AFC’s history-making Kpone project

“One of the most interesting things about the Kpone IPP is that in this deal, which is valued at close to $1bn, over 65% of the equity is African,” says Oliver Andrews, who was appointed executive director and chief investment officer of the Africa Finance Corporation (AFC) this September.

“Before, people used to say that we need outsiders to come in, but now we have demonstrated that we are able to structure the capital within the continent.”

A former CEO of TCI Infrastructure Ltd, and the Gambia Ports Authority, Andrews, a 30-year veteran in the infrastructure business, had formerly, as the AFC’s chief coverage officer, led the corporation’s origination, industry and projects development department.

The Kpone plant is also highly significant as it is a major African-led initiative that has not required any direct financing from the Bretton Woods institutions.

With a development price tag of circa $900m, it marks a clear landmark in Africa’s bid to rely on its own financial assets to fund major industrial developments.

“The deal was led by an African team – the negotiation for the power purchase agreement; the negotiations for a government consent and support agreement; the engineering, procurement and construction contracts; fuel supply contracts; and financial structuring and documentation– these were all led by the AFC Cenpower Team,” says Andrews.

“You have to negotiate with the Ministry of Finance, the Attorney General, the Ministry of Energy and a whole array of players who might not all have the same interests, all with different perspectives, different objectives and different cultures! Getting those interests aligned takes time”

Daunting size of project
The genesis of the project itself goes back to the 1990s when reforms to the country’s energy policy recommended the commissioning of large-scale privately owned power plants.

This created considerable interest among local Ghanaian investors as well as DFIs and sufficient funding was raised to carry out the basic feasibility studies.

The Kpone IPP project itself was initiated in 2003 by the founding shareholders, a Ghanaian investor group comprising Nana Samuel Brew-Butler, Jimmy Heyman and Kweku Awotwi, now collectively Cenpower Holdings Limited (CHL) investor group.

In 2006, the founding shareholders executed a Joint Project Development Agreement with Infraco, a multi-donor-funded project development company to jointly develop the project.  

Infraco was set up in 2004 to encourage private infrastructure investment in developing countries to contribute to economic development and reduce poverty.

The shareholders of Infraco are the Private Infrastructure Development Group (PIDG) comprising the World Bank and the governments of the Netherlands, Sweden, Switzerland, Austria and UK.

But given the scale of the project, the size of the investment and the complexity of the multitude of elements that needed to be brought together to ensure bankability, progress was slow.

Then in 2010, AFC came in as lead project developer and financier, purchasing a majority stake in the project’s Special Purpose Vehicle, Cenpower Generation Company Ltd (CGCL), and joined the founding shareholders – Cenpower Holdings Limited and InfraCo Africa – to assist in the financing and development of the Kpone IPP.

But even at this stage, the project was littered with hurdles, problems and snags.