How the financing was arranged
Prior to the Azito financing, the government and the IFC had worked together on private sec-
tor ventures, but not with private commercial bank financing. ABB brought in Société
Générale as joint arranger of the financing, so that its commercial lending skills would com-
plement the IFC’s emerging-market financing skills. Société Générale helped the government
and the IFC to define what would make a project financing bankable in terms of phasing pro-
ject construction, defining the tariff structure, designing a cash-flow capture structure and
controlling the investment of project funds.
After the concession contract was signed in 1998, the joint arrangers started to work on
a financing for just the power project. Then the government expanded the scope of the financ-
ing to include the transmission line. At financial closing Cinergy would on-lend funds for the
transmission line to the government, which would be responsible for the construction of the
transmission line. This required the bankers to do more due diligence and other work to pre-
pare the financing documents, and, as a result, delayed the financial closing. Also, from a
lender’s perspective, it increased the government’s obligations and therefore the project’s
political risk. As a result, the lenders asked for additional multilateral agency protection and
were able to negotiate a political risk guarantee from the IDA. The political risk guarantee
covers only 15 per cent of the project cost, but 50 per cent of the commercial bank funding.
It was a critical element in the loan syndication process because Côte d’Ivoire did not have
an established international borrowing record, sub-Saharan Africa was a new frontier for pro-
ject lending, and banks were generally cautious about emerging-market exposure immediate-
ly after the Asian financial crisis.
In early 1999, the government, seeing a continuing delay in the financial closing, became
concerned about a possible power shortage and asked ABB to begin construction. After some
difficult negotiations, ABB agreed to start with bridge financing provided by Société
Générale, secured with assets on ABB’s own balance sheet, and based on assurances that the
World Bank would participate in the financing through an IDA partial risk guarantee.^9
The CDC was the lead arranger of a US$60 million club loan along with the African
Development Bank, Deutsche Investitutions und Entwicklungsgesellschaft mbH (DEG) and
Nederlandse Financierings-Maatschappir Voor Ontwikkelingslanden NV (FMO), including
US$47 million senior debt and US$13 million partially convertible subordinated loans. The
CDC is a leading investor in emerging markets. It invests in, manages and supports commer-
cially viable private-sector businesses while working closely with host governments. Based
in London, with 30 overseas offices, the CDC concentrates on pre-emerging and emerging
economies, and those carrying out economic reform programmes.
Project contracts
A fixed-price, date-certain turnkey engineering, procurement and construction (EPC) contract
was awarded to ABB Energy Ventures and Industrial Promotion Services, the local arm of the
Aga Khan Fund for Economic Development, for construction of the power plant in two phases.
A separate EPC contract covered construction of the transmission line.
The project company signed a 20-year take-or-pay PPA with the government that pro-
vides for capacity payments and energy payments. If the government does not dispatch the
plant, it makes a capacity payment but not an energy payment. Electricity is delivered to con-
sumers by CIE, which, as noted above, is a private-sector distributor.
POWER PLANT