Standard Bank’s provision of USD 170 million in debt financing to helpbuild a 118 Megawatt (MW) gas-fired power plant in Ressano Garcia,Mozambique, is the final piece in unlocking the complete gas-to-powervalue chain in development across Mozambique.Standard Bank, Africa’s biggest lender by assets and market valueacted as sole mandated lead arranger to Gigawatt, a Mozambican companythat was awarded a gas power generation concession by the country’sGovernment which is expected to supply power to the capital city ofMaputo. The project will supply approximately 12% of Mozambique’stotal power demand upon completion. This will help reduce thecountry’s reliance on neighbouring South Africa, which currentlysupplies the bulk of the electricity needs of the nation’s capital bywheeling the electricity generated in Northern Mozambique throughSouth Africa and then on to Maputo given the limited transmissionnetwork in Mozambique.
“The Gigawatt transaction not only demonstrates Standard Bank’scommitment to Mozambique but also underscores the role that financingcan play in helping resource-rich countries benefit from their ownnatural resources,” said Mr Ronaldo Toledo, Head Investment Banking atStandard Bank Mozambique. “This deal is the culmination of severalother transactions that have been put in place over a number of yearswhich will see gas extracted from the gas fields of northernMozambique and transferred across the length of the country for theultimate benefit of its people.”
As sole commercial lender, Standard Bank has been instrumental inhelping to unlock the value in Mozambique’s natural gas reserves,participating in funding of several deals involving key strategicplayers in the country’s oil and gas and power and infrastructuresectors. This has seen more than USD540 million of debt extended tothe Republic of Mozambique Pipeline Investments Company Limited(ROMPCO), an additional USD20 million of debt to the Matola GasCompany (MGC) and USD240 million of debt to an unincorporated jointventure consisting of Sasol Petroleum Temane Limitada (SPT), whichsources gas from Sasol’s fields in Mozambique’s Temane/Pande region.
Gigawatt has also signed a long-term Power Purchase Agreement withstate power company, Electricidade de Moçambique (EDM) which plans touse all the power generated by the project domestically. Thetransaction, which was funded with 75% senior debt and 5% subordinated
debt with a door-to-door tenor of 12 years, reached financial close on20 June 2014 and is the first project-financed Independent Power
Producer (IPP) initiative to reach financial close in Mozambique.
The Gigawatt plant will be constructed over an 18 month period througha joint venture between WBHO Construction and Parsons Brinkerhoff.
Engines for the gas plant will be supplied by Rolls Royce and will beoperated by TSK. Standard Bank also provided the forex and interest
rate hedges, agency function and will act as account bank inMozambique and South Africa.
“Standard Bank has been involved in each of these ongoing individualprojects, ROMPCO, Matola Gas Company and SPT. Gigawatt is theconcluding development, which is largely thanks to the rapidadvancement of our Mozambican franchise,” said Mr Toledo. “TheGigawatt deal also speaks to Standard Bank’s ongoing commitment to useits on-the-ground presence and expert capabilities across Africa tofinance the development of power and infrastructure projectsthroughout the continent.”
Standard Bank’s research shows that demand for power in Mozambique,which reaches around 805MW at peak usage at present, is growing at
roughly 14% per annum. Given the strong growth in demand, EDM hasneeded to import power from the region since 2011 to alleviateshortfalls in capacity. The southern African country is striving toboost its power generating capacity, particularly in the south of the
country where its load centres are located, to reduce its reliance onneighbouring South Africa, which is also battling ongoing electricity
shortages.