CMEC provides $114.89 supplier credit for Phase 1 of 335MW Omotosho Power Plant Project (Linked to Record ID#62130)

Project narrative

On March 27, 2002, China Machinery Engineering Corporation (CMEC, 中国机械设备工程股份有限公司) signed a $114.89 million supplier credit agreement with the Government of Nigeria for Phase 1 of the Omotosho Power Plant Project. This loan carried the following terms: 12 year maturity, 6 year grace period, and 6% interest rate. It was collateralized against the cash proceeds from oil sales (under a renewable, annual offtake agreement between PetroChina and Nigerian National Petroleum Corporation, in which PetroChina agreed to purchase 30,000 barrels of crude oil a day from Nigerian National Petroleum Corporation). In order to finance its supplier credit agreement with the Government of Nigeria, CMEC secured an export seller’s credit from China Eximbank that covered approximately 65% of the total cost ($170 million) of the project. Phase 1 of 335MW Omotosho Power Plant Project involved the construction of a 335MW gas-fired power plant in Omotosho within Ondo State. Construction began in March 2005. Then, on November 10, 2006, a project company (special purpose vehicle) called Omotosho Power Plc was established to manage the power plant. On April 17, 2007, the power plant was officially commissioned, adding 335 MW of electricity to the national grid. It was originally envisaged that, upon completion, the power project would operate commercially and the proceeds from the sales of electricity would be used for the repayment of the supplier credit. However, implementation delays, gas supply limitations, and insufficient funding at the Power Holding Company of Nigeria (PHCN) resulted in an accumulation of unpaid invoices to CMEC. The Government of Nigeria eventually defaulted on its repayment obligations under the supplier credit agreement. Nigeria’s Debt Management Office (DMO) later assumed responsibility for these obligations. In 2013, Nigeria’s National Council on Privatisation (NCP) approved a debt-to-equity swap in which CMEC-Pacific would pay $217.5 million for the power plant and the Government of Nigeria would transfer ownership of Omotosho Power Plc to CMEC-Pacific. The DMO then reported in 2014 that it had fully repaid its outstanding obligations to CMEC.