FCMB Capital Markets is sole arranger for Azura IPP
FCMB Capital Markets Limited, the investment banking subsidiary of FCMB Group plc, has again consolidated its power sector credentials with its role as sole arranger for the naira component of the financing package for Nigeria’s first large-scale, privately-funded and project financed Independent Power Plant (IPP), Azura-Edo IPP.
FCMB Capital Markets was sole arranger for the aira equivalent of $150 million, as part of an international group of investors and banks working on the $750 million Azura-Edo IPP. The Azura-Edo IPP project is a Greenfield, 450 megawatts (MW) open cycle gas turbine, power station near Benin City in Edo State. It is the first phase of a 1,120MW power plant facility that is targeted to begin producing electricity in early 2017. The project, which will lead to further economic development, is also forecasted to create over 1,000 jobs.
The Presidential Task Force on Power Generation report, dated February 8, 2014, shows peak electricity demand in Nigeria at 12,800MW – three times current peak power generation. For a country with a population of over 170 million, actual energy generation equates to 0.02KW per capita for Nigeria, compared with 0.80KW per capita for South Africa (40,000MW generation; 50m population) and 0.52KW per capita for Brazil (100,000MW generation; 192m population). Using those two countries as benchmarks, Nigeria should be generating 88,000MW to 136,000MW of electricity.
In 2011, the National Planning Commission forecasted that Nigeria needed 35,000MW of power generation capacity to achieve Vision 20:2020; this capacity was to be achieved from the 10 National Integrated Power Projects (NIPPs), large hydro plants, IPPs, and renewable power plants as well as through granting incentives to encourage new entrants to invest in the power generation space.
The role of the private sector in this plan was considered critical; hence, the successful privatisation in 2013 of the successor companies carved out of the defunct Power Holding Company of Nigeria (PHCN). New sources of power generation such as the Azura-Edo IPP have a significant role to play in closing the power generation gap. In the recent past, it was challenging, for private investors to raise capital to develop and finance Greenfield power projects in Nigeria owing to the inability to structure a bankable business case due to the absence of a robust tariff framework, gas supply, and suitable off-taker arrangements supported by appropriate financial guarantees and other credit enhancements.
Over the past three to four years, the government has invested considerable financial and other resources as part of the government’s Power Transformation Agenda, to encourage private investors to make substantial investments in the Nigerian electricity industry. This has created the enabling environment in which private investors now have confidence to work in partnership with government to ensure that power projects like the Azura-Edo IPP can be made bankable.
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