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Nigerian government and the World Bank work to improve electricity supply in the country by signing a risk guarantee agreement to support Azura-Edo Power Plant
| By Anayo Ezugwu | Sep 7, 2015 @ 01:00 GMT |
THE federal government is devising ways of improving power supply in the country. It has signed an agreement with World Bank for a N47.4 billion ($237 million) risk guarantee in support of the 450 megawatts Azura-Edo Independent Power Plant. The agreement was signed three after the loop was completed.
Apart from the ministry of finance which represented the federal government and the Nigerian Bulk Electricity Trading Plc, NBET, the World Bank, which provided the guarantee, other parties to the agreement are Azura Power West Africa Limited, 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 percent 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.
The NBET said 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 $117 million, and a liquidity guarantee, capped at $120 million. The combined value of these guarantees would serve 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.
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 more than 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 President 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 licensed the Nigerian Electricity Regulatory Commission, NERC, to perform 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, PPA, 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).
The significance of the agreement, according to Godknows Igali, permanent secretary, ministry of power, is that: “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.”
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