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FG, Azura sign $1bn deal for IPP in Edo state

By BusinessNews Staff on May 7, 2014

The Federal Government and Azura Power Holdings Limited Monday signed a $1 billion-financing deal for the flagship 450 megawatt Azura-Edo Independent Power Project (IPP) which is located Edo State.

The project also involves a $300 million investment which is being made by Seplat Petroleum Development Company Plc in new gas processing facilities at its Oben Gas Plant, which is part of Seplat’s joint venture with the Nigerian Petroleum Development Company would supply the Azura-Edo IPP with the project’s fuel gas requirements.

The Azura-Edo IPP is first Nigerian power project to benefit from the World Bank’s ‘Partial Risk Guarantee’ structure which was specifically created to meet the developing needs of emerging markets globally.

It also offers political risk insurance for equity and commercial debt from the Multilateral Investment Guarantee Agency, which is part of the World Bank group.

Speaking at the Azura Transaction Closure Summit in Abuja, the Co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala said the sheer number of investors that participated in the IPP further showed the confidence which the international investors has on the Nigerian economy.

Meanwhile, Governor of Edo State, Adams Oshiomole has commended President Goodluck Jonathan for providing the policy framework which has enabled private sector involvement in power sector.

However, the minister described the Azura-Edo IPP as the “guinea pig” that would eventually open the way for other hitherto skeptic investors to embrace the Nigerian market.

According to Okonjo-Iweala, the scale of the project showed the extent to which government and the private sector could go in terms of partnership to finance critical infrastructure.

She said government is committed to providing all securitisation of the asset as well as supporting the partial risk guarantee.

She added:“The completion of this transaction marks a major step forward in the power sector reform process with the creation of a strong and robust model for project financed power sector transactions.

“The strength of the model is evidenced by the level of investor interest in the project, with significant international capital now committed to the project following four years of hard work.

“I would like to congratulate the project developers and the funding partners for their commitment and dedication to instituting a world class process and structure for others to follow.”

Essentially, the financing of the Azura-Edo IPP involved $220 million of equity and $530 million of debt from a consortium of local and international financiers.

Oshiomhole, who also expressed gratitude for the choice of Edo for the location of the landmark project called for special waivers as incentives for genuine investors.

He said: “The key issue is that you need to have an appreciative host community, not one that sees investors as enemies to be fought and kidnapped or defeated. We need communities that recognise that the land that they have is an asset they can manage and turn around and add value.

“I am proud to say that the location of this power project, the enthusiasm of the host communities, the general attitude of Edo people beginning with His royal majesty the Oba of Benin- we are all unanimous that this is what the responsibility of the state is- to create an enabling environment to attract investors to locate.”

According to him: “At this time with all the challenges in the country, every government needs more money and as we pursue internally generated revenue, there’s the temptation to want to make all the monies from anymore who wants a piece of your land.

The occasion also incorporated the signing of an Engineering, Procurement and Construction contract with Siemens and Julius Berger Nigeria; a Gas Sales and Purchase Agreement with Seplat; and an Operations & Maintenance contract with PIC Marubeni.

The Federal Government would also sign the Grid Connection Agreement while the Gas Transportation Agreement would follow shortly.

Minister of Power, Prof. Chinedu Nebo said government is working to address all issues around gas supply to the project.

Also speaking at the ceremony, United States Ambassador to Nigeria, Mr. James Entwistle said Nigeria’s participation in power offered an opportunity to provide leadership and roadmap for other African countries in the implementation of reforms and privatisation of the power sector.

Meanwhile, in a separate statement, the Chief Executive Officer, Seplat, Mr. Austin Avuru said: “The domestic gas space is a huge opportunity for Seplat. The privatisation of the domestic power industry, coupled with a massive government initiative to promote the use of natural gas, has driven investment in gas infrastructure development and power generation.”

[This Day]

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