PRESS RELEASE

World Bank to Help Nigeria Improve Gas Supply and Reliability, and Bring More Electricity to Nigerian Consumers

April 22, 2013


Abuja, April 22, 2013 — The World Bank provided its first Partial Risk Guarantee (PRG) for US$145 million to support Nigeria’s gas sector and bring more electricity to Nigerian consumers.  The PRG agreements in support of a Gas Supply and Aggregation Agreement (GSAA) were signed today between the World Bank and the Power Holding Company of Nigeria (PHCN), Egbin Power PLC, Chevron Nigeria Ltd, and Deutsche Bank.

Under the 10-year GSAA, which is based on the industry template developed by Nigeria National Petroleum Corporation (NNPC), Chevron Nigeria Ltd will provide gas to Egbin power plant, thereby assuring gas availability and reliability for power generation and assisting in economic growth. This is the first time that Egbin power plant will be able to procure gas under long-term arrangements.

“With over 75% of Nigeria’s power generation depending on natural gas, assuring the availability and reliability of gas supply is a critical step in realizing the goal of un-interrupted electricity supply to Nigerian consumers,” said Marie Francoise Marie-Nelly, World Bank Country Director for Nigeria.

The World Bank PRG, provided under the IDA-financed Nigeria Electricity and Gas Improvement Project (NEGIP), was key to enabling long-term gas supply arrangements. PRGs are used to cover private lenders against the risk of a public entity failing to perform its payment or contractual obligations. The NEGIP PRG was instrumental in achieving financial closure of the Egbin GSAA transaction, by providing payment security for Chevron Nigeria Ltd for the supply of gas. The payment security instrument used was a 10-year Letter of Credit (L/C) issued by Deutsche Bank.

The absence of long-term gas supply arrangements has been one of the main causes of power shortages in Nigeria, as the gas had to be procured on a ‘best endeavor’ basis, which often was of low quality and insufficient quantity, resulting in poor performance of the power plants. The long-term contracts enabled by the PRG will also help encourage investments in upstream gas production by international and domestic oil and gas companies.

The use of the Partial Risk Guarantee to support Nigeria’s Gas Supply and Aggregation Agreement has provided the level of comfort needed by investors, and paved the way for a new commercial framework for gas contracts.  This will help to catalyze long-term private investments in Nigeria’s gas sector and underpin future investments in the power sector,” said Pankaj Gupta, World Bank Manager of the Financial Solutions Unit.

Under the NEGIP project, the World Bank has committed to a series of PRGs for a total of US$400 million, of which the PRG for Egbin GSAA is the first to be signed. Subsequent PRGs will support other gas supplies to PHCN plants and Niger Delta Power Holding Company plants. 

Media Contacts
In Abuja
Obadiah Tohomdet
Tel : 234-09 314569-75
otohomdet@worldbank.org
In Washington DC
Cathy Russell
Tel : +1 (202) 458-8124
crussell@worldbank.org



PRESS RELEASE NO:
2013/360/AFR

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