The Federal Government has announced that it has completed the signing of a N47.4bn ($237m) World Bank Partial Risk Guarantees (PRGs), for the construction of the 450 megawatts Azura-Edo Independent Power Plant (IPP).
It was learnt that the government signed the agreement with the World Bank after it took three years to complete the process.
Parties to the agreement are the Federal Government represented by the Ministry of Finance and Nigerian Bulk Electricity Trading Plc (NBET), the World Bank in its role as the provider of the guarantees, the project sponsors represented by Azura Power West Africa Ltd (Azura); and various lenders represented by JP Morgan, Standard Chartered Bank, Rand Merchant Bank, Standard Bank; and Siemens Bank.
It is expected that the project will add 450MW, about 10 per cent 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.
Reliable sources at the NBET told newsmen that 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 Mobilization Guarantee, capped at $117m, and a Liquidity Guarantee, capped at $120m.
The combined value of these guarantees would serve to leverage a total investment in the Azura Power plant of more than $900m made by a set of 20 international banks and equity finance institutions drawn from nine different countries.
Located on the outskirts of Benin City, the Azura-Edo IPP is comprised of 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 over 1,000 jobs during its construction and operation.
The NBET also noted that 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 Buhari administration to accelerating investment in the country’s power sector,” NBET added.
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 Permanent Secretary, Ministry of Power, Ambassador Godknows Igali, said: “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,
“The Federal Government will continue to strengthen NBET, NERC and the Transmission Company in furtherance of the reforms,
“I want to thank the Vice President, Prof. Yemi Osinbajo for his personal leadership leading to the conclusion of these agreements,
“I also wish to express my gratitude to our sister agencies especially the Ministries of Finance and Justice for their support and the World Bank for its partnership,
“I commend NBET for a job well done.” Igali said.
He stressed that the NBET also known as the Bulk Trader, was established as a special purpose vehicle for carrying out, under license from NERC, the bulk purchase and resale function contemplated by the 2005 Electric Power Sector Reform Actor (EPSRA).
He added that NBET has a robust capitalization from the Federal Government of Nigeria and is the Federal 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 (PPAs) and sells to the distribution companies through vesting contracts.