Narrative
Full Description
Project narrative
On October 16, 2013, Standard Bank and the Industrial and Commercial Bank of China (ICBC) signed a $108 million syndicated loan agreement with Triumph Power Generating Company (TPGC or ‘Triumph’) — special purpose vehicle — for the 83MW Athi River Medium Speed Diesel (MSD) Power Plant Project in Kenya. ICBC provided $80 million of debt financing, and the Standard Bank of South Africa (Stanbic) provided the remaining $28 million. The syndicated loan carries an interest rate of 6-month LIBOR (0.361% in October 2013) plus 803 basis points, a 1.5 year grace period, and a 15 year maturity. The project was implemented on a public-private partnership (PPP) basis. As such, the loan was provided to a project company rather than the Government of Kenya. Triumph Power Generating Company Ltd (TPGC) was established to undertake the design, financing, construction, and operation of the power plant on a build-own-operate (BOO) basis. The project was structured on a limited recourse basis and it reportedly finance according to a debt-equity ratio of 75:25. The power plant is located at Kitengela (near the Athi River) in Machakos County, about 25km from the Nairobi city in Kenya. The plant has a total installed capacity of 83MW and will consist of 10 x 9.0MW medium speed diesel (MSD) units. XJ International Engineering Corporation — a wholly owned subsidiary of China State Grid Corporation — was the Engineering, Procurement, and Construction (EPC) contractor responsible for implementation. As part of the project, Kenya Power and Lighting Company (KPLC) signed a 20-year agreement with Triumph to purchase power from the plant, which was expected to be a crucial supplier to the utility during times of drought when the country's hydroelectric generating capacity becomes constrained. The foundation excavation work for the project began on April 23, 2012, and the power plant has been in commercial operation since February 2, 2016. The World Bank's Multilateral Investment Guarantee Agency (MIGA) agreed to provide $102.5 million in breach of contract insurance should Kenya Power and Lighting Company (KPLC) fail to honor its 20-year power purchase agreement with Triumph. MIGA's insurance also covers the Government of Kenya's obligations under the Government of Kenya (GoK) Letter of Support. According to Kwame Parker, East Africa Head of Debt Solutions & Infrastructure Finance at CfC Stanbic Bank, '[t]he highlight of this transaction is that it marks the first time that a Chinese commercial bank has used MIGA cover for a non-recourse transaction' and '[i]t's also likely the first time a Chinese financial institution is directly lending to a project company for a transaction in Sub-Saharan Africa that is not related to resource extraction, with no explicit sovereign guarantee.'
Staff comments
1. This project is also know as the Triumph HFO Power Plant. The Chinese title of the project is 肯尼亚重油发电站项目 and 肯尼亚83MW阿西河重油发电厂EPC项目. 2. This project is identified as an 81MW power plant by some sources. 3. XJ International Engineering Corporation is part of the XJ Group of China which is one of China‘s largest manufacturers of power equipment and transmission and distribution technologies for the electric utility market and is owned by the State Grid Corporation which provides power to approximately 88% of China. 4. This loan is omitted from the database of Chinese loan commitments that SAIS-CARI released in July 2020. 5. Given that multiple sources refer to the transaction as a non-recourse project finance transaction and a debenture (which typically create a legal mortgage/charge that can be taken when a project company has an interest in property) and a charge over land, AidData has coded the loan as collateralized. 6. This no-recourse transaction is supported by a credit enhancement package for the project company, which includes a PRG Support Agreement and Project Agreement with KPLC, the Government of Kenya (GoK), and the World Bank’s International Development Association (IDA) in relation to the issuance of an irrevocable on-demand letter of credit by JP Morgan to mitigate against any off-taker payment default as well as the related GoK political risk letter of support. The loan agreement is also linked to a sponsor subscription deed, accounts agreement, and hedging agreement. 7. Triumph Power Generating Company (TPGC) is a special purpose company that was set up in Kenya by BoardHoldings Ltd. (UK) a family-owned company whose principal shareholder is Abdirahman Haji Abass, a Kenyan national. BoardHoldings will own 40% of the company, with the majority of the balance of the shareholding to be held by other family-owned companies such as Tecaflex Ltd., Interpel Investments Ltd and Southern Intertrade Ltd. 8. The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank Group. MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors in developing member countries, covering all regions of the world.