Dr. Emmanuel Moore Abolo is the Chief Risk & Compliance Officer at the Nigerian Export-Import Bank. He gave a presentation on financing opportunities in Nigeria's power sector at the Power Nigeria Conference. The presentation discussed Nigeria's power sector overview including generation and distribution, estimated financing needs totaling $15 billion over five years, potential sources of funding, lending opportunities across the value chain, key considerations for quality lending, and overall risks. The sector is emerging but traditional credit risk management frameworks can still be applied, requiring in-house analytical resources and support of high-quality sponsors.

1. DR. EMMANUEL MOORE ABOLO
CHIEF RISK & COMPLIANCE OFFICER
NIGERIAN EXPORT-IMPORT BANK
ABUJA, NIGERIA.
2ND
JANUARY 2016
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Financing the power: Creating finance-
friendly business models that attract
capital
How banks currently assess risk for
Nigerian power projects
POWER NIGERIA
CONFERENCE
aboloemma@gmail.comaboloemma@gmail.com
mail@drabolomoore.commail@drabolomoore.com

2.  NIGERIA POWER SECTOR OVERVIEW – GENERATION
 NIGERIA POWER SECTOR OVERVIEW – GENERATION
 NIGERIA POWER SECTOR OVERVIEW – DISTRIBUTION
 NIGERIA POWER MARKET: KEY FINANCING STATISTICS
 KEY ISSUES IN POWER FINANCING
 POWER FINANCING: SOURCES OF FUNDING
 POTENTIAL SOURCES OF TERM DEBT FINANCE
 LENDING OPPORTUNITIES IN THE NIGERIA POWER SECTOR
 RELATED OPPORTUNITIES ... MORE POTENTIAL FINANCING TARGETS
 KEY CONSIDERATIONS FOR QUALITY LENDING
 OVERVIEW OF KEY RISK ISSUES
 OVERALL – NEW MARKET, SAME CREDIT RULES
CONTENTCONTENT
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3. Nigeria Power Sector Overview – Generation
 Mainly gas-fired and hydro
 Less than 5,000MW total capacity currently;
and projected at 11.5GW over the next 5
years;
 About 30 grid-based plants in total:
- 20 under development or near
completion, including about 11 NIPP
plants and 9 State and private
- About 10 currently operational, mostly
FGN owned, with 3 private
 7 FGN plants now being sold; NIPP plants to
be sold later
 FGN will be the leading off-taker (PPA issuer)
 Several private IPPs currently focused on
captive operations, due to better economics
 The power sector reforms will create new
infrastructure asset classes
Genco Assets by Size (in MW)

4. Nigeria Power Sector Overview – Distribution
 Discos are natural monopolies
 Primary cash source in the sector
 Currently 11 across the country, and all are
currently being sold (60.0% stake):
- Most traverse several States; only Ikeja/Eko
are single State assets
- Ikeja is the largest – 2,077GWh
- Jos is the smallest – 714GWh
 Discos require significant rehabilitation,
maintenance & technology investments
 A few IEDNs/captive Discos may emerge
 Ultimate structure will be private sector led
 NERC will play a major role as regulator
Disco Assets by Size (in MW)

5. Nigeria Power Market: Key Financing Statistics
 Generating companies will require about
US$12bn …
 US$1.7bn to acquire the approx. 5,000MW
being privatized;
 About US$2.5bn in capex to rehabilitate and
expand these assets
 Another US$4.2bn to acquire the NIPP assets
when they are sold later on
 Approximately US$4.0bn over 5 years to fund
working capital needs – mainly fuel, and
operations and maintenance (O&M) costs
 Distribution companies will require about
US$3bn …
 US$1.3bn to acquire the 10 assets being
privatized;
 About US$1.5bn in capex to rehabilitate and
expand these assets
 Approximately US$600m over 5 years to fund
working capital needs – mainly power
purchase, staff costs, and O&M
Overall market of US$15bn over the next five years …. US$10.5bn in debt
funding based on 70:30 D:E ratio
Genco Estimated Financing Needs by Type (US$MM)
Disco Estimated Financing Needs by Type (US$MM)

6. KEY ISSUES IN POWER FINANCINGKEY ISSUES IN POWER FINANCING
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7. FINANCING: SOURCES OF FUNDINGFINANCING: SOURCES OF FUNDING
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8. POTENTIAL SOURCES OF TERM DEBT FINANCE
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9. Lending Opportunities in the Nigeria Power Sector
A variety of lending opportunities are emerging across the sector,
with different risk profiles …
 Generating companies are typically easier to finance with debt, assuming:
 Long-term PPAs (20 years minimum) with a credible buyer, e.g FGN
 Similar term GSAs and GTAs in place with credible sellers
 Appropriate risk enhancements in place, such as World Bank PRGs
 Shareholders are able to contribute at least 30% equity, to provide a capital
buffer and cover development costs
… however, limited opportunities for ancillary business, e.g cash collection
 Distribution companies are relatively higher risk, but can also carry debt, if:
 Credible owner and operator are in place to manage the asset well
 Strong government commitment to ensure cost-reflective tariffs
 Owners are able to navigate the BPE-NERC-FGN-State Government terrain:
Politics and governments likely to have a high impact on lending outcomes
… there are additional opportunities for cash collection/management and
working capital funding at the Disco level

10. Related Opportunities ... More potential financing targets
Infrastructure/Power
Developers
Consultants and
Specialist Service
Providers
Original Equipment
Manufacturers (OEMs)
Contractors
Fuel Suppliers (Gas,
LPFO, Coal)
 Green-field or brown-field project development across the value chain
 Acquisition of Gencos & Discos; and new IPPs
 Development cost and risk sharing
 Feasibility Studies, Engineering Designs, Works Supervision, Project
Management, Pre-investment due diligence
 Specialist surveys, audits and related services
 Research, benchmarking and advocacy
 Supply & installation of equipment
 Term Operations & Maintenance Contracts
 Own Government/Export Credit Agency Support
 Engineering, Procurement Construction Contracts
 Term Operations & Maintenance Contracts
 Local firms: Sub-Contracting/Joint Ventures
 Development of fuel supply infrastructure – pipelines, tank farms, etc
 Bankable long term fuel supply contracts
 New market creation/exports

11. Key Considerations for Quality Lending
The standard framework of credit risk management will still be useful in the
emerging power sector …
Share acquisition vs. capex?
Working capital vs. trade finance?
Genco vs.
Disco?
Impact of
FGN, NERC,
BPE, States,
politics,
elections?
Project
finance vs.
corporate
lending?Specialised Risk
Analysts required
Largely non-existent, so
creativity required to
establish benchmarks
Important to support
borrowers with strong
management and
technical capacity
Wholesale contracts vs. retail sales

12. Overview of Key Risk Issues
1. Bankability of industry and transaction documents (PPA, GSA, Veting
Contract, Connection Agreements, NELMCO Agreements etc.)
2. Creditworthiness of the NBET and TCN (FGN Support)
3. Availability of adequate gas and generation capacity; and transparent
allocation of available power to the DISCOs
4. Exclusive DISCO service territory and rights (e.g. Embedded Generation
and IEDN possibilities)
5. Performance Agreement obligations (ATCC, Rehab and Expansion)
6. Regulatory certainty (e.g. Tariff Setting, Subsidies and Dispute Resolution)
7. Timely availability of FGN Guarantees and /or WB PRG
8. Timely implementation of agreements reached with the Labor Unions
9. Evolution of market structure (e.g. declaration of Eligible Customers and
Wholesale/Retail competition)

13. Overall – New market, Same credit rules
1. Traditional credit risk management frameworks will still prove useful but:
 In-house analytical, technical and legal resources will be required
 Longer tenor funding may be necessary to be competitive
 Important to support high quality sponsors with good technical partners
2. Different skill sets required for different loan and asset types, for example:
 Investment banking skills for acquisition financing
 Classic corporate banking tools for lending to Discos
 Project finance capabilities for financing Gencos
3. As with all lending, strong sector knowledge is the ultimate requirement
 Encompasses technical, engineering, legal, economic and financial
 Strong relationships key at Senior levels of government, asset owners,
technical firms, consultants, lawyers, banks
IN SUMMARY... There are opportunities for financing and capacity
development across the value chain in the Nigerian power sector; but, hard
work would be required to create quality loan portfolios

14. FNANCIAL MODELING ISSUES-1FNANCIAL MODELING ISSUES-1
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15. FNANCIAL MODELING ISSUES-2FNANCIAL MODELING ISSUES-2
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16. FNANCIAL MODELING ISSUES-3FNANCIAL MODELING ISSUES-3
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17. FNANCIAL MODELING ISSUES-4FNANCIAL MODELING ISSUES-4
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18. FNANCIAL MODELING ISSUES-5FNANCIAL MODELING ISSUES-5
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19. Thank youThank you
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20. Q & AQ & A
0802100329708021003297
aboloemma@gmail.comaboloemma@gmail.com
mail@drabolomoore.commail@drabolomoore.com
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