United Capital Plc, one of Africa’s leading investment banking and financial services groups, in partnership with United Bank for Africa (UBA) Plc, has served as advisers on the structure by which the Nigerian Bulk Electricity Trading Company Plc (NBET) will now be able to provide Bank Guarantees (BG) to power generation companies (GenCos) in line with the provisions of the Power Purchase Agreements and Power Purchase Activation Agreements executed between NBET and the GenCos.
The arrangement involves the assignment of BG, valued at N50.59 billion, to the GenCos. The BG will be held by security trustees (United Capital Trustees Limited) and will serve as payment guarantee to the GenCos.
Speaking on the development, Group Chief Executive Officer, Mrs. Oluwatoyin Sanni said: “The transaction enables the Federal Government of Nigeria to demonstrate it’s clear commitment to the far-reaching power sector reform, ensuring that the entire value chain runs efficiently. It underscores the importance of developing a well-structured power sector that is fair and equally beneficial to the interests of consumers, generators, and distributors.”
According to her, the structure enhances the existing payment security to the GenCos and payments received will enable GenCos to fund working capital and raise capital expenditure towards upgrading their operations and increasing capacity, to meet the demands of the Nigerian economy.
“Advantages of the structure include speed/ease of execution, cost efficiency and risk mitigation by providing recourse to an alternative source of payment for the GenCos to the satisfaction of all parties,” she said.
Sanni disclosed that the structure was achieved through a successful collaboration between UBA Plc that brought its reputation as a financial powerhouse and a leader in the financial services sector, not just in Nigeria but it all over Africa to the transaction.