General Office to prosecute a civil case.
The Enterprise subsequently took the case to the civil bench of the High Court, demanding from Tewodros the settlement of 454 million Br in accounts receivable.
Tewodros settled 86 million Br of the payment, including 40 million Br worth of bank guarantees from the Bank of Abyssinia issued in 2018; 30 million Br in payments from Tiliksew Gedamu, a businesswoman who acquired a gas station associated with Tewodros; and 16 million Br from other sources. An additional 19 million Br in accounts receivable is expected from the sale of fuel trucks to the businesswoman.
The assets up on the auction bloc include 90 shares with Zagol Petroleum at a par value of 100,000 Br and a real estate property in Nifas Silk District up for a threshold price of 961,000 Br.
Officials at the Enterprise say the majority of the payments remain uncollected.
"These are the only assets we have discovered thus far," said Tigist Nigussie, head of legal services at the Enterprise, who claims that other fuel trucks registered under Tewodros or his companies were tracked down but are off-limits as they are all being held as collateral by banks, including the Bank of Abyssinia.
When companies default on payments, first creditors, including banks, get priority to have their loans repaid, according to Tadesse Lencho (PhD), assistant professor of law at Addis Abeba University.
"The subsequent creditors are unsecured because the first ones take the assets as collateral," says Tadesse.
Executives at the Enterprise say such circumstances are behind their recent decision to switch over to a new payment modality, which requires distributors to provide bank guarantees for the petroleum products they buy. Previously, the distributors were provided with the products on a credit basis, to pay back the full amount within a month following the sale.
However, with special agreements, the Enterprise would sometimes extend the payback period.
Around three dozen distributors are receiving the four petroleum products the Enterprise imports: benzene, diesel, heavy fuel oil, and jet fuel. The distributors operate under the supervision of the Petroleum & Petroleum Products Supply & Distribution Regulatory Authority, delivering over 70 billion Br worth of petroleum products annually. Up to 300 trucks transport the petroleum products to Ethiopia from ports in Djibouti, where the mandate of the Enterprise ends and the Authority begins its supervision.
The three companies where Tewodros is involved are among these companies that emerged into the scene over the past five years. He is a major shareholder of Zagol Petroleum, a retailer and active client of the Enterprise. It was founded in 2017, with three shareholder' equity contributions of 20 million Br in initial capital.
Genet Petroleum owes 264 million Br in accounts payable for oil supplies it received in credit in early 2018, after having settled part of its initial 350 million Br payment. Bilen Petroleum, which is under the ownership of Tewodros, has received 104 million Br worth of petroleum products it secured in early 2019.
Executives of the Enterprise hold Tewodros liable for the receivables held by Genet Petroleum, registered under his mother, Genet Aregay, for he had a power of attorney he obtained to act on the company's behalf. Tewodros denied this.
"I was only a witness to the agreement the Enterprise and the General Manager of Genet Petroleum signed," Tewodros told Fortune, in a telephone interview he had from abroad.
A portion of the proceedings from the sale of assets has been settled after Tewodros and the Enterprise transferred them to Tiliksew and her oil company, Sky Petroleum, as well as from bank guarantees he provided to the Enterprise. Tiliksew acquired fuel trucks and a gas station in October 2020.
The businesswoman has confirmed the acquisitions she made but declined from providing details about the payments that she is expected to settle on behalf of Tewodros.
PUBLISHED ON Aug 14,2021 [ VOL 22 , NO 1111]
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