A US$867mn project financing for the 250MW Bujagali hydroelectric power plant project in Uganda has reached financial close. Located on the Victoria Nile, it is the first greenfield power financing in Uganda and the largest private sector investment in east Africa to date.
It consists of a senior debt tranche of US$613,8mn, and a subordinated debt of US$68mn. The remaining funds mark the largest private equity power investment made to date in Africa.
Banks and multilaterals contributing senior debt loans are: IFC, African Development Bank, European Investment Bank, Agence Francaise de Developpment, KfW, FMO, DEG, Proparco, Standard Chartered Bank and ASBA Bank. The IFC, FMO and Proparco also providing subordinated loan facilities.
In total, the World Bank group is providing US$360mn worth of investment to the project. This includes US$130mn-worth of loans from the IFC to the private project company Bujagali Energy Limited.
The International Development Association is also providing a partial risk guarantee of up to US$115mn for the project's commercial lenders.
The World Bank's insurance arm Miga is also involved in the creation of an innovative equity political risk insurance structure involving a claims cooperation agreement between the insurance agency and the lenders.
This involved Miga providing an investment guarantee of up to US$115mn. It is the agency's third guarantee for an electricity project in Uganda to date.
Commenting on the role of Miga, Edith Quintrell, the insurer's director of guarantees remarks: "MIGA’s guarantee, the linchpin to securing part of the Bujagali equity investment, supports the agency’s overall strategy of helping Uganda address the electricity issues it is facing.”
Equity partners on the deal are Industrial Promotion Services in Kenya, Aga Khan Fund for Economic Development, Jubilee Investments Company (part of the Aga Khan Group), and World Power Holdings (owned by Blackstone Capital Partners.)
Linklaters provided legal counsel to the lenders and the team was led by energy and infrastructure partner James Douglas and managing associate Martin Kavanagh.
The law firm has established a solid reputation in the sub-saharan African power project market. Alongside the Bujagali power deal, it has also worked on the recent US$800mn acquisition financing of the Cahora Bassa power station in Mozambique. This was the first major international financing involving Mozambique to be arranged by commercial banks without any political risk cover. (Click here to read more GTR coverage of the Cahora Bassa acquisition deal, GTR e-News, October 11, 2007)
Commenting on the landmark Bujagali power project, Linklaters "Martin Kavanagh remarks: ""We are very pleased to have worked with this group of lenders representing the majority of the lending community for large scale African infrastructure projects on this groundbreaking project.
“The size of this financing was made possible due to the identity of the lender group and the very robust project structuring undertaken by the sponsors and the Ugandan government. We view this as a direct template for power projects throughout sub-Saharan Africa."
The Ugandan hydropower plant will be commissioned in 2011, and it will re-use water flowing from two existing upstream facilities to generate additional electricity. The electricity will increase the supply of energy to the national power grid at a lower cost than compared to other power generation options.
World Bank Uganda country manager Grace Yabrudy remarks: “We welcome the close of contract negotiations between Bujagali Energy Limited (BEL) and the project’s commercial investors as an example of partnerships that can make a real difference in Uganda’s , and Africa’s development. Bujagali will bring a more reliable and accessible power supply that will help create jobs, reduce poverty, and improve quality of life.”
The Bujagali Hydropower project forms just part of the World Bank group’s support for Uganda’s energy sector. It is also providing a US$300mn facility that will provide funding for a set of investments aimed at reducing the supply-demand gap until the Bujagali hydroproject comes into service.
Financial support is also being given to a variety of other projects designed to support sector reform and improve access for rural areas to sources of renewable electricity.
The project sponsor Bujagali Energy is a joint venture between Industrial Promotion Services (IPS) in Kenya, and the US-based Sithe Global Power.
IPS is the industrial development arm of the Aga Khan Fund for Economic Development - a member of the Aga Khan Development Network. Sithe is an international development company that develops, constructs, and acquires power assets around the world.
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