25 August 2015, Sweetcrude, Abuja – The Federal Government signed N47.4bn ($237m) risk guarantees with the World Bank in support of the 450 megawatts Azura-Edo Independent Power Plant (IPP) after it took three years to complete the loop.
The Guarantees comprise a Debt Mobilisation Guarantee (capped at USD $117 million) and a Liquidity Guarantee (capped at USD $120 million).
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 drawn from nine different countries.
According to a statement from the Ministry of Power on Monday, parties to the agreement included the Federal Government represented by the Ministry of Finance and Nigerian Bulk Electricity Trading Plc (NBET); the World Bank in its role as the provider of the guarantees; the project sponsors represented by Azura Power West Africa Ltd (Azura); and various lenders represented by JP Morgan, Standard Chartered Bank, Rand Merchant Bank, Standard Bank; and Siemens Bank.
The execution of these World Bank Guarantees comes on the back 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 Federal Government, NBET and Azura Power.
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.
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.
“The execution of the Azura PRG Agreements represents a major milestone in the evolution of the Nigerian electricity market and provides an exemplary illustration of the commitment shown by the President Muhammadu Buhari – led administration to accelerating investment in the country’s power sector,” the statement noted.
According to the Permanent Secretary, Ministry of Power, Ambassador Godknows Igali, “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.”
He added that, “The Federal Government will continue to strengthen NBET, NERC and the Transmission company in furtherance of the reforms. I want to thank the Vice President, Prof. Yemi Osinbajo for his personal leadership leading to the conclusion of these agreements.
“I also wish to express my gratitude to our sister agencies especially the Ministries of Finance and Justice for their support and the World Bank for its partnership.
“I commend NBET for a job well done.” He stressed that the NBET 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 Actor (EPSRA).”
Igali pointed out that NBET has a robust capitalisation from the Federal Government of Nigeria and is the Federal 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 (PPAs) and sells to the distribution companies through vesting contracts.