CfC Stanbic Bank and ICBC Conclude USD108m Debt Facility for Triumph Heavy Fuel Oil Plan

CfC Stanbic Bank, a member of Standard Bank Group, and the Industrial and Commercial Bank of China (ICBC) have concluded a USD108 million debt financing package with Triumph Kenya for the construction of an 83MW heavy fuel oil plant in Kenya.As mandated co-lead arrangers, CfC Stanbic Bank provided USD28 million of debt funding while ICBC supplied the remaining USD80 million for the plant, which is currently being built. Kenya Power has signed a 20-year agreement with Triumph to purchase power from the plant, which will be a crucial supplier to the utility during times of drought when the country’s hydroelectric generating capacity becomes constrained.

The World Bank’s Multilateral Investment Guarantee Agency (MIGA) will provide USD102.5 million in breach of contract insurance should Kenya Power fail to honour its 20-year purchase agreement with Triumph. MIGA’s insurance will also cover the Government of Kenya’s obligation to support debt and equity investors in the transaction should political events prevent Triumph from producing power from the plant, or affect Kenya Power’s ability to purchase its electricity.
“The highlight of this transaction is that it marks the first time that a Chinese commercial bank has used MIGA cover for a non-recourse transaction,” said Kwame Parker, East Africa Head of Debt Solutions & Infrastructure Finance at CfC Stanbic Bank. “It’s also likely the first time a Chinese financial institution is directly lending to a project company for a transaction in Sub-Saharan Africa that is not related to resource extraction, with no explicit sovereign guarantee.”
The ability of CfC Stanbic to leverage its on-the-ground presence and knowledge of the Kenyan financial market underscores ICBC’s decision to partner with an African banking institution in this transaction. The deal also demonstrates the effectiveness of the relationship between ICBC and CfC Stanbic Bank’s parent, Standard Bank Group, in which the Chinese lender has a 20% stake.

Kenya has historically relied on hydropower for most of its electricity needs and has a current installed generating capacity of 1,672 MW, compared with peak power demand of 1,330 MW. The nation’s economy has expanded at an average rate of 4-5% over the last 3 years.