Azura-Edo IPP: A watershed
The story of the Azura-Edo independent power project (IPP) transaction is no doubt a study in determination, team work, hard work, tenacity and a testimony to the enterprising spirit of young Nigerians.
Being the first large-scale privately owned, project-financed IPP in Nigeria, it has clearly shown the way for the crop of IPPs that were licensed before Azura-Edo IPP was licensed, but still struggling to get off the ground as a result of finance constraints.
Given the green light by the Nigerian Electricity Regulatory Commission (NERC) in 2012, the promoters of the project, young men and women who are mostly Nigerians, went to town to sell their idea to local and international investors in a bid to raise the requisite capital for the take-off of the project.
Enter May 5, 2014. Abuja saw the Transaction Closure Summit for the completion of the signing of the key industry contracts and confirmation on the debt financing of the flagship 450 megawatts (MW) Azura-Edo IPP located in Edo State by Azura Power Holdings Ltd.
The $750 million transaction is the first of a new wave of project-financed green-field IPPs currently being developed in Nigeria. The financing of the project involves $220 million of equity and $530 million of debt from a consortium of local and international financiers.
Equity investors in the project include the lead sponsor, Azura Power Holdings, African Infrastructure Investment Managers, Aldwych International, and Asset & Resource Management (ARM). Banks involved in the project are Standard Chartered Bank as global mandated lead arranger and structuring bank; IFC and FMO as joint lead arrangers for the DFI loan tranche; First City Monument Bank Limited (FCMB) as disbursement bank for the BOI-PAIF loan tranche and First Rand Bank Limited (acting through its Rand Merchant Bank division) as joint mandated lead arranger for the offshore commercial tranche. Involved in group of lenders were Siemens Bank, Swedfund and CDC.
The transaction sets the template for other IPPs to ride on, said David Ladipo, managing director, Azura. “Azura project is very important because it lays the foundation for other IPPs to follow the same path.”
The project 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.
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 first phase of the plant is expected to come on stream in 2017.
With a $300 million investment by Seplat Petroleum Development Company Plc, new gas processing facilities at its Oben Gas Plant will supply gas to the Azura-Edo IPP.
Describing the take-off of the project as a landmark achievement, Chinedu Nebo, minister of power, said: “The Azura power project is a veritable example of how IPPs should be executed.”
We believe promoters of other IPPs in the country should take a cue from the precedent set by the brains behind Azura-Edo IPP, who have succeeded in creating a viable, commercial and financial structure for their IPP.