By Alex C
Azura Power Holdings Ltd has signed contracts and confirmation on the debt financing of its flagship 450megawatts (MW) Azura-Edo Independent Power Project (Azura-Edo IPP) in Edo State, Nigeria.
The US$750 million transaction is the first of a new wave of project-financed greenfield IPPs currently being developed in Nigeria, a ground breaking project expected to pave the way for other project financed IPPs in Nigeria.
The financing of the Azura-Edo IPP involves $220 million of equity and $530 million of debt from a consortium of local and international financiers. The formal signing ceremony witnessed the showcase of the $300 million investment made by Seplat Petroleum Development Company Plc (Seplat) in new gas processing facilities at its Oben Gas Plant.
This, as part of Seplat’s joint venture with the Nigerian Petroleum Development Company, will supply the Azura-Edo IPP with the project’s fuel gas requirements. In total, the investments by Azura and Seplat constitute over a $1 billion of local and international financing into the Nigerian gas and power sector.
Mr. Sundeep Bahanda, co-founder of Amaya Capital and Dr. David Ladipo, Managing Director of Azura, in a joint statement said “We are extremely proud to have completed the signing of the key industry contracts and debt financing of the Azura project and are now fully focused on starting the construction of the power plant by the summer. This is an historic day for all Nigerians as we have shown that an indigenously developed power project can attract the world’s best-in-class financing and operating partners from both Nigeria and around 14 countries across the world.
“We are building the leading power development company in West Africa with the intention of creating a multi-asset indigenous power generation company operating to world class standards in both development and operations and providing much needed electricity to the people of Nigeria.”
The Managing Director and Chief Executive Officer of NBET, Mr. Rumundaka Wonodi remarked that the transaction, which is NBET’s first greenfield project, is important to the Nigerian power sector reform process.
“It is significant in that it sets the precedent for other independent power plants to follow. Projects such as these help achieve Mr. President’s power reform targets as it paves the way for millions of Nigerians to access power in the medium term. NBET is committed to working in partnership with local and international investors and development partners. The NBET-Azura PPA guarantees that NBET will off-take 100% of Azura Edo’s power output for the next 20 years,” Wonodi stated.
Speaking on behalf of the global mandated lead Arranger, Mrs Bola Adesola, the CEO of Standard Chartered Bank Nigeria said that the advisory, structuring and financial contribution to this transaction forms part of the Bank’s $2billion pledge to President Obama’s ‘Power Africa’ campaign launched last year, which aims to bring electricity to more than 20 million Africans within 5 years.
““We are proud to have played a leading role in structuring the financing for this ground breaking transaction, which creates a template for other similar transactions. We are on course to exceed our USD2 billion target well ahead of time, which is more than 20% of the total private sector commitment.”
The fundraising was led by Standard Chartered Bank as Global Mandated Lead Arranger, with the International Finance Corporation (IFC), Financierings-Maatschappij voor Ontwikkelingslanden (FMO), Rand Merchant Bank (RMB) and First City Monument Bank (FCMB) acting as Mandated Lead Arrangers and the Core Lender Group.
As Structuring Bank, Standard Chartered has facilitated a balanced, diverse capital structure comprised of equity, senior and subordinated debt. The Lender group consists of a mix of commercial banks, multilaterals and DFIs, international and local commercial banks.
Standard Chartered is lending its expertise in the administration of the transaction via its additional role as ‘Joint Documentation Bank’. Loan draw-downs are expected to commence from May 2014 and should be concluded within 3 months.
Azura is owned by Amaya Capital Limited and American Capital Energy & Infrastructure, and the other sponsors contributing equity to the project include the Africa Infrastructure Investment Fund 2, Aldwych International Ltd, the Asset & Resource Management Company Ltd and FMO (the Dutch development finance company).
The Azura-Edo IPP is also the first Nigerian power project to benefit from the World Bank’s ‘Partial Risk Guarantee’ structure, specifically created to meet the developing needs of emerging markets world-wide, and political risk insurance for equity and commercial debt from the Multilateral Investment Guarantee Agency, also part of the World Bank group.
The Azura-Edo IPP comprises a 450MW 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. It represents the first phase of a 1,500MW power plant facility.
The plant’s location on the outskirts of Benin City is ideal because of its close proximity to Nigeria’s biggest gas distribution pipeline (which makes gas feedstock easily available) and its unique accessibility to the country’s high voltage transmission network (which facilitates the evacuation and distribution of power). The first phase of the plant, which is targeted to come on stream in 2017, is forecast to create over 1,000 jobs during its construction and operation.
The United Nations estimates that Nigeria’s population will reach 230 million within the next 20 years, and the total grid-based power generation capacity must rise, during this period, by at least tenfold to meet the demand.
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