Miga has agreed to insure a US$27.9mn loan to independent power producer (IPP) Gulf Power in Kenya, to build up the country’s power producing capacity.
The political risk insurance and credit enhancement arm of the World Bank Group will cover Standard Bank of South Africa’s non-shareholder loan against the risk of war and civil disturbance for 15 years. In the event of repayment default (due to war or civil disturbance), Miga’s guarantee would ensure the lender is compensated.
The World Bank Group has so far supported the project via ‘A’ and ‘B’ loans arranged by the International Finance Corporation (IFC), and a partial risk guarantee from the International Development Association (IDA). This project represents the first time Miga has provided cover to a participant under a ‘B’ loan arrangement by the IFC.
A spokesperson for Gulf Power tells GTR that as well as the Miga cover, the IDA is providing a 15-year liquidity risk guarantee to the project, whereby it will underwrite the offtaker’s payment risk.
Gulf Power is just one of a number of government-backed IPPs in Kenya that the World Bank supports. The 80-MW heavy fuel oil plant near Nairobi will produce electricity that Gulf Power will sell to Kenya Power, the national transmission and distribution company, for 20 years under a power purchase agreement.
Miga’s executive vice-president and CEO, Keiko Honda, believes an ability to extend such long tenors is what makes the organisation so important for attracting investment in capital-intensive projects. “Our ongoing support to Kenya’s energy sector is a strong demonstration of how the agencies of the World Bank Group can mobilise significant volumes of private sector investment to provide an essential service,” she says.
Commenting on the arrangement, syndicated loans and management director at the IFC, Stefania Berla, says: “Our collaboration with Miga is helping lenders get comfortable with the risks, and ultimately delivering a diversified energy mix to meet the huge demand for power generation in Kenya.”
“Kenya’s power sector needs over US$5bn of new investments by 2015 for electricity generation alone,” she adds.