30 August 2011, Sweetcrude, Port Harcourt – The Rivers State government has opted to take a N100 billion bank loan out of the N250 billion bond portfolio approved by the State House of Assembly with the hope of improving power supply to homes and businesses in the state.
GTBank is offering the N100 billion lifeline, at eight per cent interest, instead of the 12 per cent bond rate. In this manner, the state is to save four per cent interest per annum on the N100 billion from GTB, according to a government statement.
Commissioner of Information and Communication, Ibim Semenitari, said “the bulk of the loan would be used to make down payments before September 30, for power distribution projects that will ensure uninterrupted power supply in Rivers state by 2012”. Quoting the state governor, Chibuike Amechi, Semenitari said: “Whereas we have more than enough generation capacity, distribution is still insufficient. With this loan from the GT Bank, we will now be seeking to borrow N150 billion from the capital market, depending on our cash inflows”.
The Rivers State Government was planning to issue a shelf registration for N250 billion at the capital market. A shelf registration, according to her, is a procedure that allows corporations or governments to file one registration statement, covering several issues over a period of time. With the shelf registration, the corporation or entity can go back to the market with minimal procedure up to the limit approved, but often times may not necessarily reach that limit.
Government said with the N100 billion loan, it will not be taking up the N250 billion bond shelf registration. “Also the state will only draw down N30 billion of this facility in the first instance”.
Commissioner for Finance, Chamberlin Peterside, said; “This is in keeping with prudential guidelines. The loan facility is a bridge loan that will be accessed if the need arises but only N30 billion will be required now, given that single obligor limit rules do apply.”
The state said its fundamentals remain quite strong and its financial outlook is stable and promising. Rivers State received a’ B+’ rating from both rating giants, Fitch and Standard & Poors, in 2010. The state expects above N800 billion in the next four years and intends to write the loans and bonds within that period.