Azura Power Completes Signing $1Bn 450MW Gas Turbine IPP

Azura Power Holdings Limited has completed 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.

Announcing this on Monday the Company described the US$750 million transaction is the first of a new wave of project-financed greenfield IPPs currently being developed in Nigeria.

The financing of the Azura-Edo IPP involves US$220 million of equity and US$530 million of debt from a consortium of local and international financiers.

The announcement was made at a formal signing ceremony to mark the conclusion of the key project and financing agreements that form part of the wider transaction.

The event also showcased the US$300 million investment being made by Seplat Petroleum Development Company PLC ("Seplat") in new gas processing facilities at its Oben Gas Plant, which, as part of Seplat’s joint venture with the Nigerian Petroleum Development Company, 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 Federal Government of Nigeria (FGN) was also involved in signing the Grid Connection Agreement with the Gas Transporation Agreement to follow shortly.

The Azura-Edo IPP is also 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 FGN through a Put and Call Option Agreement agreed by Dr Ngozi Okonjo-Iweala, the coordinating minister for the Economy and minister of Finance complementing the Power Purchase Agreement that was signed last year between Azura and the Nigerian Bulk Electricity Trading PLC.

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 operation.

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.

Mr. Sundeep Bahanda, co-founder of Amaya Capital and Dr. David Ladipo, managing director of Azura, said in a joint statement: "We are extremely proud to have completed the signing of the key industry contracts and debt financing of the Azura project and are now fully focused on starting the construction of the power plant by the summer.

“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."

Also speaking at the event, Dr. Ngozi Okonjo-Iweala, said: “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. I would like to congratulate the project developers and the funding partners for their commitment and dedication to instituting a world class process and structure for others to follow.”

On his part, Mr. Rumundaka Wonodi, managing director and chief executive officer of NBET, remarked that “The transaction, which is NBET’s first greenfield project, is important to the Nigerian power sector reform process. It is significant in that it sets the precedent for other independent power plants to follow. Projects such as these help achieve Mr. President’s power reform targets as it paves the way for millions of Nigerians to access power in the medium term. NBET is committed to working in partnership with local and international investors and development partners. The NBET-Azura PPA guarantees that NBET will off-take 100% of Azura Edo’s power output for the next 20 years.”

Bola Adesola, chief executive officer, Standard Chartered Bank Nigeria, speaking on behalf of the Global Mandated Lead Arranger, said: “We are proud to have played a leading role in structuring the financing for this ground breaking transaction, which creates a template for other similar transactions. Our advisory, structuring and financial contribution to this transaction forms part of the Bank’s USD2billion pledge to President Obama’s 'Power Africa’ campaign launched last year, which aims to bring electricity to more than 20 million Africans within 5 years. We are on course to exceed our USD2 billion target well ahead of time, which is more than 20% of the total private sector commitment.”

Also, Prof. Chinedu Nebo, minister of Power, said: "The Azura power project is a veritable example of how IPPs should be executed. The holistic approach adopted by Azura that led to an unusual networking of professionals and institutions - and the due diligence that fetched the concurrence of all parties involved - is a landmark achievement. We hail the masterful display of expertise that has brought the project to this take-off point."

Olusegun Aganga, minister of Industry, Trade, and Investment, said "The successful fund raising for the Azura-Edo IPP has proved yet again that the local and international investment community believe in Nigeria. This transaction proves clearly that the reforms of the current government are working, and investors and partners around the world have taken notice. I was involved in this project at its inception, and must therefore commend the sponsors for this milestone. We continue to expect great things from Azura Power."

Marie-Francoise Marie-Nelly, World Bank Country Director for Nigeria, said "The Azura-Edo IPP exemplifies a coordinated package of support from the World Bank, IFC and MIGA, coming together as the World Bank Group, to catalyze the significant private investment needed to increase Nigeria's power supply for long term economic growth, job creation and shared prosperity”.

The fundraising was led by Standard Chartered Bank as Global Mandated Lead Arranger, with the International Finance Corporation (IFC), Financierings-Maatschappij voor Ontwikkelingslanden (FMO), Rand Merchant Bank (RMB) and First City Monument Bank (FCMB) acting as Mandated Lead Arrangers and the Core Lender Group.