FG, W’Bank sign N47.4bn power plant guarantees

The Federal Government has signed N47.4bn ($237m) risk guarantees with the World Bank in support of the 450 megawatts Azura-Edo Independent Power Plant.

It was learnt that the government signed the agreement with the World Bank on Friday after it took three years to complete the loop.

Parties to the agreements are the Federal Government, represented by the Ministry of Finance and Nigerian Bulk Electricity Trading Plc; the World Bank, in its role as the provider of the guarantees; the project sponsors, represented by Azura Power West Africa Limited; and various lenders represented by JP Morgan, Standard Chartered Bank, Rand Merchant Bank, Standard Bank; and Siemens Bank.

The project is scheduled to add 450MW, about 10 per cent of the country’s current power generation capacity to the national grid by 2018 and is the first of a series of new IPPs expected to drive growth in the power sector.

Impeccable sources at the NBET told our correspondent on Sunday that the execution of the World Bank guarantees came as a result of the release, earlier this month, of the Federal Government solicitor-general’s legal opinion confirming the validity of the Put-Call Option Agreement that was signed last year by the government, the country’s electricity bulk trader and Azura Power.

The guarantees comprise a Debt Mobilisation Guarantee, capped at $117m, and a Liquidity Guarantee, capped at $120m.

The combined value of these guarantees would serve to leverage a total investment in the Azura Power plant of more than $900m made by a set of 20 international banks and equity finance institutions drawn from nine different countries.

The Azura-Edo IPP, which is located on the outskirts of Benin City, comprises an open cycle gas turbine power station; a short transmission line connecting the power plant to a local substation and a short underground gas pipeline connecting the power plant to the country’s main gas-supply.

The first phase of the plant, which is targeted to come on stream in 2018, is forecast to create over 1,000 jobs during its construction and operation.

According to the NBET, the Azura project played a path-breaking role by helping to set the contractual framework for the development of other large-scale IPPs, several of which will also benefit from the World Bank’s PRG programme.

“Thus, last Friday’s execution of the Azura PRG Agreements represents a milestone in the evolution of the Nigerian electricity market and provides an exemplary illustration of the commitment shown by the Buhari administration to accelerating investment in the country’s power sector,” the bulk trader said.

The NBET, which is also known as the bulk trader, was established as a special purpose vehicle for carrying out, under licence from NERC, the bulk purchase and resale function contemplated by the 2005 Electric Power Sector Reform Act.

To drive investment in Nigeria’s power sector, NBET has a robust capitalisation from the Federal Government and is the government’s anchor agent for World Bank and African Development Bank guarantees within the power sector.

NBET purchases electricity from the generating companies through Power Purchase Agreements and sells to the distribution companies through Vesting Contracts.

Azura Power is owned by Amaya Capital Limited and American Capital Energy and Infrastructure, and the other sponsors contributing equity to the project include the Africa Infrastructure Investment Fund; Aldwych International Limited; the Asset and Resource Management Company Limited; and FMO (the Dutch development finance company).

Speaking on the significance of the agreement, the Permanent Secretary, Ministry of Power, Dr. Godknows Igali, said, “This landmark development confirms the Buhari administration’s commitment to the continuation of the power sector reforms which is anchored on attracting private sector investments, and establishing and supporting institutions that are critical to the reforms.”

Source: Punch Newspaper.