AfDB Approves US$ 32 Million Loan for Ghana’s Tema Power Project
Tunis, 16 October 2008 – The African Development Bank Group’s Board of Governors on Tuesday 15 Oct. 2008 in Tunis, approved a US$ 32 million private sector loan to Tema Osonor Plant Limited, a special purpose vehicle incorporated in Ghana to finance the country’s Tema Power Project.
The loan will help finance the design, construction and operation of a 126-Megawatt thermal power station at Tema near the Ghanaian capital, Accra. The primary fuels of the station will be natural gas with light crude oil and distillate fuel oil serving as secondary fuels. The gas will be transported to the project site from Nigeria through the West African gas Pipeline (WAGP) Station.
The project, which will help diversify national power generation and reduce current load shedding, is in line with the Ghanaian government’s Growth and Poverty Reduction Strategy (GPRS) and the AfDB’s Country Strategy for Ghana. Both focus on private sector engagement and infrastructure development. The project is also aligned to the Bank’s Private Sector Operations Strategy, as it will contribute to the construction of competitive infrastructure and support a business enabling environment in Ghana.
The project is expected to create from 150–200 skilled and unskilled jobs during the construction phase and another 100 during its commercial operation.
The project company will build capacity and technical expertise in modern power generation plant management by providing appropriate training to local employees. This will help sustain long-term thermal power generation in Ghana while also encouraging indigenous private sector participation in this critical sector.
Other project goals include the promotion of indigenous, investor-led power production in Ghana, the shifting of the burden of investment for power generation from the central government to the private sector, the building and sustaining of local capacity in the development and maintenance of power generation infrastructure, and the diversification of the power generation mix.
The AfDB’s participation in the financing of the project has been welcomed by local banks which have provided financing for the gas turbine.
The total cost of the project is estimated at US$ 140 million, to be financed through an equity injection of US$44 million and senior loans of US$96 million from the AfDB, the Energy Africa Infrastructure Fund (EAIF) and the Entrepreneurial Development Bank of the Netherlands (FMO), which will also provide a US$ 10 million mezzanine (unsecured) loan.
The AfDB portion of the financing will comprise a senior (asset-based loan and cash flow) loan of US$ 30 million for a period of 15 years, including a grace period of one-and-a-half years and a complementary senior loan of US$ 2 million for contingency for a period of five years, including a grace period of one-and-a-half years. The two loans represent 23 per cent of the project cost.
The project sponsor is GECAD Inc, a company incorporated in Delaware in the United States of America, and its affiliate GECAD (Ghana) Ltd. GECAD Inc. is an authorized representative and distributor of General Electric (GE) Energy and GE Consumer and Industrial Systems USA. It sells engineering projects and services to power companies in West Africa. GECAD Ghana is the GECAD Inc. agent in Ghana.