About the project
The Kpone Independent Power Plant (KIPP) is a landmark US$900 million energy project which aims to transform electricity generation across West Africa. AFC is the lead project developer, mandated lead arranger and largest equity investor in Kpone IPP, which reached financial close in December 2014. The project is being implemented by Cenpower Generation Company Limited, a Ghanaian special purpose vehicle created to develop the plant.
Kpone IPP will be situated in the heavy industrial area of Tema, a coastal town 24km to the east of Accra. This location provides easy access to all main logistical interconnections, is adjacent to the West African Gas Pipeline landing point in Tema and is approximately 600 meters from the Atlantic Ocean. The plant can therefore make use of sea water for direct cooling. The plant will be a Combined Cycle Gas Turbine (CCGT) plant with a generation capacity of 350MW and a power transmission of 161kV. It will have a fuel storage capacity of 18,000 cubic metres.
This was an innovative project, the first of its kind in many senses, and as such the lack of precedents meant that the project faced a number of developmental and financial hurdles. These included strict international financing requirements within significant local constraints, as well as both real and perceived sector risk factors. For example, the off-taker’s insistence not to take fuel-supply risk necessitated the structuring of a US$93 million Fuel Finance Facility. This facility, provided by the Development Finance Institutions, was specifically designed to address the significant constraints facing the Ghana Power Sector, including fuel supply challenges due to natural gas unavailability, liquid fuel price variability and issues with availability of liquid fuel (Light Crude Oil and Distillate) storage and treatment infrastructure.
As the mandated lead arranger, AFC coordinated finance for the US$887 million transaction from a consortium of nine private sector commercial banks, development finance institutions, and institutional and export credit agencies:
• Rand Merchant Bank (Global Lead Bank and Mandated Lead Arranger for the commercial banking tranche)
• Nedbank and Standard Bank (mandated lead arrangers in transaction)
• Export Credit Insurance Corporation (‘ECIC’) of South Africa (provided the export credit cover for the South African commercial tranche)
• FMO (Nederlandse Financierings-Maatschappij voor Ontwikkelings Landen N.V), the Dutch Development Bank (Mandated Lead Arranger for the DFI tranche)
• Deutsche Investitions-und Entwicklungsgesellschaft mbH – DEG
• OPEC Fund for International Development – OFID
• Industrial Development Corporation – IDC
• Emerging Africa Infrastructure Fund – EAIF
• Development Bank of South Africa – DBSA
The core equity holders, in addition to AFC, are: Sumitorno Corporation, African Infrastructure Investment Managers (AIIM), various Ghanaian Private Investors and Netherlands Development Finance Company (FMO). InfraCo, a project co-developer since 2005, exited the project September 2014.
Whilst large international firms are beginning to invest heavily in the continent’s there remains a deficit of funding from Africa’s own private sector. Kpone IPP however represents a truly African solution to Africa’s huge power shortage problem; the founding shareholders are Ghanaian, the construction company is African, 67% of equity is held by African companies and 83% of senior debt is issued by African lenders. The success of Kpone IPP’s financing and development will provide the template for further African investment in African infrastructure.
The plant will also have a significant, immediate impact in Ghana when it comes on-stream in 2017. It will improve the country’s generation capacity by 10%, provide 20% of thermal generation and supply power to over one million homes.
First in its field
Kpone IPP is a pioneering energy project not only for Ghana but for the wider West African region and represents the:
• First private sector greenfield IPP to be project financed in Ghana
• First IPP in Ghana to obtain a generation licence
• First project finance deal in Ghana to take fuel supply risk
• First IPP investment in Africa for Sumitomo Corporation, Japan
• First project to provide a fuel financing facility for the Electricity Company of Ghana (ECG)
• First IPP to be developed on a Build Operate Transfer (BOT) basis- the plant will be returned to the Ghanaian government after 20 years of operation.
• Largest private financed IPP in sub-Saharan Africa in the last 10 years
The landmark US$887 million financing transaction has received five major awards:
• Winner of Africa Power Deal of the Year – PFI Thomson Reuters Awards
• Winner of Best Power Deal of the Year – EMEA Project Finance Awards
• Winner of Infrastructure Deal of the Year – African Banker Awards
• Highly Commended for African Infrastructure and Project Finance Award – The Banker
• Power Deal of the Year – African Investor Infrastructure Investment Awards