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12 May 2009
Standard Bank, ICBC fund power station expansion
Standard Bank and the ICBC have been mandated as joint lead arrangers to finance the expansion of the Morupule B Power Station, near Palapye in eastern Botswana.
The US$1,6 billion coal-fired Morupule B Power Station project is a major Botswana government initiative, driven by the Botswana Power Corporation (BPC), aimed at boosting the country?s power generation capacity. It comes in the wake of Eskom switching off its power to Botswana to supply growing domestic demand in South Africa.
As part of this contract, the China National Electric Equipment Corporation (CNEEC), which is one of Industrial and Commercial Bank of China's (ICBC) top corporate clients, has been awarded a US$970 million contract to supply and build a significant portion of the power station.
This is the first major transaction involving Standard Bank and ICBC, which has a 20% stake in Standard Bank. At the time of the signing of the strategic partnership agreement, both banks said that one of their key objectives would be to participate in co-funding large infrastructure, resources and M&A deals in Africa.
This deal comes at a time when banks around the world are cutting back on international lending and concentrating on domestic lending in the wake of the global financial crisis and government bail-outs.
In December 2008, the BPC called for proposals from potential financiers to finance up to US$800 million of the project, with the BPC providing equity funding for the remaining portion of the project.
The ICBC and Standard Bank Group submitted a single proposal to BPC. This proposal comprehensively covered all the solutions that BPC were looking for and they were awarded the mandate. Standard Bank Group's on the ground presence in Botswana and its experienced Global Markets, Debt Capital Markets and Project Finance expertise in Africa helped secure the mandate.
Standard Bank and ICBC are arranging a US$825 million loan for 20 years, backed by a Botswana Ministry of Finance guarantee and a Sinosure guarantee covering the project's political and commercial risks. A US$140 million bridge finance facility will also be provided.
Jacko Maree, Standard Bank Group Chief Executive says: "This project will make a major difference to the lives of millions of people in Botswana and we are proud to be part of it. There is little doubt that had it not been for our strategic partnership with ICBC, we would not have been able to undertake the funding of a project of this scale.
"Our partnership with ICBC has opened a unique financial services gateway between Africa and China and this project will hopefully the first of many that are in the pipeline."
Jiang Jianqing, Chairman, Industrial and Commercial Bank of China says: "China and Africa boast extensive cooperative opportunities and a promising future in economic and trade partnership."
"The strategic cooperation between ICBC and Standard Bank creates an outstanding financial services platform to bridge companies and projects on the two continents. ICBC is devoted to providing best services to companies, governments, and retail clients, both in China and Africa and will spare no effort in making our contribution to stimulate economic and social development in Africa."
The Botswana project is a good beginning, and in future, ICBC and Standard Bank will continue their close cooperation to assist with economic and social development in Africa and China."
Wang Yi, the President of Sinosure, says: "Sinosure, the official Export Credit Agency of China, is very pleased to be part of Morupule B Power Station financing team. Sinosure, in collaboration with the World Bank, will provide a credit guarantee to ICBC's facility to Botswana Power Corporation.
"The Morupule B Power Station project is destined to be a milestone in the history of bilateral economic cooperation between China and Botswana. This sends a strong message to the world that even though it is experiencing the worst financial crisis in a century, Chinese banks, backed by Sinosure, are still available to provide export credit.
"I hope that with the smooth implementation of the Morupule B Power Station project, all parties can effectively promote mutual understanding and open the door to further economic cooperation between China and Botswana."
The Morupule B Power Station project involves the installation of 4x150 megawatt coal-fired air-cooled units. Associated projects include water supply works and the construction of transmission lines and substations for the distribution of power to the rest of the BPC grid.
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