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IFC, MIGA offer loan and guarantees to support gas project in Ghana

15 Dec 2016
Financial Nigeria

Summary

The Sankofa Gas Project is expected to generate $2.3 billion annnually for the Ghanaian government apart from providing a stable, long-term source of domestic gas supply.

Ghanaian President John Mahama

The International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) – both members of the World Bank Group – have announced today a total commitment of $517 million in debt and guarantees to support Ghana’s Sankofa Gas Project, an integrated offshore oil and natural gas project.

The $7.7 billion Sankofa gas project is being developed by Vitol Ghana and Eni Ghana, in partnership with Ghana’s National Petroleum Corporation. First announced in January 2016, the project is touted to be the first major development of gas in Ghana and will enable the transformation of the economy. The project will be a source of reliable, affordable energy, providing up to 1,000 megawatts of power and helping meet the country’s growing energy needs.

Being a gas-to-power project, the IFC said the project will replace the country's oil-fired power generation sources with a clean-burning alternative.

IFC, which is the private-sector financing arm of the World Bank, said it has committed a loan of $235 million to Vitol Ghana and arranged another $65 million in debt from the Managed Co-Lending Portfolio Program, a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio.

The financing is part of a $1.35 billion loan facility provided by commercial banks, including HSBC, Société Générale, ING, Standard Chartered Bank, UKEF, among others. These commercial lenders have received up to $217 million in political risk guarantees from MIGA – the World Bank's arm that promotes foreign direct investment into developing countries by offering political risk insurance and credit enhancement guarantees.

“Ghana will require significant power generation and infrastructure to meet the growing needs of its young and expanding population,” said Phlippe Le Houérou, IFC’s Executive Vice President and CEO. “This project demonstrates that private capital can be mobilized 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.”

IFC and MIGA's financing brings the World Bank’s total commitment for the Sankofa Gas Project to approximately $1.217 billion. Last year, the World Bank provided a $700 million guarantee package to help Ghana’s National Petroleum Corporation ensure timely payments for gas purchases, which has enabled the project to secure financing from its private sponsors.

“This is a transformational project for Ghana at an important time,” said Ian Taylor, Vitol Group’s CEO. “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.”

The Ghanaian government has identified the Sankofa project as one of two transformational projects that will help the country achieve its COP21 commitments for climate mitigation. It is expected to start producing gas in early 2018, as the government hopes to reduce carbon emissions in Ghana by an estimated 1.6 million metric tonnes annually.

The carbon emissions reduction will be equivalent to taking 1.2 million cars off the road each year or planting 152 million trees.

In terms of revenue, the project is expected to generate $2.3 billion annnually for the Ghanaian government apart from providing a stable, long-term source of domestic gas supply.


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