Rabai Case Study
Rabai Location
The Project is a 90MW Fuel Oil fired power plant
located at Rabai, 20 km inland from the port of Mombasa. The site is
adjacent to the KPLC high voltage substation.
0 2 0 0 4 0 0 6 0 0 8 0 0 10 0 0 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 GDP /Capita
Kenya is generally regarded, notwithstanding the recent civil unrest, as the business hub of East Africa and one of the more stable business environments on the African Continent. Over the last few years the country has enjoyed sustained growth benefiting from a pro business, pro private sector Government.
Subject Descriptor Units Scale 2004 2005 2006 2007 2008 2009 Gross domestic product Annual percent change 4.60% 5.8 6.10% 7% 2.50% 3.40% Gross domestic product per capita U.S. dollars Units 495 572 670 845 860 921 Inflation, average consumer prices Annual percent change 11.60% 10.30% 14.40% 9.76% 12.34% 7.01% Population Persons Millions 32.8 33.4 34 34.6 35.3 35.9 International Monetary Fund, World Economic Outlook Database, April 2008
Rabai was recognized by both Project Finance International and
Project Finance Magazine as ‘Africa Power Deal of the Year’
Why is this Project of interest?
It was structured in the midst of a period of considerable unrest in
Kenya
Following the Dec 2007 Presidential elections a dispute over the result
led to violence which resulted in the deaths of over 1,000 people and the displacement of over 300,000 people
At this time we had to work closely with our financing partners to
determine the conditions upon which they would continue with the transaction
There was much discussion with the Government of Kenya regarding
risks associated with political violence
The financing was ‘firmed up’ following the announcement of a
power sharing deal brokered by Kofi Annan
The Project reached Financial Close on October 8th 2008
This was less than one month after the collapse of Lehman Brothers
The debt terms including margin were unaffected by the crisis
The project was to some extent insulated from the crisis by the
nature of its lenders
The Development Finance Institutions lending to Rabai were
prepared to continue
The success of the financing to some extent also reflects the extent
to which Africa has been insulated from some of the effects of the crisis
Growth in many parts of Africa has moved from the 7%pa to the
5%pa range
This is in contrast to the negative growth being experienced in
much of the developed world
Clear transparent process
Built on a platform of a reformed energy sector
New Electricity Act enabling private sector participation
An independent pro-investment Energy Regulatory Commission
A cost reflective tariff
A track record; success breeds success
Use of standard documentation reflecting risk allocation
designed to facilitate project financing
Clear decisive leadership within the Energy Sector
Co-operation and full involvement of officials from the
Attorney General’s Office and the Ministry of Finance
Development Finance Institutions being somewhat less
affected by the banking crisis
Reasons for Success
Recognition of the need for Government Support
A willingness to learn from previous deals inside and outside
Kenya
Reasons for Success II
Government Support Sector Reform Guarantees Requested Comfort Letter Requested
Private Sector Participation
Public
Amount of cash is finite and is
required for uses such as health and education
The utility has to be in a
position to raise the capital required to complete any given project
Public projects have a
tendency to run over time and over budget
Private
Funds are readily available for
well structured projects
The utility has only to pay
electricity and not to raise the capital for any given project
Performance levels are
typically high
The private sector takes
performance risk
Government does, however, have the option to complete projects in
Equity and Debt Participants
34.5%(€9.2m) 20%(€5.3m) 25.5%(€6.8m)
100% (99% Prefs. 1% Ords.)
Aldwych FMO BWSC IFU
Rabai Power Holdings UK
Rabai Power Ltd. DEG FMO EAIF Proparco 15% (€12.0m) 25%* (€19.8m) 25%* (€19.8m)
* Both EAIF and Proparco are investing in senior and subordinated debt $2.8m each
Equity
Debt 20%(€5.3m)
25% (€19.8m)
KPLC Aldwych Const. Kenya Government of Kenya
Rabai Power Ltd.
Power Purchase Agreement, Direct Agreement & Sub Lease Construction Period Management Agreement BWSC Fuel Supplier Fuel Supply Agreement EPC Contract (onshore and offshore) a Spare Parts & Technical Services Agt.
Lenders
Financing Agreements
Rabai O&M Co.
Operations and Maintenance Agreement
Government of Kenya Letter
Ken Gen
Energy Regulatory Commission
Policy Direction
Recommend Licence Issue
KPLC Ministry of Energy Policy Licence Imports IPPs Retail Customers R E G U L A T I O N Enforce Licence Requirements Retail Tariff Approval PPA & Bulk Tariff Approval
Customer Complaints
Sector and Customer Information – Sector
Overview
Aldwych International Ltd. Burmeister & Wain Scandinavian Contractors A/S
Emerging Africa Infrastructure Fund
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V.
Promotion et Participation pour la Coopération économique
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V.
Deutsche Investitions- und Entwicklungsgesellschaft mbH
Bank of New York Mellon
Allen & Overy LLP
The Industrialization Fund for Developing Counties A joint venture
of
and
Rabai Power Holdings Limited
€84,600,000 Project Financing facility for
Lead Arrangers
Barclays Kenya Limited
Trinity International LLP Lenders Legal Advisor Sponsor Legal Advisor Facility Agent And Security Trustee Kenyan Security Trustee
Rabai Power Limited
