ESRS Revised date: August 27, 2015 and September 16, 2015
This summary covers an investment by Seven Energy International Ltd. of Mauritius in Accugas Ltd. in Nigeria. The investor has applied for a MIGA guarantee of up to $200 million for a period of up to 15 years against the risk of expropriation.
The project involves ownership, operation, and expansion of Seven Energy International Ltd.’s natural gas midstream facilities in the eastern Niger Delta region that are run through its wholly owned subsidiary, Accugas Ltd. Proceeds of a shareholder loan from Seven Energy to Accugas have been used to fund construction of Accugas’ assets, including construction of a gas-processing facility and the Uquo to Oron pipeline. The company has executed gas-supply agreements (GSA) to deliver up to 175 million standard cubic feet per day to two power plants (Ibom Power Company and Calabar Electricity Generation Company Ltd), which will be providing in excess of 750 megawatts to the national electricity grid.
The International Bank for Reconstruction and Development (IBRD) is also proposing to provide a partial risk guarantee (PRG) to provide liquidity support. The PRG will guarantee a letter of credit issued by a commercial bank to backstop the offtaker’s obligations under the GSA between Calabar Electricity Generation Company Ltd. and Accugas.
Despite having the largest gas resources in Africa, Nigeria’s gas infrastructure is not adequately developed and the country faces persistent power supply shortages. In early 2013, total available capacity was around 3,500 megawatts, significantly below demand. The supply shortfalls are compounded by generally inefficient technical and commercial management of the grid system leading to frequent interruptions and poor service quality. The considerable unmet demand of power forces a large portion of the population and almost all businesses to resort to self-generation at a high cost to themselves, the economy and the environment. In the 2010 Nigeria Investment Climate Assessment, 83 percent of Nigerian business owners consider a lack of electricity the biggest obstacle to doing business.
MIGA’s proposed support for the project is aligned with the World Bank Group’s comprehensive support to the government’s energy sector reform program, which involves multiple interventions aimed at increasing installed power generation, transmission and distribution capacity, improving the governance in the gas and electricity sectors, and providing comfort to gas producers, in an effort to attract private sector investments.