Mr. M Patrick Mgbenwelu, Head, Project Finance (Debt & Advisory) _ Stanbic IBTC Bank Plc in this interview spoke on the need to finance infrastructure in Nigeria and what the bank has been doing in that regard.

Stanbic IBTC in the last four to five years has been very active in the infrastructure financing space. Can you elaborate on some of these deals?

Stanbic IBTC Bank is a member of the Standard Bank Group. The bank has certainly played a major and leading role on most landmark infrastructure financings over the last four to five years, and our work in this area has secured us notable industry awards.

The Bank has an unrivalled and successful track record of providing financial advisory and debt arranging services to private and corporate clients undertaking large scale infrastructure transactions in Nigeria.

Our financial advisory and debt arranging expertise cuts across a wide range of projects with awards specific to our work in Nigeria as summarized in our recent awards which include but is not limited to the following: Public Private Partnerships (PPP) Champion of the Year (2009) _

African Investor Infrastructure Awards; African PPP Deal of the Year – Lekki Expressway (2008) _ Project Finance Magazine; African Infrastructure Deal of the Year – Lekki Expressway (2008) _ Reuters Project Finance International; and Best Investment Bank in Nigeria (awarded to Stanbic IBTC Bank) (2009) – EMEA Finance.

Although we have been involved in various transactions, one that certainly does stand out is our involvement in the financing of the Lekki Epe Expressway. The project involves the development of a toll road corridor along the Lekki Peninsula.

The approximately 50km strip of road heads towards the east of Victoria Island; an area now considered to be the fastest growing residential and commercial area in Lagos.

The deal was finalized in October 2008 when financial draw down took place. Standard Bank acted as co_financial advisor as well as an arranger, underwriter and largest lender on the project. Funding for the project comes from Lagos State Government, which has invested N5 billion (US$42 million) in a 20_year mezzanine tranche.

The African Development Bank provided N10 billion (US$85 million) senior debt over 15 years and local lenders, including First Bank of Nigeria and United Bank for Africa, provided a 12_year note facility of N9.4 billion (US$80 million).

The remaining term funding was provided by Standard Bank Plc, which became the sole arranger of the N11 billion (US$93 million) 15_year international tranche. This tranche was underwritten by Standard Bank Plc and Stanbic IBTC Bank Plc.

This transaction is notable for the following reasons (i) the first true PPP toll road in West Africa, (ii) the first 15 year tenored financing (longest financing to date) in Nigeria, (iii) the largest PPP deal closed in Nigeria to date and (iv) the longest tenured cross_currency swap done to date.

One of Nigeria’s biggest challenges is the dearth of infrastructure, this however is getting better with PPP and wholly private sector driven initiatives. How is Stanbic IBTC helping to provide the much_needed fund to facilitate these infrastructure development initiatives?
The rapid development and application of PPP in Nigeria is certainly a welcome boost to assist accelerating the financing of infrastructure projects, and we need to commend the excellent work being done by the Infrastructure Concession Regulatory Commission (ICRC) in promoting and “hand_holding” interested parties during the planning and bidding stages of their various PPP transactions. ICRC’s role is crucial especially given the fact that not much is known about PPPs in Nigeria. The Commission has gone a long way to ensure some of the key ingredients for a successful PPP are put in place from the onset.
Stanbic IBTC and the Standard Bank of South Africa played major roles on the first true PPP transaction in Nigeria (i.e.

the Lekki Epe Expressway) where we acted as financial adviser and debt arranger alongside other Nigerian and foreign financial institutions. Our involvement in PPPs goes beyond funding itself, but also includes PPP consulting/advisory to clients at all levels, State, Public and Private sectors.

In addition to the foregoing, given our deep understanding of a PPP project’s life cycle coupled with the significant amounts needed to fund the initial capital intensive up_front costs, we are also able to source much needed long_term funding for these transactions.

As a member of the Standard Bank Group we pull on expertise and lessons learned from other PPP projects from one or more of our other Standard Bank Group offices across the globe. Utilizing the expertise from our Global Market’s teams, we are able to bolt_on unique features such as ‘tenor extension’ mechanisms which we successfully did on the Lekki Epe Expressway financing.

Stanbic IBTC has been involved in telecom, oil and gas, industrial, construction i.e. road and property infrastructure financing; you must have a big war chest to be giving out such financing support?

We have certainly been involved in financings across a range of sectors and do intend to maintain our presence as Nigeria’s leading project finance and PPP infrastructure bank across all the sectors you have mentioned.

Whilst we are very active across most sectors, we generally always take a leading role on financings so as to ensure we are fully involved in structuring a bankable transaction before it is formally launched into the debt market. Being active in so many financings does not necessarily require a huge “war chest”, although this is without question a huge benefit.

Majority of the large financings that we are involved in are eventually syndicated and we are able to achieve successful syndications given our strong structuring and distribution expertise. The capacity to structure “bankable projects” is derived from our very deep financial advisory resources internally which we bring to bear on all project finance transactions.

Stanbic IBTC and Standard Bank are strong players in infrastructure development across markets where Standard Bank operates;

why the special interest in infrastructure development?
Perhaps it is ideal at this juncture to set out Stanbic IBTC/Standard Bank’s key focus areas and also explain what we mean by infrastructure as this term (depending on who you speak to) tends to include and or exclude a number of key areas.

The Standard Bank’s key focus areas can be summarized as follows: Power & Infrastructure; Oil & Gas; Manufacturing and Distribution and Telecoms. When we use the term infrastructure, this includes Power plants, roads, airports, Sea_ports, and other core infrastructure.
Our interest in infrastructure is partly also driven by the markets in which the Standard Bank Group operates in, i.e. emerging economies.

The investment in infrastructure remains central to the objectives of most emerging economies so it only makes good business sense to be involved in such a sector deemed of critical importance to a host of economies.

The cross_fertilization of ideas, lessons_learned, and best practices across the various economies where the Standard Bank Group operates is what also places us miles ahead of other financial institutions. For our clients, we provide a deep local knowledge / understanding of the issues for closing large scale infrastructure projects whilst providing a global reach in terms of funding and expertise.

The two most recent projects Stanbic IBTC is financing are the Ikeja City Mall and the AccuGas Gas pipeline project in Akwa Ibom.

Now, these are two distinctly different projects. What do these deals imply for Stanbic IBTC and why are you involved in the two projects?

One of our various key objectives when assessing projects is concentration risk. As a result, we do not focus specifically on any one particular sector, but deliberately ensure that we are involved in packaging and financing robustly structured projects across a range of sectors.

The Ikeja Mall transaction represented a financing that had the necessary ingredients for our involvement, i.e.

Stanbic IBTC Bank/Standard Bank’s leading role in structuring the financing, the presence of an experienced contractor, credible sponsors, robust project economics and evidence of a growing ‘target market’ for the project to mention a few.

We have a very selective interest in real estate projects and are continuously seeking out other real estate transactions that fit into the foregoing criteria and the bank’s real estate financing business model.

The AccuGas financing, although in a completely different sector, was one which clearly demonstrates the bank’s commitment to supporting the Nigerian oil and gas sector that still requires much needed project finance funding for getting a number of deals off the ground.

The AccuGas transaction is quite a unique project because, apart from its extremely robust project economics, its multiplier effects are considered to be almost immediate given the transaction’s core objective of supplying gas to key sectors of the Nigerian economy.

The Federal Government as part of efforts in driving local content in the oil and gas sector is urging financial institutions like Stanbic IBTC to support the local players in the industry. What are some of the efforts the bank has made in this regard?

Stanbic IBTC has played a number of key roles supporting local players in the oil and gas industry.

For example, we acted as Global Facility Co_coordinator and joint Mandated Lead Arranger for the recently concluded US$400 million Oando refinancing where we also undertook the role of financial modeling bank and documentation bank.

The AccuGas transaction was somewhat of a unique one given the fact that we commenced discussions with the project sponsors at quite an early stage and spent quite some time structuring the transaction before it was formally launched into the bank market. We again played leading roles as structuring bank, financial modelling bank, and documentation bank and facility agent.

Our efforts in the Nigerian Oil and Gas sector can be summarized as one that goes beyond funding, but providing unbiased financial advisory solutions and “hand_holding” clients and their project teams until they have achieved drawdown.

Given the immense growth expected within this sector, our structuring features include elements that can accommodate additional financing, accelerated dividend distribution to the extent the project seeks to raise expansion debt at a later point in time.
There’s been a lot of talk regarding the adoption of gas as an alternative for power generation.

Does the AccuGas gas pipeline have any connection with developing a power station?
One of the major objectives that the AccuGas sponsors have is to complete a 60 kilometre gas pipeline which will be capable of carrying up to 100m cubic feet/day of gas from the Uquo gas field in OML 13 to the Ibom Power Plant in Ikot Abassi. The gas pipeline was over 60% completed as at the date of loan signing and completion of the entire project is scheduled to take place during Q4 2010. The AccuGas transaction does not therefore involve developing a power plant but rather increasing the supply of much needed gas to an already built power plant.
This certainly is a very huge project, apart from the US$60m debt financing coming from Stanbic IBTC and UBA. How else are the promoters of the project intending to finance the project?
The project can certainly be considered large given the fact that it is private sector led. The estimated total project costs of approximately US$25O million was funded from a combination of sources, of which the equity contribution amounted to US$126.5 million (50.4%). The balance of project costs was funded from a combination of a US$63 million (25.6%) Gas Supply Agreement deposit from the Akwa Ibom State Government and US$60 million (24%) from bank debt provided by Stanbic IBTC Bank and UBA Plc. It is to be noted, whilst we expect to see more oil and gas project financing coming into the debt market during Q4 2010 / H1 2011, we do not expect to see subsequent financing having gearing of the levels shown above.

Mr. M Patrick Mgbenwelu, Head, Project Finance (Debt & Advisory) _ Stanbic IBTC Bank Plc in this interview spoke on the need to finance infrastructure in Nigeria and what the bank has been doing in that regard.
Stanbic IBTC in the last four to five years has been very active in the infrastructure financing space. Can you elaborate on some of these deals?
Stanbic IBTC Bank is a member of the Standard Bank Group. The bank has certainly played a major and leading role on most landmark infrastructure financings over the last four to five years, and our work in this area has secured us notable industry awards. The Bank has an unrivalled and successful track record of providing financial advisory and debt arranging services to private and corporate clients undertaking large scale infrastructure transactions in Nigeria. Our financial advisory and debt arranging expertise cuts across a wide range of projects with awards specific to our work in Nigeria as summarized in our recent awards which include but is not limited to the following: Public Private Partnerships (PPP) Champion of the Year (2009) _ African Investor Infrastructure Awards; African PPP Deal of the Year – Lekki Expressway (2008) _ Project Finance Magazine; African Infrastructure Deal of the Year – Lekki Expressway (2008) _ Reuters Project Finance International; and Best Investment Bank in Nigeria (awarded to Stanbic IBTC Bank) (2009) – EMEA Finance.

Although we have been involved in various transactions, one that certainly does stand out is our involvement in the financing of the Lekki Epe Expressway. The project involves the development of a toll road corridor along the Lekki Peninsula. The approximately 50km strip of road heads towards the east of Victoria Island; an area now considered to be the fastest growing residential and commercial area in Lagos.
The deal was finalized in October 2008 when financial draw down took place. Standard Bank acted as co_financial advisor as well as an arranger, underwriter and largest lender on the project. Funding for the project comes from Lagos State Government, which has invested N5 billion (US$42 million) in a 20_year mezzanine tranche. The African Development Bank provided N10 billion (US$85 million) senior debt over 15 years and local lenders, including First Bank of Nigeria and United Bank for Africa, provided a 12_year note facility of N9.4 billion (US$80 million). The remaining term funding was provided by Standard Bank Plc, which became the sole arranger of the N11 billion (US$93 million) 15_year international tranche. This tranche was underwritten by Standard Bank Plc and Stanbic IBTC Bank Plc.
This transaction is notable for the following reasons (i) the first true PPP toll road in West Africa, (ii) the first 15 year tenored financing (longest financing to date) in Nigeria, (iii) the largest PPP deal closed in Nigeria to date and (iv) the longest tenured cross_currency swap done to date.
One of Nigeria’s biggest challenges is the dearth of infrastructure, this however is getting better with PPP and wholly private sector driven initiatives. How is Stanbic IBTC helping to provide the much_needed fund to facilitate these infrastructure development initiatives?
The rapid development and application of PPP in Nigeria is certainly a welcome boost to assist accelerating the financing of infrastructure projects, and we need to commend the excellent work being done by the Infrastructure Concession Regulatory Commission (ICRC) in promoting and “hand_holding” interested parties during the planning and bidding stages of their various PPP transactions. ICRC’s role is crucial especially given the fact that not much is known about PPPs in Nigeria. The Commission has gone a long way to ensure some of the key ingredients for a successful PPP are put in place from the onset.
Stanbic IBTC and the Standard Bank of South Africa played major roles on the first true PPP transaction in Nigeria (i.e.

the Lekki Epe Expressway) where we acted as financial adviser and debt arranger alongside other Nigerian and foreign financial institutions. Our involvement in PPPs goes beyond funding itself, but also includes PPP consulting/advisory to clients at all levels, State, Public and Private sectors.
In addition to the foregoing, given our deep understanding of a PPP project’s life cycle coupled with the significant amounts needed to fund the initial capital intensive up_front costs, we are also able to source much needed long_term funding for these transactions. As a member of the Standard Bank Group we pull on expertise and lessons learned from other PPP projects from one or more of our other Standard Bank Group offices across the globe. Utilizing the expertise from our Global Market’s teams, we are able to bolt_on unique features such as ‘tenor extension’ mechanisms which we successfully did on the Lekki Epe Expressway financing.
Stanbic IBTC has been involved in telecom, oil and gas, industrial, construction i.e. road and property infrastructure financing; you must have a big war chest to be giving out such financing support?
We have certainly been involved in financings across a range of sectors and do intend to maintain our presence as Nigeria’s leading project finance and PPP infrastructure bank across all the sectors you have mentioned. Whilst we are very active across most sectors, we generally always take a leading role on financings so as to ensure we are fully involved in structuring a bankable transaction before it is formally launched into the debt market. Being active in so many financings does not necessarily require a huge “war chest”, although this is without question a huge benefit. Majority of the large financings that we are involved in are eventually syndicated and we are able to achieve successful syndications given our strong structuring and distribution expertise. The capacity to structure “bankable projects” is derived from our very deep financial advisory resources internally which we bring to bear on all project finance transactions.
Stanbic IBTC and Standard Bank are strong players in infrastructure development across markets where Standard Bank operates;

why the special interest in infrastructure development?
Perhaps it is ideal at this juncture to set out Stanbic IBTC/Standard Bank’s key focus areas and also explain what we mean by infrastructure as this term (depending on who you speak to) tends to include and or exclude a number of key areas. The Standard Bank’s key focus areas can be summarized as follows: Power & Infrastructure; Oil & Gas; Manufacturing and Distribution and Telecoms. When we use the term infrastructure, this includes Power plants, roads, airports, Sea_ports, and other core infrastructure.
Our interest in infrastructure is partly also driven by the markets in which the Standard Bank Group operates in, i.e. emerging economies.

The investment in infrastructure remains central to the objectives of most emerging economies so it only makes good business sense to be involved in such a sector deemed of critical importance to a host of economies. The cross_fertilization of ideas, lessons_learned, and best practices across the various economies where the Standard Bank Group operates is what also places us miles ahead of other financial institutions. For our clients, we provide a deep local knowledge / understanding of the issues for closing large scale infrastructure projects whilst providing a global reach in terms of funding and expertise.
The two most recent projects Stanbic IBTC is financing are the Ikeja City Mall and the AccuGas Gas pipeline project in Akwa Ibom.

Now, these are two distinctly different projects. What do these deals imply for Stanbic IBTC and why are you involved in the two projects?
One of our various key objectives when assessing projects is concentration risk. As a result, we do not focus specifically on any one particular sector, but deliberately ensure that we are involved in packaging and financing robustly structured projects across a range of sectors.
The Ikeja Mall transaction represented a financing that had the necessary ingredients for our involvement, i.e.

Stanbic IBTC Bank/Standard Bank’s leading role in structuring the financing, the presence of an experienced contractor, credible sponsors, robust project economics and evidence of a growing ‘target market’ for the project to mention a few.
We have a very selective interest in real estate projects and are continuously seeking out other real estate transactions that fit into the foregoing criteria and the bank’s real estate financing business model.
The AccuGas financing, although in a completely different sector, was one which clearly demonstrates the bank’s commitment to supporting the Nigerian oil and gas sector that still requires much needed project finance funding for getting a number of deals off the ground.

The AccuGas transaction is quite a unique project because, apart from its extremely robust project economics, its multiplier effects are considered to be almost immediate given the transaction’s core objective of supplying gas to key sectors of the Nigerian economy.
The Federal Government as part of efforts in driving local content in the oil and gas sector is urging financial institutions like Stanbic IBTC to support the local players in the industry. What are some of the efforts the bank has made in this regard?
Stanbic IBTC has played a number of key roles supporting local players in the oil and gas industry.

For example, we acted as Global Facility Co_coordinator and joint Mandated Lead Arranger for the recently concluded US$400 million Oando refinancing where we also undertook the role of financial modeling bank and documentation bank. The AccuGas transaction was somewhat of a unique one given the fact that we commenced discussions with the project sponsors at quite an early stage and spent quite some time structuring the transaction before it was formally launched into the bank market. We again played leading roles as structuring bank, financial modelling bank, and documentation bank and facility agent.
Our efforts in the Nigerian Oil and Gas sector can be summarized as one that goes beyond funding, but providing unbiased financial advisory solutions and “hand_holding” clients and their project teams until they have achieved drawdown. Given the immense growth expected within this sector, our structuring features include elements that can accommodate additional financing, accelerated dividend distribution to the extent the project seeks to raise expansion debt at a later point in time.
There’s been a lot of talk regarding the adoption of gas as an alternative for power generation.

Does the AccuGas gas pipeline have any connection with developing a power station?
One of the major objectives that the AccuGas sponsors have is to complete a 60 kilometre gas pipeline which will be capable of carrying up to 100m cubic feet/day of gas from the Uquo gas field in OML 13 to the Ibom Power Plant in Ikot Abassi. The gas pipeline was over 60% completed as at the date of loan signing and completion of the entire project is scheduled to take place during Q4 2010. The AccuGas transaction does not therefore involve developing a power plant but rather increasing the supply of much needed gas to an already built power plant.
This certainly is a very huge project, apart from the US$60m debt financing coming from Stanbic IBTC and UBA. How else are the promoters of the project intending to finance the project?
The project can certainly be considered large given the fact that it is private sector led. The estimated total project costs of approximately US$25O million was funded from a combination of sources, of which the equity contribution amounted to US$126.5 million (50.4%). The balance of project costs was funded from a combination of a US$63 million (25.6%) Gas Supply Agreement deposit from the Akwa Ibom State Government and US$60 million (24%) from bank debt provided by Stanbic IBTC Bank and UBA Plc. It is to be noted, whilst we expect to see more oil and gas project financing coming into the debt market during Q4 2010 / H1 2011, we do not expect to see subsequent financing having gearing of the levels shown above.