Two members of the World Bank Group have announced the commitment of $517 million in debt and guarantees to support Ghana’s Sankofa Gas Project, an integrated offshore oil and natural gas project.
The project is to provide a source of reliable, affordable energy in the country.
The financial commitments by the International Finance Cooperation (IFC) and the Multileral Investment Guarantee Agency (MIGA) bring to about $1.217 billion the total amount of the World Bank Group’s support to the country’s oil and gas sector.
Last year, the World Bank committed a $700-million guarantee package, which among other things, was to help the Ghana National Petroleum Corporation (GNPC) to ensure timely payments for gas purchases.
That guaranteed market is what has enabled the project to secure financing from its private sponsors.
The $7.7 billion Sankofa Gas project is expected to fuel up to 1,000 megawatts of power generation, helping Ghana meet its growing energy needs and displace oil-fired power generation with a clean-burning alternative.
The Sankofa project is being developed by Vitol Ghana and Eni Ghana in partnership with Ghana’s National Petroleum Corporation.
Senior loan
IFC has committed a loan of $235 million to Vitol Ghana and arranging another $65 million in debt from the Managed Co-Lending Portfolio Programme, a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio.
The IFC financing is part of a $1.35 billion loan facility provided by commercial banks, including HSBC, Société Générale, ING, Standard Chartered Bank and UKEF.
MIGA has committed these commercial lenders with up to $217 million in political risk guarantees.
Ghana’s government has identified the Sankofa project as one of two transformational projects that will help the country achieve its COP21 commitments for climate mitigation.
Once it starts to produce gas in early 2018, the project is expected to reduce carbon emissions in Ghana by an estimated 1.6 million tonnes annually as gas displaces heavy fuel oil-equivalent to taking 1.2 million cars off the road each year or planting 152 million trees.
Sankofa is expected to generate $2.3 billion in revenues for Ghana’s government (per year) and provide a stable, long-term source of domestic gas that will solve Ghana’s chronic gas supply constraints.
Power generation infrastructure
The Executive Vice-President and Chief Executive Officer (CEO) of the IFC, Mr Phlippe Le Houérou, said in a statement issued in Accra that, “Ghana will require significant power generation and infrastructure to meet the growing needs of its young and expanding population.”
He said the project demonstrated that private capital could be mobilised on a large scale to contribute to the country’s energy security.
“Developing Ghana’s domestic natural gas resources will help the country reduce carbon emissions and provide a clean source of power for generations,” he stated.
The CEO of Vitol Group, Mr Ian Taylor, said “This is a transformational project for Ghana at an important time. The World Bank Group’s involvement, including financing from IFC and MIGA, is enabling Ghanaian gas to be used for the benefit of Ghana’s economic development. We are pleased and proud to be part of this project.”
Political risk guarantee
MIGA’s guarantees will support Vitol Ghana’s commercial borrowing needs for the project and will be issued for up to 15 years, against the risks of Transfer Restriction (including Inconvertibility), Breach of Contract, Expropriation, and War and Civil Disturbance.
“MIGA’s political risk guarantee is a key part of the World Bank Groups’ long-term commitment to serve Ghana’s rising demand for energy. Moreover, the natural gas from the Sankofa Project underpins the nation’s transition to a low-carbon future.” said the Executive Vice President of MIGA and CEO, Mr Keiko Honda.
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