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CBN sets up 7-man c’ttee on N300bn power fund

By Omoh Gabriel, Business Editor

The Central Bank of Nigeria, yesterday, set up a 7-man inter-ministerial committee to evaluate and approve projects that will benefit from the N300 billion funding it has set aside for power and aviation resuscitation in the country. The committee members are contained in the fresh guideline set by the apex bank on the fund.

According to the guideline on the approval process  released in the CBN website yesterday, “the recommended applications that have fulfilled all the laid down criteria shall be forwarded to an Approving Committee for final approval.

The Approving committee comprises: Director, Development Finance Department, CBN – Chairman; Managing Director, BoI – Member; Representative of the supervising Federal Ministry – Member; Representative of the Sector Regulator — Member; Technical Adviser, Africa Finance Corporation – Member.

“BoI shall provide secretariat services to the Committee and Federal Ministry of Power for Power Projects.”
Beneficiaries, conditions

The apex bank stated that any corporate entity, duly registered in Nigeria, involved in electricity power supply value chain that includes power generation, transmission, distribution and associated services are eligible to benefit from the funds.

Other conditions to be met by power projects are that eligible projects can be promoted by private or public sector sponsors or a combination of both, but must be structured either as profit-oriented business or a public service, provided that contracted cash-flows or financing support exist to ensure repayment of principal and interest, as well as long term viability.

It said: “Also qualified to apply are Project Company that offer appropriate credit enhancement options to support its financial obligations; could be already existing and in operation, in design/development, under construction, or existing but operationally inactive.”

For airlines the guideline said: “Any airline duly incorporated under the Companies and Allied Matters Act of 1990 and operating in Nigeria that requires long term loans, refinancing of existing loans, leases and working capital for existing power and airline projects only.”

SMEs too
CBN in the guidelines said: “In a bid to catalyse financing of the real sector of the Nigerian economy, the Central Bank of Nigeria has, in accordance with Section 31 of the CBN Act 2007, approved the investment of the sum of N500 billion Debenture Stock to be issued by the Bank of Industry (BoI). The sum of N200 billion has been set aside for the refinancing/restructuring of SME/manufacturing portfolios while the sum of N300 billion will be applied to power and aviation projects.

“These guidelines relate to the N300 billion intervention fund to the power and aviation sector.

Fund’s objectives
“The objectives of the Fund are to: fast-track the development of electric power projects, especially in the identified industrial clusters in the country; fast-track the development of the aviation sector of the Nigerian economy by improving the terms of credit to airlines; serve as a credit enhancement instrument to improve the financial position of the Deposit Money Banks; improve power supply, generate employment, and enhance the living standard of the citizens through consistent power supply; provide leverage for additional private sector investments in the power and aviation sectors.”

Managers, moratorium
The CBN guideline further said: “The Bank of Industry, BoI, shall be the managing agent and be responsible for the day to day administration of the Fund. While the Africa Finance Corporation, AFC, shall serve as Technical Adviser to the Fund.

“All Banks and Development Finance Institutions, DFIs, excluding the BoI, shall participate in the scheme. The Power Intervention Fund, PIF, facility shall not be more than 70 per cent of the total cost of the project and shall have a tenor of 10-15 years as determined by the project’s cash flow profile.”

CBN said the working capital facility shall be of one year duration with provision for roll-over but not more than 5 years. It also said moratorium on principal shall depend on the type and nature of the project and shall be the same as either the construction period of the project or the time required to complete the project.

It also said that additional moratorium period of 18 months may be added to the moratorium period in order to address the risk of completion delays.

According to the CBN in the guideline protracted completion delays could be addressed through other mechanisms such as adequate sponsor support and contingencies to be determined on a project specific basis. The treatment of IDC shall depend on the project. The two options allowed under the initiative are that interest shall accrue and be capitalized accordingly during the moratorium period. And that interest shall be funded during construction from a pre-funded IDC Account. The amount required for IDC can be added to the total project cost. The IDC payment option adopted shall be expressly stated on the loan documents

The fund shall provide refinancing up to 60 per cent of the loans granted to an airline subject to a maximum of N5 billion per project. The tenor of refinancing shall be 10 – 15 years and shall be determined by the supporting cash-flow profile. The Fund shall be administered at an “all-in” Interest rate/ charge of 7 percent per annum payable on quarterly basis. Specifically, the Managing Agent (BOI) shall be entitled to a 1% management fee and the Banks, 6%. In the event of default in loan repayment principal and interest, the Participating Bank shall have the right to charge commercial interest rate on the amount in default. Any PB that fails to disburse received funds to the borrower in accordance with the provisions of this guidelines shall be subject to a penalty that shall be decided by the CBN. 8.3.3 Professional / Consultant Fees Professional/consultant fees associated with the refinancing/restructuring exercise shall be grossed up and included in the total project cost to be refinanced.

According to the guideline each request must be accompanied by the following documents: request from the customer seeking such loan and/or refinancing/restructuring; last 3 years financials of an existing company; feasibility study/business plan of the project; relevant permits/approvals; off-take and other relevant agreements; environmental impact assessment report; copies of duly executed offer documents between the bank and the company evidencing existence of a facility in the case of refinancing; six (6) months account statements showing the current exposure (if any); Certificate of Incorporation evidencing the incorporation of the Company with the Corporate Affairs Commission; and list of Directors of the company (Form CO7)


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