NPA completes mandatory due diligence on Lekki Port project

Lekki Port, Nigeria’s first ever private/public partnership, touted to revolutionise the maritime sector and spur unprecedented economic growth, has received a major boost with the recent conclusion of the

due diligence required by one of its key investors, the Nigerian Ports Authority (NPA), putting it on a firm footing to see it become operational by 2018.

With this development, the much anticipated funding from shareholders expected to fuel rapid construction of the Lekki Port will now be ploughed into the project, so that the next phase of development can commence in earnest.

The deep seaport is a $1.5 billion public private partnership project between the Federal Government (represented by the NPA), the Lagos State government and the Tolaram Group. A shareholder’s agreement to this effect was signed in December 2012, among all three parties.

Lagos State government’s equity and that of the Tolaram Group are in place, while NPA is in the process of making its equity contribution into the project. It is standard procedure for due diligence to be conducted by shareholders before infusion of equity into a project.

NPA has carried out and concluded its due diligence on the project through a credible auditor, KPMG, to ensure accountability, transparency and value for money of the project, which is essential and crucial to a project of this magnitude.

The NPA on its part has also got its Federal Government budget approved by the House of Assembly.

The Federal Executive Council approval for the project and issuance of the Finance Guarantee was received in December 2013.

Sandeep Parasramka, chief finance officer, Lekki Port, while shedding light on major developments, particularly as it concerns the company’s drive in ensuring that Lekki Port becomes operational by

2018, said: “Apart from getting the concession from NPA to build Lekki Port, Tolaram has put together leading global consultants such as Standard Chartered Bank, the Louis Berger Group Inc., Delta Marine Consultants, BMT Asia Pacific, TBA Netherlands, Jardine Lloyd Thompson Pte Ltd, and GMaps, following which the EPC contractor, China Harbour Engineering Company (one of the foremost builders of ports with a track record of delivering projects on time), has been appointed to build the port and the container terminal has been sub-concessioned to International Container Terminal Services, Inc, Philippines, a leader in the container terminal operations with a footprint across the globe.

“The project will make Nigeria the gateway to the West African region and will be one of the most efficient and modern maritime facilities, catering for containerised, liquid and dry bulk cargo par international standards.

“Lekki Port will have significant positive macro-economic impact estimated at $361 billion over the entire concession period. It is expected to contribute more than $200 billion to the government treasury while also creating close to 163,000 new jobs in the economy.

“The stage we are in now is structuring the financial terms, which will take a short period before funding is made available to Lekki Port. It is only normal that when you do such a large financing of a huge project such as this, it takes more time than building a house.”

Conventionally, projects of this magnitude are undertaken through project financing on a non-recourse basis. This requires the lending parties to agree on appropriate terms of lending and conduct stringent due diligence. These processes take time and are essential to achieve the debt financing.

The good news for Lekki Port is that they are at an advanced stage, with the due diligence completed and financing terms well underway.

With the magnitude of processes and resources required to complete a large infrastructure project, it is inevitable that there will be time overruns, and Lekki Port is no exception. However, we understand

that all shareholders are very committed to ensuring that the scheduled operational date of 2018 is very much on course and are making rapid progress towards this, with the view to kick-off construction works in the last quarter of 2014.

Reacting to recent speculations in some online and print media, Olumide Oduntan, executive director, finance and administration of NPA, stated categorically, that “the sale of land transaction between Lagos State government and the port promoters does not affect the Deep Sea Port project as the land in question is not the land designated for the port site. It is a separate and distinct transaction that does not include NPA nor have any relationship with the project. Simply put, the transaction was a creative way for Lagos State government to fund its shares in the Lekki Deep Sea Port project.”

He expressed satisfaction with the pace of the development of the project and noted that the NPA was finalising documentation and internal processes (including a due diligence report prepared by KPMG Professional Services) after which it planned to infuse its equity contribution into the project.

He, however, noted that this was a project that NPA was 100 percent in support of, and it would revolutionise the maritime sector and contribute to resolving the congestion of ports in Lagos State and Nigeria.