Nigerian FG Announced, Completed signed PRGs.

The Federal Government under the administration of President Muhammadu Buhari is moving swiftly to rev up power generation in the country, following prolonged foot dragging by the previous administration.

To underscore its commitment to the on-going power sector reform, government announced yesterday, that it had completed the signing of the World Bank Partial Risk Guarantees (PRGs) in support of the 450MW Azura-Edo Independent Power Project (IPP).

Work on the site had been stalled when former president Goodluck Jonathan failed to accede to a request by institutions funding the project, including the World Bank, for the waiver of Nigeria’s sovereign immunity to further de-risk the project.

 

Former finance minister, Ngozi Okonjo Iweala, who is chairman of the government backed Nigerian Bulk Electricity Trader, NBET, had sent the request to government, following the demand by the promoters of the project who have sought a guarantee that in the event of default in receiving payment for power generated and supplied to the national grid, they are able to put a claim on the Nigerian government.

However, BusinessDay learnt that the senior government officials consistently declined to grant the request, arguing there was no ground for the government to leave open the window to a potential litigation in the future.

Our reporter learnt that following representations made to President Buhari once he took office, he called for the papers, and having reviewed them, the president directed the vice president and the solicitor-general to sign the documents.

Parties to the suite of agreements include the FGN represented by the Ministry of Finance and Nigerian Bulk Electricity Trading PLC (NBET); the World Bank; the project sponsors represented by Azura Power West Africa Ltd (Azura); and various lenders represented by JP Morgan, Standard Chartered Bank, Rand Merchant Bank, Standard Bank; and Siemens Bank.

The execution of these World Bank Guarantees comes on the back of the release, earlier this month, of the FGN Solicitor General’s Legal Opinion confirming the validity of the Put-Call Option Agreement that was signed last year by the Federal Government of Nigeria, NBET and Azura Power.

The Guarantees comprise a Loan Guarantee (capped at USD $117 million) and a Payment Guarantee (capped at USD $120 million). The combined value of these Guarantees serves to leverage a total investment in the Azura power plant of more than $900 million made by a set of 20 international banks and equity finance institutions drawn from 9 different countries.

The Azura-Edo IPP, which is located on the outskirts of Benin City, comprises an 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. The first phase of the plant, which is targeted to come on stream in 2018, is forecast to create over 1,000 jobs during its construction and operation.
The Azura project played a path-breaking role by helping to set the contractual framework for the development of other, large-scale, independent power plants (IPPs), several of which will also benefit from the World Bank’s PRG programme.