Azura: A Breakthrough for Nigerian Power
Blackouts are an everyday event in Nigeria. A weak electricity grid and insufficient generation capacity cause widespread and regular power outages, forcing millions of people to rely on costly and polluting diesel generators to keep the lights, refrigerators, and computers on.
To confront this, IFC is supporting Azura — a new gas-fired power plant that will provide electricity for 14 million people in the West African country.
Azura is Nigeria’s first privately-financed independent power project (IPP). It draws from the country’s reserves of natural gas, a clean-burning transition fuel, to address critical electricity needs and help Nigeria move toward a less carbon-intensive economy.
IFC is working with the World Bank, the Multilateral Investment Guarantee Agency (MIGA), and nearly two dozen commercial banks and other lenders to support the project. A new 450-megawatt plant near Benin City, about 300 kilometers east of Lagos, is the start of a two-phase project that will ultimately generate about 1,000 MW of new power for the country. Commercial operation is due to start in the middle of 2018.
Richard Arkutu, head of IFC’s Special Initiative for Infrastructure in Africa, said the $813 million financing package signed in December 2015 was a breakthrough for power generation in Nigeria, given the stamp of approval from the World Bank Group as well as financing partners including Standard Chartered Bank, Siemens Bank, Rand Merchant Bank, KfW, Proparco, Swedfund, OPIC, and others.
“This transaction has managed to get about 20 investors comfortable with participating in the Nigerian power sector, and we expect most of them will look at more transactions,” he said.
The project documentation and financial structure are also expected to be used as a template for future privately-financed power deals in Nigeria, providing a model that could save costs and time, according to IFC Chief Investment Officer Belen Castuera.
“Azura sets out a bankable template for balanced risk allocation,” she said. “There is now an option for the government to use this structure with minimal changes for future projects and proceed swiftly to implement them.”
As part of the Azura deal, IFC provided $50 million in debt, $30 million in subordinated debt, and mobilized $212.5 million. We also worked with the Dutch development organization FMO to arrange senior debt from other lenders. The deal included World Bank partial risk guarantees and MIGA insurance.
This engagement builds on other IFC activities to support the gas sector in Nigeria, including a 2014 subscription of $50 million of the inaugural bond issuances by Seven Energy International Limited, which is working to develop the country’s stranded natural gas. Part of the funds raised will go to building a pipeline to supply power projects in the southeastern city of Calabar.