Azura Power completes signing of $1bn, 450MW gas turbine IPP in Edo

Azura Power Holdings Ltd on Monday concluded the signing of the key industry contracts and confirmation on the debt financing of its flagship 450MW Azura-Edo Independent Power Project (“Azura-Edo IPP”) in Edo State, Nigeria.

The transaction is worth about $750 million and is the first of a new wave of project-financed greenfield IPPs currently being developed in the country. Standard Chartered Bank is playing a leading role in structuring and financing this transaction which creates a template for other similar financed IPPs in Nigeria.

 The formal signing ceremony to mark the conclusion of the key project and financing agreements that form part of the wider transaction held in Abuja yesterday.

Azura-Edo IPP, which has received a lot of international funding from both the equity and debt sides, is a 500 megawatts project being developed on the outskirts of Benin City, Edo state.

The financing of the Azura-Edo IPP involves $200 million of equity and $530 million of debt from a consortium of local and international financiers.

The signing event equally showcased the $300 million investment being made by Seplat Petroleum Development Company PLC (“Seplat”) in new gas processing facilities at its Oben Gas Plant.

As part of Seplat’s joint venture with the Nigerian Petroleum Development Company, it will supply the Azura-Edo IPP with the project’s fuel gas requirements. 

In total, the investments by Azura and Seplat constitute over a $1 billion of local and international financing into the Nigerian gas and power sector, the investors said.

Azura is owned by Amaya Capital Limited and American Capital Energy & Infrastructure, and the other sponsors contributing equity to the project include the Africa Infrastructure Investment Fund 2, Aldwych International Ltd, the Asset & Resource Management Company Ltd and FMO (the Dutch development finance company).

The event also saw 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 of Nigeria (FGN) was also involved in signing the Grid Connection Agreement, with the Gas Transporation Agreement to follow shortly.

David Ladipo, Managing Director, Azura told BusinessDay that this is an important transaction, not because of the amount of money involved, but because it is a ‘part breaking’ transaction and sets the template for other IPPs to ride on.

  “A lot of the project documents that we have negotiated with government counterparties, as well as private sector couterparties are, in many senses, the first of that kind in Nigeria.

 “Azura project is very important because it lays the foundation for other IPPs to follow the same path, to undergo through the contractual negotiations faster than we have,” Ladipo told Businessday after the ceremony.

 Significantly, the overall transaction will be underpinned by financial support provided by  Nigeria’s federal government,  through a Put and Call Option Agreement agreed by Ngozi Okonjo-Iweala, the Coordinating Minister for the Economy and Honourable Minister of Finance, who expressed excitement at the signing event.

 The Put and Call Option Agreement would complement the Power Purchase Agreement that was signed last year between Azura and the Nigerian Bulk Electricity Trading PLC.

 In a keynote address, Ngozi Okonjo-Iweala observed that 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,” she added.

 Bola Adesola, CEO, Standard Chartered Bank of Nigeria- which is structuring bank and global mandated lead arranger in Azura-Edo IPP, said the project is the first local power project to benefit from the World Bank’s recently developed Partial Risk  Guarantee structure.

 “We are proud to have played a leading role in structuring and financing this land breaking transaction which creates a template for other similar transactions.”

 She said that their advisory, structuring and financial contribution to the transaction forms part of the bank’s $2 billion pledge to President’s Obama’s Power Africa campaign, launched last year and aims to bring electricity to  about 20 million Africans in five years.

 “We are on course to exceed our $2 billion target well ahead of time, which is more than 20 % of the total pirate sector commitment,” Adesola stressed.

 According to Sundeep Bahanda, co-founder of Amaya Capital and  David Ladipo, Managing Director of Azura, “This is an historic day for all Nigerians, as we have shown that an indigenously developed power project can attract the world’s best-in-class financing and operating partners from both Nigeria and around 14 countries across the world.

 “We are building the leading power development company in West Africa, with the intention of creating a multi-asset indigenous power generation company operating to world class standards in both development and operations, and providing much needed electricity to the people of Nigeria.”

Onyinye Nwachukwu