United Capital Plc, in collaboration with United Bank for Africa (UBA) Plc, has assigned bank guarantees valued at N50.59 billion to the Generation Companies (GenCos) on behalf of the Nigerian Bulk Electricity Trading (NBET) Plc.
United Capital served as advisers on the structure by which the NBET will now be able to provide bank guarantees to Generation Companies (GenCos) in line with the provisions of the Power Purchase Agreements and Power Purchase Activation Agreements executed between NBET and the GenCos.
The arrangement involves the assignment of bank guarantees valued at N50.59 billion to the GenCos. Also the bank guarantees will be held by Security Trustees United and Capital Trustees Ltd and will serve as payment guarantee to the GenCos.
The group chief executive officer of United Capital, Mrs Oluwatoyin Sanni, said, “The transaction enables the federal government of Nigeria to demonstrate its clear commitment to the far-reaching power sector reform, ensuring that the entire value chain runs efficiently.
“It underscores the importance of developing a well-structured power sector that is fair and equally beneficial to the interests of consumers, generators, and distributors.”
She further added that United Capital had innovated and advised on an efficient structure to facilitate the issuance of payment security in the form of bank guarantees to the GenCos on behalf of NBET.
“The structure involved the re-assignment of bank guarantees provided by Distribution Companies (DisCos) to NBET by issuing them to the GenCos, avoiding the need to issue fresh bank guarantees,” she explained.
Sanni noted that the advantages of the structure include speed/ease of execution, cost efficiency and risk mitigation by providing recourse to an alternative source of payment for the GenCos to the satisfaction of all parties.
“The structure enhances the existing payment security to the GenCos and payments received will enable GenCos to fund working capital and raise capital expenditure towards upgrading their operations and increasing capacity to meet the demands of the Nigerian economy.”
She pointed out that the structure was achieved through a successful collaboration between UBA and United Capital.
