Azura Power signs $890m financing for Azura-Edo IPP

A milestone towards the beginning of construction work at the Azura-Edo Independent Power Project (IPP) in Benin City, Edo State, which will begin in January 2015, was achieved this week, as Azura Power Holdings Limited signed the equity and loan financing documents for the financing of its Azura-Edo Independent Power Project (IPP) in Benin City.

The Azura-Edo IPP comprises a 450MW 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.

It represents the first phase of a 1,500MW power plant facility.

The plant’s location on the outskirts of Benin City is ideal because of its close proximity to Nigeria’s biggest gas distribution pipeline (which makes gas feedstock easily available) and its unique accessibility to the country’s high voltage transmission network (which facilitates the evacuation and distribution of power).

The first phase of the plant, which is targeted to come on stream in 2017, is forecast to create over 1,000 jobs during its construction and operations.

The Azura-Edo project is the first of a new wave of project-financed greenfield IPPs currently being developed in Nigeria. The project is being developed by a consortium of local and international investors led by Amaya Capital Limited and American Capital Energy and Infrastructure.

The other sponsors contributing equity to the project are the Africa Infrastructure Investment Fund 2 (AIIF2), Aldwych International Limited, and the Asset and Resource Management Company Limited (ARM).

The debt financing is being provided by a consortium of 15 banks from nine countries led by Standard Chartered Bank (SCB) as Global Mandated Lead Arranger for the project, IFC, a member of the World Bank Group, Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO) and Rand Merchant Bank (RMB), a division of FirstRand Bank Limited.

FCMB Capital Markets was the Local Loan Arranger for the Central Bank of Nigeria’s Power and Aviation Infrastructure Facility (BOI-PAIF) through the Bank of Industry.

The Azura-Edo IPP is  the first Nigerian power project to benefit from the World Bank’s ‘Partial Risk Guarantee’ structure, specifically created to meet the developing needs of emerging markets world-wide, and political risk insurance for equity and commercial debt from the Multilateral Investment Guarantee Agency, also part of the World Bank group.

Significantly, the overall transaction will be underpinned by financial support provided by the Federal Government of Nigeria through a Put and Call Option Agreement agreed by  Ngozi Okonjo-Iweala, the coordinating minister for the economy and minister of finance, complementing the Power Purchase Agreement that was signed in 2013 between Azura and the Nigerian Bulk Electricity Trading plc (NBET).

The signing was witnessed by senior government officials, including: the permanent secretary for power, Godknows Igali; vice-chairman of the Nigerian Bulk Electricity Trading, Saka Isau; MD/CEO of NBET, Rumundaka Wonodi, and the commissioner for market, competition and rates at the Nigerian Electricity Regulatory Commission,  Eyo Ekpo.

The United Nations estimates that Nigeria’s population will reach 230 million within the next 20 years, and the total grid-based power generation capacity must rise, during this period, by at least tenfold to meet the demand. Azura is, and will continue to be, a key driver in this growth in capacity.

Sundeep Bahanda, co-founder of Amaya Capital and David Ladipo, managing director of Azura, said in a joint statement: “The completion of the financing is a major milestone in our project development timeline. We have been working very closely with our financing partners over the past few years and today’s signing reflects all the tireless work put in by all the financiers and our advisors. By also working closely with the Federal Government of Nigeria since 2009 when this project was conceived, the Azura-Edo project is being used to develop many of the project and financial contracts into templates that will be used in project financed power projects over the coming years.”

In his own reaction, Diana Layfield,  chief executive officer, Africa for Standard Chartered Bank, the Global Mandated Lead Arranger for this transaction, said: “The expertise, effort and commitment dedicated to the Azura Edo transaction from diverse stakeholders inspires confidence and inspiration for other markets to attract investment and increase their respective power output to support long term economic growth. This transaction forms part of Standard Chartered’s commitment to Power Africa – a dynamic public-private partnership, lead by President Obama, which aims to deliver over 30,000MW of power across Africa in 5 years.”

Olusola Bello