Cenpower Kpone IPP
Cenpower Generation Company Limited (‘Cenpower or CGC’) is a Special Purpose Vehicle created to develop the Kpone Independent Power Plant (KIPP) in the Tema industrial zone, close to Accra, Ghana’s capital. The landmark 350MW KIPP, project, is among the largest private IPPs in the country.
The project achieved commercial operations in June 2019 and it currently accounts for approximately 10% of Ghana’s total installed capacity and approximately 15% of its available thermal generation capacity, supplying power to over 1 million homes. As a Combined Cycle Gas Turbine (CCGT) plant, it is among Ghana’s most fuel-efficient thermal power stations. The power plant is a critical base-load component for meeting Ghana’s growing electricity demand.
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 challenging financing requirements within significant 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 at that time, 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 financing for the 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 at Financial Close, in addition to AFC, were Sumitomo Corporation, Cenpower Holdings Limited (Founding Shareholders) African Infrastructure Investment Managers (AIIM) and the Netherlands Development Finance Company (FMO).
Whilst large international firms are beginning to invest heavily in the continent, 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 provides the template for future African investment in African infrastructure.
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 license
- 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.
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 Award