AFC’s history-making Kpone project

In late September, the Africa Finance Corporation-led Cenpower team finally brought to financial close a massive, $1bn power project that has taken 10 gruelling years to realise – and made history in the process. Anver Versi and Stephen Williams tell the fascinating story of the deal.

The African investment bank has put together a complex financial structure for what will become the largest private power plant financed in sub-Saharan Africa.

Most significantly, this is the largest African-financed initiative in the Independent Power Producer (IPP) segment and the biggest tranche of its funding, by far, is from African sources. 

The project is the Kpone power plant to be located near the Tema heavy industrial area, 24 km east of Accra, the capital of Ghana. It is a Combined Cycle Gas Turbine (CCGT) power plant with a planned capacity of about 340 MW.

Once this plant is commissioned in roughly three years, it will completely change the power infrastructure in Ghana.

Currently, the sporadic and generally inadequate supply of power in the country is severely hampering economic growth and multiplying inefficiency costs.

The impact of this project on the economy of Ghana and its potential to spur an acceleration of industrial growth and its consequent job creation is impossible to calculate; at the very least it will be hugely transformative

The Kpone IPP project has been carefully planned. It has been designed to work with multiple fuels – natural gas, crude oil and distillate – although natural gas will be the primary fuel.

It is located about 600 metres from the Atlantic Ocean, adjacent to the West African Gas Pipeline landing point in Tema and close to all main interconnections and is adjacent to a planned 330kV transmission corridor and a 161kV major substation. The site will enable the use of seawater for direct cooling.

The impact of this project on the economy of Ghana and its potential to spur an acceleration of industrial growth and its consequent job creation is impossible to calculate; at the very least it will be hugely transformative.

The project will add approximately 2,700GWh of electricity every year to the national grid and provide supply for approximately 1m households.

But Kpone also registers a number of significant firsts. It is the first greenfield project finance IPP in Ghana; it is the largest IPP in sub-Saharan Africa in the last 10 years; it is the largest private power plant financed in SSA; it is the first project finance deal in Ghana taking fuel supply risk and it is Sumitomo Corporation of Japan’s first IPP investment in Africa. But perhaps the most outstanding feature of this project is that it is African.

The initiative was African, the founding shareholders are Ghanaians, 67% of the equity is held by African entities; the construction company, Group Five, is African, 83% of the senior debt is issued by African lenders and the African commercial banks involved provide about 70% of the total debt.

The lead developer and largest shareholder is the Africa Finance Corporation (AFC), an African private sector-led international financial institution involved in creating, developing and financing industrial and financial assets.

By any measure, Kpone is a massive and vastly complex project – the sort of project that would normally be unthinkable unless a whole slew of multilateral organisations, including the World Bank, were involved.