Out-Law News 1 min. read

Construction starts on Nigeria’s ‘first privately-funded power plant’

Nigerian president Goodluck Jonathan has welcomed the start of construction works for the first phase of the country’s “first fully-financed private sector power plant”.

The first phase of the Azura-Edo Independent Power Project (IPP) will see construction of a 450-megawatt (MW) open cycle gas turbine power plant by Azura Power near Benin City, in Edo state. The first phase of the plant is targeted to come on stream in 2017.

Azura Power, formed to develop power generation facilities across West Africa, is owned by Amaya Capital Limited and American Capital Energy & Infrastructure.

A 100-hectare site has been acquired for Azura-Edo, which is big enough to accommodate the planned expansion to a total generating capacity of 1,500 MW.

Azura Power said the plant site is close to Nigeria’s biggest gas distribution pipeline and has “unique accessibility” to the country’s high voltage transmission network.

The $750 million transaction for the first phase of the project, the first of a series of project-financed greenfield IPPs in Nigeria, was finalised in May 2014. Financing comprises $220m of equity and $530m of debt from a consortium of local and international financiers. Contributors to the project include the Africa Infrastructure Investment Fund 2, Aldwych International Ltd, the Asset & Resource Management Company Ltd and Dutch development finance company FMO.

According to Azura Power, Azura-Edo is also the first Nigerian power project to benefit from the World Bank’s ‘Partial Risk Guarantee’ facility, which was “specifically created to meet the developing needs of emerging markets worldwide”, with political risk insurance for equity and commercial debt from the bank’s Multilateral Investment Guarantee Agency.

Azura Power said “significantly, the overall transaction will be underpinned by financial support provided by the federal government of Nigeria through a ‘put and call option’ agreement”, which gives the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.

The Standard Chartered Bank of Nigeria said its advisory, structuring and financial contribution to the Azura-Edo project formed part of the bank’s $2bn commitment to US President Barack Obama’s Power Africa initiative, which aims to boost energy security, increase economic growth and decrease poverty by investing in oil and gas, wind, solar, hydropower and geothermal resources across Africa.

Earlier this year, Nigeria and the US signed a memorandum of understanding (1-page / 160 KB PDF) to increase electricity supplies in Nigeria and to coordinate the ongoing privatisation and regulation of the power sector.

In a related development, $300m is being invested in the new Oben gas plant in Edo state by the Seplat Petroleum Development Company PLC as part of a joint venture with the Nigerian Petroleum Development Company. Oben will supply gas to Azura-Edo.

In total, the investments by Azura Power and Seplat amount to more than $1 billion of local and international financing into Nigeria’s gas and power sector, Azura Power said.

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