The US$900million financing deal for Ghana’s largest Independent Power Producer (IPP) project, the 350megwatt Cenpower project that was initiated by Ghanaians, has been hailed as the “African Power Deal of 2014”.

The deal, largely financed by African institutions, including the Africa Finance Corporation, will be awarded in London this week at the Thomson Reuters PFI Awards.

For a project initiated by Africans to have managed to raise as much as US$900million is seen as a bold statement to the rest of the world that Africa is indeed ready for business.

One of the initiators, Sam Nana Brew-Butler, who is Chairman of Cenpower Generation Limited, said at a sod-cutting ceremony attended by Vice President Amissah-Arthur that: “We are encouraged and happy to note that this remarkable and extraordinary deal is largely African: the initiators and founding shareholders are Ghanaians; 62% of equity is held by African entities; 83% of the senior debt is issued by African lenders; and the project construction company is African, assisted by indigenous Ghanaian sub-contractors”.

The Africa Finance Corporation (AFC), which is the lead project developer, mandated lead arranger and largest equity investor in the project, called it one of its most innovative and significant financing projects. At the Powering Africa Summit in Washington last week, the AFC showcased the Kpone IPP project, and others across the continent, as a demonstration of its commitment to helping address the infrastructure deficit across the continent.

Ahead of the summit, AFC’s Senior Vice President of Power, Batchi Baldeh, commented on the pressing need to address Africa’s power deficit: “The significant shortfall in power generation capacity is currently restraining the economic development of sub-Saharan Africa. When KIPP comes on-stream fully in 2017, it is expected to increase Ghana’s dependable installed generation capacity by 13% and supply power to approximately 1 million households. It is through landmark projects like KIPP and influential initiatives such as Power Africa that millions of Africans will be able to fulfil their true potential”.

The US$900million raised for the 350megwatts project consists of US$650million debt and US$250million equity from sponsors. The actual construction cost is pegged at US$423million.

In a bid to address the lack of fuel for power generation, the project is to be completed in 32 months and has an in-built cost cover for three types of fuel -- being light crude oil, diesel and gas.

“This initiative means that the state will not be burdened with any arduous responsibility of importing fuel for its operations, and the plant will not shut down because of lack of fuel,” Sam Nana Brew-Butler said.

“This is a project that incorporates a collector sub-station to serve other projects in the Energy Enclave, a sub-station that will eventually be transferred to GRIDCo. This is the very first BOOT power project, and the current owners have agreed to transfer it to ECG (i.e. state of Ghana) on the expiration of its 20-year PPA, for US$1.00 -- even though the plant will still have life of another 10 to 15 years,” he added.

Nana Brew-Butler paid tribute to late President John Evans Atta Mills for playing a key role toward realisation of the project.

“There is a tendency for Ghanaians to complain that their presidents travel too often. Let me however observe that it was through one of such travels by the late President J.E.A. Mills in 2010 that we made our first contact with the big four trading houses in Japan, including Sumitomo. That contact eventually resulted in Sumitomo’s investment in Cenpower -- their first investment in thermal power in Africa,” he said.

“Coincidentally, it was during another trip by the presidency -- this time the visit to South Africa by the then Vice-President and current Head of State, H.E John Dramani Mahama, during the World Cup 2010 -- that he engaged Willie Zeelie and other representatives of Group 5, contractors to this project,” he added.