24 August 2015, Abuja – The federal government has finally signed off its backing of a $237 million World Bank Partial Risk Guarantees (PRG) for the construction of the 450 megawatts (MW) Azura-Edo Independent Power Plant (IPP).
The government by this development has also underlined its commitment to the ongoing power sector reform and support for the 450MW Azura IPP, which is the first of a series of new IPPs that will drive growth in Nigeria’s power sector.
Details of the final closure was contained in a statement from the Nigerian Bulk Electricity Trading Plc (NBET) on Sunday in Abuja.
NBET, which is also known as the Bulk Trader, stated that parties to the suit on the PRG agreements included the federal government represented by the Ministry of Finance and NBET; the World Bank in its role as the provider of the guarantees; the project sponsors represented by Azura Power West Africa Ltd; as well as various lenders represented by JP Morgan, Standard Chartered Bank, Rand Merchant Bank, Standard Bank and Siemens Bank.
According to the NBET, the execution of the World Bank guarantees comes on the back of the release, earlier this month, of the legal opinion of the government’s Solicitor General, confirming the validity of the put-call option agreement that was signed last year by the government, NBET and Azura Power.
The guarantees as disclosed, comprise a debt mobilisation guarantee, which is capped at $117 million and a liquidity guarantee, capped at $120 million.
NBET explained that the combined value of these guarantees serves to leverage a total investment in the Azura power plant of more than $900 million made by a set of 20 international banks and equity finance institutions that are drawn from nine different countries.
While quoting principal parties who were present at the signing of the agreements, the statement had the Permanent Secretary in the Ministry of Power, Godknows Igali to have 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.”
Igali further said the government would continue to strengthen NBET, the Nigerian Electricity Regulatory Commission (NERC) and the Transmission Company of Nigeria (TCN) in furtherance of the reforms.
He also thanked Vice-President, Yemi Osinbajo for what he described as his personal leadership to the conclusion of the agreements, as well as the World Bank.
Similarly, the Practice Manager for Financial Solutions and Guarantees at the World Bank, Pankaj Gupta, was quoted to have said: “Finalisation of the World Bank’s risk mitigation package is an important step in the transaction process that allows commercial parties to Nigeria’s groundbreaking Azura-Edo IPP to move towards financial close.”
He advocated the development evidence the strong relationship between the bank and the government of Nigeria, as well as its confidence in Nigeria’s power sector reforms.
Equally quoted was the Managing Director of NBET, Mr. Rumundaka Wonodi, who said: “NBET is happy at this landmark milestone. It has taken three years to complete the loop on the front runner Azura project; but with this, we have a framework for accelerating other transactions.
“We are grateful for the support of the government, the World Bank and USAID among others and to the Azura investors for being diligent with their project development efforts.”
The joint Managing Directors of Azura Power, Mr. Sundeep Bahanda and Dr. David Ladipo also expressed their delight with the development.
Located on the outskirts of Benin City, the 450MW Azura plant 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.
Its first phase which is targeted to come on stream in 2018, is forecast to create over 1,000 jobs during its construction and operation.
NBET which was established as a special purpose vehicle for carrying out, under licence from the NERC, the bulk electricity purchase and resale function contemplated by the Electric Power Sector Reform Act 2005 (EPSRA), noted that 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.
Also, Azura Power is owned by Amaya Capital Limited and American Capital Energy and Infrastructure. The other sponsors contributing equity to the project include, the Africa Infrastructure Investment Fund; Aldwych International Ltd; the Asset and Resource Management Company Ltd and the Netherlands Development Finance Company (FMO).
– This Day