UTM Offshore, Afreximbank sign project preparation facility financing deal
Nigeria’s first FLNG project gets a boost
African Export-Import Bank (Afreximbank) has executed a project preparation facility financing head of terms with UTM Offshore Limited (UTM), the bank said in a statement at the weekend.
Under the deal signed during the bank’s 29th Annual Meeting in Cairo, Egypt, last week, it will part-finance activities designed to move the first Floating Liquefied Natural Gas (FLNG) project in Nigeria to bankability.
It marks a continuation of the support of Afreximbank, which has been leading UTM’s fundraising efforts to secure the necessary investments required for the project’s implementation.
In line with Nigeria’s Petroleum Industry Act (PIA) and global energy transition efforts, UTM Offshore Limited is developing Nigeria’s first Floating Liquefied Natural Gas (FLNG) project in partnership with the Nigerian National Petroleum Corporation (NNPC) and its affiliate, LNG Investment Management Services.
Afreximbank considers this project of historical significance as the first FLNG project developed by an African-owned company on the continent.
UTM is undertaking the development, design, and construction of an FLNG facility with a Liquefied Natural Gas (LNG) nameplate production capacity of 1.2 million metric tons yearly and a storage capacity of 200,000 cubic meters, as well as ancillary facilities to be located 60 kilometres from the shore of Akwa Ibom State, Nigeria.
Representing a “first” in the African FLNG sector for UTM’s ownership, this intervention aligns with Afreximbank’s strategic aim of advancing activities, which boast of strong climate finance credentials and accelerate the development of energy transition solutions, in line with the reduction of carbon emissions prescribed at COP26.
The project has economically transformative potential – establishing trade-enabling infrastructure, which will allow Nigeria to ensure the monetisation of its natural resources and pivot from a crude oil export-based economy to a gas-based processing industrial economy.
“Specifically, the project will generate exports estimated at a minimum of US$ 11.4 billion from Nigeria to the rest of the world, in the process creating over 2,000 construction jobs and a minimum of 1,000 high-quality jobs,” Executive Vice-President of Afreximbank, Mr. Amr Kamel, said at a brief but colourful signing ceremony.
He added: “To support this project throughout its journey along the project finance value chain, Afreximbank is leveraging its diverse product suite to provide end-to-end solutions. During the pre-investment stage, the project preparation facility will be deployed towards de-risking the project and rapidly advancing it towards bankability.
“In addition, under the PPF, the bank will be appointed as MLA and lead in syndicating the debt raise – with the ability to incorporate credit enhancements if required. Through its Financial Advisory Mandate, Afreximbank has been playing an active role in structuring the transaction to ensure optimal returns and debt sizing, as well as identifying equity investors to invest in the project on favourable terms.”
Also speaking, the Managing Director and Chief Executive Officer of UTM Offshore Limited, Mr. Julius Rone, said the participation of the bank in the project’s preparation stage will play a significant role in de-risking this landmark activity being promoted by UTM Offshore, fast-tracking the fund-raising process and project implementation.
“The project is well-aligned with the strategy of the bank to support trade-enabling infrastructure that contributes to the monetisation of the natural resources of its member state while diversifying their dependence on crude oil export,” Rone said, adding, “This intervention also serves to demonstrate the bank’s commitment to promoting climate finance and energy transition solutions that will lower Africa’s carbon footprint, in alignment with COP26 and the global decarbonisation trend.”
African Export-Import Bank is a Pan-African multilateral financial institution mandated to finance and promote intra-and extra-African trade. It deploys innovative structures to deliver financing solutions that support the transformation of the structure of Africa’s trade, accelerating industrialisation and intra-regional trade, thereby boosting economic expansion in Africa.
The bank has a rich history of intervening in support of African countries in times of crisis. Through the Pandemic Trade Impact Mitigation Facility (PATIMFA) launched in April 2020, Afreximbank disbursed more than US$6.5 billion in 2020 to help member countries manage the adverse impact of financial, economic, and health shocks caused by the COVID-19 pandemic.
A stalwart supporter of the African Continental Free Trade Agreement (AfCFTA), Afreximbank has completed the development of a Pan-African Payment and Settlement System (PAPSS) that was adopted by the African Union (AU) as the payment and settlement platform to underpin the implementation of the AfCFTA.
Afreximbank is working with the AU and the AfCFTA Secretariat to develop an Adjustment Facility to support countries in effectively participating in the AfCFTA. At the end of 2020, the bank’s total assets and guarantees stood at US$21.5 billion, and its shareholder funds amounted to US$3.4 billion. Afreximbank disbursed more than US$42 billion between 2016 and 2020.
With headquarters in Cairo, Egypt the bank has ratings assigned by GCR (international scale) (A-), Moody’s (Baa1) and Fitch (BBB-).