Government’s objectives
The government wanted to build on the success of the CIE and CIPREL concessions,
increase the number of electricity producers, and encourage greater private participation.
Accordingly, the Azito project was designed as a competitively tendered concession from
the government that would be financed in part from private commercial banks, alongside
the multilateral agency banks. The government also had a number of broader objectives,
such as increasing generation capacity, extending access to more rural areas and benefiting
the environment through the use of a clean-burning fuel such as natural gas. Finally, Azito
was one of 12 private projects designated by President Henri Konan Bedie’s government in
the late 1990s to upgrade the country’s infrastructure without adding a burden to the gov-
ernment budget.^8
Bidding and concession process
The government launched an international competitive bidding process in November 1996.
There were four bidders: AES, Cinergy, Enron and Tractebel. Cinergy won primarily by
proposing the lowest electricity tariff. Because of conflicts among the Ivorian regulatory
agencies concerned, the concession agreement was not signed until September 1998 and the
financing was not structured until early 1999. Among the issues that caused the delay were
the lack of a formal legal structure for build-operate-transfer (BOT) contracts and the routing
and financing of the transmission line.
Throughout the world contractors negotiating to become the first independent power pro-
ducer (IPP) in a given country have introduced legal issues neither covered by local law nor
even seen before by local government authorities. In the course of the Azito project negotia-
tions, the issues included the use of project assets for collateral and the availability of inter-
national arbitration in the event of a project dispute.
Legal issues related to the concession included structuring power sector revenues and
preventing dilution of Azito project cash flows as a result of subsequent project approvals.
Proper allocation of sector revenues required modification of the cash-flow waterfall estab-
lished for CIE in 1990. The new priority ranking gave IPPs and gas suppliers equal pro rata
treatment, and gave private participants in the sector priority over government agencies, in
order to allay investors’ and lenders’ payment risk concerns. To protect the interests of exist-
ing power projects the government pledged not to approve new projects unless they met the
following coverage ratio: total power sector revenues less fees paid by the government to CIE
were to be no less than 1.3 times payments to fuel suppliers and IPPs. If the power sector did
not meet this ratio, payments to new entrants would be subordinated to amounts due to exist-
ing power plants and fuel suppliers.
The government modified the tariff structure to improve the financial viability of the
power sector. In doing so, it tightened the eligibility requirements for subsidised power, mak-
ing sure that the subsidies were restricted to low-income users. Such a compromise required
delicate political balancing.
Under the original plan, the transmission line was to cross heavily populated areas. After
objections from the IFC and others, it was rerouted. The government originally planned to
finance the transmission line but could not find a source of funding. As a result, the trans-
mission line was financed along with the power plant by the public/private international bank-
ing syndicate.
AZITO, CÔTE D’IVOIRE