SEC fines power utility over dam bond offering

Ethiopia’s state-owned electricity company, Ethiopia Electric Power (EEP), has agreed to pay USD 6.5 million to refund investors in the United States after failing to register bonds it marketed and sold to American residents of Ethiopian descent, the US Securities and Exchange Commission (SEC) said.

As part of a settlement, the utility will pay USD 5,847,804 in disgorgement and USD 601,050.87 in prejudgment interest, according to an SEC administrative order. Investors can receive distribution payments from the disgorgement fund up to a maximum of their principal loss plus interest owed to them. Ethiopia Electric Power Corp. held investor meetings in the US and advertised the bond sales on the website of its embassy as well as on radio and television, the SEC said. It went on to raise USD 5.8 million from about 3,100 US residents between 2011 and 2014, “without ever registering the bond offering with the SEC,” the regulator said.

“Foreign governments are welcome to raise money in the US capital markets so long as they comply with the federal securities laws, including registration provisions designed to ensure that investors receive important information about prospective investments,” Stephen L. Cohen, associate director of the SEC’s Division of Enforcement, said in a news release. “This settlement ensures that investors get all of their money back plus interest.”

US residents bought the bonds in denominations of five dollars to 10,000 dollars, for total investments per investor ranging from 50 dollars to one million dollars. Nearly two-thirds of the investors reported they were US citizens.

Sources told The Reporter that after the SEC’s administrative order was issued, top officials from the National Bank of Ethiopia and the Ministry of Foreign Affairs criticized officials of the power utility for gross negligence. Furthermore, it was learnt that officials pooled from the central bank, the Ministry of Foreign Affairs and the Ministry of Finance and Economic Cooperation would look into possible was of rectifying the issue and resell the bond in the US.

Ethiopia has stepped up debt sales to finance hydro-electric projects that will meet power demand in the country and has issued bond locally and internationally. 

The most ambitious power project is the four billion dollars state-funded Grand Ethiopian Renaissance Dam (GERD) that is being built on the Blue Nile River, the main tributary of the Nile. It aims to produce 6,000 megawatts, which will almost triple the country’s current capacity.