Electrifying results for Ghana deal
In September last year JP Morgan and US Ex-Im arranged a US$350mn structured trade finance facility in Ghana in support of a government-led electrification programme aimed at providing electrical power to the country’s remote villages. The initiative is known as the Self Help Electrification Programme (Shep), and is a developmental priority which is about to enter its fourth phase.
The facility will help bring electricity to over 1 million Ghanaians, and help push more of the country’s population into middle income status.
The programme includes a pivotal role for JP Morgan’s client, Weldy-Lamont Associates, a firm based in the US representing manufacturers of electrical power and control equipment. The company has taken responsibility for the procurement, engineering, installation and management of all the equipment needed to transmit and distribute electricity in the villages.
The project is stretched over five and a half years, and is repayable in tranches over a 10-year period.
The client required the financing to have long tenor at a fixed rate, and repayments were due to be repaid from annual budget allocations. After considering various financing options, the client opted for a direct loan from US Ex-Im. However, Weldy-Lamont and its various sub-suppliers would require letters of credit (LC), and US Ex-Im would need a bank with LC processing capabilities to carry out disbursements under its direct loan.
This is where JP Morgan stepped in to issue LCs during the 5.5-year work plan and disbursement period.
Talking about the needs of the client, Margo Gill, who led JP Morgan’s structured trade finance deal team, comments: “The transaction, structured with several tranches to accommodate the long-term nature of the electrification project, blended a commercial solution with Ghana’s long-term developmental need.”
She adds: “Throughout, JP Morgan’s advisory work over an extended period, to Weldy-Lamont, a small business exporter, and to the government of Ghana, was vital to keeping the deal on track and at the same time achieve two goals of critical importance to US Ex-Im.”
Due to this financing package, it is expected that when the electrification project is completed, an estimated 750 Ghanaian villages and over 1 million Ghanaians will have access to electricity.
Ghana’s President John Kufuor, who witnessed the formal signing of the agreement in Washington DC, on September 16, said that the financing would add significant momentum to his government’s drive to connect schools in all parts of the country with information communication technology.
Support for Sub-Saharan African development, as well as for small US, export-focused businesses, are of critical importance to US Ex-Im. Gill concludes: “JP Morgan was pleased to play a catalytic role in bringing both of these goals together in this transaction.”
Borrower: Republic of Ghana
Exporter: Weldy-Lamont Associates
Lender: US Ex-Im
Issuance/reimbursement bank: JP Morgan
Law firms: US Ex-Im and JP Morgan in-house counsel
Tenor: 5.5-year draw and 10-year repayment
Date signed: September 2008