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Nigerian banks provide N280bn for power firms’ acquisition

By on September 6, 2013

Nigerian banks were responsible for raising over 70 per cent (about N280bn) of the balance paid by investors for the 14 successor companies to the Power Holding Company of Nigeria, investigations by our correspondent have revealed.

The Federal Government had realised about N400bn in what has been termed the biggest privatisation transaction ever in the history of the country, and top bankers have confirmed that Nigerian banks raised over 70 per cent of the total transaction sum.

Contrary to complaints by real sector operators and small business owners that indigenous banks were not advancing credits to them, the Group Managing Director/Chief Executive Officer, Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, said during the recent Nigerian Guild of Editors’ Forum in Asaba, Delta State, that the local banks provided over 70 per cent of the funds used by investors to acquire the power assets.

The Head, Oil and Gas, Ecobank, Mr. Wale Fasuyi, also said, “Indeed, over 70 per cent funding for the power assets came from Nigerian banks and Ecobank participated in a couple of syndications to finance both the Gencos and Discos.”

The Vice-President and Group Head, Project and Structured Finance, First City Monument Bank Plc, Mr. Robert Grant, in a telephone interview with our correspondent on Tuesday, confirmed that Nigerian banks played a major role in the funding of the privatised power companies, adding that the transactions offered a rare opportunity for the banks to take advantage of the power sector privatisation programme.

He said, “This is once in like 10 years transaction and the banks played a major role. This is because they have seen the future of the power sector just like it was 10 years ago in the telecoms industry. This was the same when oil blocks were awarded several years ago.

“So, the banks have the capacity and they know that if they don’t get involved now, it will be difficult doing that later. So, this is about supporting indigenous opportunities.”

The Corporate Banking Director, Diamond Bank Plc, Mr. Samuel Egube, told our correspondent that the bank had committed about $500m to the power sector.

He said, “Diamond Bank has commitments in some of the emerging Discos and Gencos. Among the Gencos, we have commitments in both the gas and hydro power generation companies. We are also involved with captive (or ring-fenced) power utilities, sales under the NIPP and some state-sponsored power projects.

“Our funding commitments to the power sector so far are about $500m and they are well sculpted to give us visible footprints across the power landscape.”

Egube explained that the bank had funded projects in the oil and gas and power sectors long before the reforms in the power sector and the divestments of Shell’s assets in the reserved-based lending space began.

“As a result, we are well positioned to also participate actively in the several forms of the transactions emanating from the power reform,” he said.

The Africa Finance Corporation and some Nigerian banks namely: United Bank for Africa Plc, FCMB and Fidelity Bank, committed a total of $215m (N34.4bn) in the form of a debt financing facility for the acquisition of Ughelli Power Plc.

The AFC said its aggregate financing commitment for the acquisition was about $55m (N8.8bn), while UBA, FCMB and Fidelity provided the balance.

GTBank and the AFC had finalised the $170m medium-term syndicated acquisition facility for Mainstream Energy Solutions Limited towards the acquisition of Kainji Hydro Electric Plc.

The Chief Executive Officer, GTBank, Mr. Segun Agbaje, said the financing underpinned the lender’s belief in, and support for, the growth of the Nigerian power sector.

UBA Plc and UBA Capital Plc also played a leading adviser role in the acquisition of three out of the six generation companies in addition to a distribution company.

The bank said it successfully arranged the debt financing of $215m and equity for the acquisition of Ughelli Power Plc by Transcorp Ughelli Power Limited.

As the financial adviser and mandated lead arranger, UBA said it successfully arranged debt financing of $68m as well as secured equity investment from a strategic and technical investor for the acquisition of the Shiroro Hydroelectric Power Plc by North South Power Company Limited.

Commenting on the deal, the Group Chief Executive Officer, UBA Capital Plc, Mr. Rasheed Olaoluwa, said the investment group had been an important partner in the privatisation process and was currently advising three out of the six generation companies.

UBA  Capital also successfully arranged the debt financing of $121m for the acquisition of the Abuja Electricity Distribution Company Plc by Kann Utility Company Limited.