China Development Bank provides $629 million loan for Phase 1 of Lekki Deep Water Port Project

Project narrative

On April 21, 2011, Nigerian Ports Authority (NPA) and Lekki Port LFTZ Enterprise Limited (LPLEL) — a special purpose vehicle and joint venture of Lekki Port Investment Holding Inc. (75% equity stake) that is itself jointly owned by China Harbour Engineering Company Ltd (52.50% indirect equity stake in LPLEL) and Tolaram (22.5% indirect equity stake in LPLEL), Lagos State Government (20% equity stake), and the Nigerian Ports Authority (5% equity stake) — signed a concession agreement for the Lekki Deep Water Port Project. LPLEL was awarded a 45-year concession on a Build, Own, Operate and Transfer (BOOT) basis. It is responsible, under the terms of the concession agreement to develop, finance, build, operate and, at the end of the concession term, transferring the Lekki Deep Water Port (located in the Lagos Free Trade Zone) to NPA. LPLEL will earn revenues through operations of the port. Upon completion, Lekki Port is expected to have a total of 3 container berths, 1 dry bulk berth and 3 liquid berths. The port is projected to have the capacity to handle about 5.5 million containers and estimated to generate 200,000 direct and indirect jobs in the economy. It is also expected to generate over $361 billion over the 45-year concession period with the Government of Nigeria earning about $200 billion. CMA Terminals Nigeria, a subsidiary of French shipping company CMA CGM, which it jointly owns with China Harbour Engineering Company (CHEC), will operate the port once it opens in 2022, following the signing of a sub-concession agreement on September 30, 2019. On October 23, 2019, China Development Bank (CDB) and LPLEL signed a long-term, $629 million commercial loan agreement for Phase 1 of the Lekki Deep Water Port Project. The borrowing terms of the loan are unknown. However, it is known that the borrower purchased a credit insurance policy from Sinosure. The proceeds of the loan (captured via Record ID#85628) were to be used by the borrower to partially finance a $679 million commercial (EPC) contract with CHEC, which was signed on May 11, 2012. On the same day, CDB and Lekki Free Trade Zone Enterprise Limited signed a Sponsor Support Agreement, Completion Guarantee Agreement and the Tripartite Keep well Agreement as well as seven security documents. The total cost of Phase 1 is $1.043 billion. CHEC made a $221,047,248 direct equity investment in Phase 1 of the project on March 30, 2020 (captured via Record ID#87054). The first, $60 million CDB loan tranche was disbursed on April 29, 2021 after Lekki Free Trade Zone Enterprise Limited had satisfied all the conditions precedent for the release of the funds. Additional debt financing was reportedly provided by Agence Francaise de Developpement (AFD), European Investment Bank, FMO, IFC, African Finance Corporation, DEG, Rand Merchant Bank, Standard Chartered, and Stanbic Bank. CHEC is the EPC contractor responsible for implementation. A formal groundbreaking ceremony took place on March 29, 2018. Phase 1 construction activities commenced on June 15, 2020. Then, in October 2020, construction of a 680 meter long quay wall commenced, with the driving of the first sets of piles underway. Speaking at the flag-off ceremony at the project site, the Chief Executive Officer of Lekki Port, Mr. Ruogang Du, said that the commencement of piling of the quay wall, which is a major phase of the construction, symbolized a significant step towards the timely delivery of the project. In late November 2020, Mr. Rotimi Amaechi, Nigeria’s Minister of Transportation directed Dr. Magdalene Ajani, the Permanent Secretary of the Ministry, and the legal department to document an agreement with the Lekki Port LFTZ Enterprise Ltd., to ensure that the port becomes operational in 2022. The Minister of Transportation gave this directive while inspecting the project. In late March 2021, it was announced that the project had achieved a 48% completion rate and would begin commercial operations during the first quarter of 2023. In early May 2021, Lekki Port LFTZ Enterprise Limited announced that construction of the Lekki Deep Seaport had reached a nearly 50% completion rate. At that time, the 1,909 meter long core of the main breakwater was completed, and work on the quay wall and landside infrastructure has reached advanced stages. This milestone of the completion of the core of the main breakwater was achieved on April 29, 2021. The Managing Director, Lekki Port LFTZ Enterprise Limited, Mr. Du Ruogang, affirmed that construction would be completed as scheduled (with a planned completion date of September 2022) and a targeted commercial operations date in Q4 2022. He also affirmed that the container terminal operator – Lekki Freeport Terminal, a subsidiary of CMA/CGM — was ready to commence operations (under a bespoke sub-concession arrangement) once construction was complete. In early August 2021, it was announced that the Lekki Deep Sea Port Project was moving forward according to schedule with 58.15% of the construction works having been completed. Phase 1 was ultimately completed when a project handover certificate was issued on October 24, 2022. Upon completion, it was originally expected that Phase 1 would increase the port’s handling capacity by 1.2 million twenty-foot equivalent units (TEUs). Phase 2 is expected to more than double this total to 2.5 TEUs.