IFC, MIGA support Sankofa Gas Project to help Ghana shift power generation to natural gas

International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), members of the World Bank Group, have announced the commitment of US$517 million in debt and guarantees to support Ghana’s Sankofa Gas Project, an integrated offshore oil and natural gas project that will provide a source of reliable, affordable energy in the country.

A release issued in Accra said: “The project will fuel up to 1,000 megawatts of power generation, helping Ghana meet its growing energy needs and displace oil-fired power generation with a clean-burning alternative.” 

The US$7.7 billion Sankofa project will be developed by Vitol Ghana and Eni Ghana, in partnership with Ghana’s National Petroleum Corporation. IFC has committed a loan of US$235 million to Vitol Ghana and arranging another $65 million in debt from the managed co-lending portfolio programme, a Loan-Syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio.

It said the IFC financing was part of a US$1.35 billion loan facility provided by commercial banks, including HSBC, Société Générale, ING, Standard Chartered Bank, UKEF, among others. MIGA has committed these commercial lenders with up to US$217 million in political risk guarantees. 

“Ghana’s government has identified the Sankofa project as one of two transformational projects that will help the country achieve its COP21 commitments for climate mitigation. Once it starts to produce gas in early 2018, the project is expected to reduce carbon emissions in Ghana by an estimated 1.6 million metric tons annually as gas displaces heavy fuel oil equivalent to taking 1.2 million cars off the road each year or planting 152 million trees,” the release said. 

It said Sankofa was expected to generate US$2.3 billion in revenues for Ghana’s government (per year) and provide a stable, long-term source of domestic gas that would solve Ghana’s chronic gas supply constraints.

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

The release said the IFC and MIGA support brought World Bank Group financing for the Sankofa Gas Project to approximately US$1.217 billion, building on a US$700 million guarantee package from the World Bank announced last year, that would help the Ghana National Petroleum Corporation ensure timely payments for gas purchases and that has enabled the project to secure financing from its private sponsors.

The Chief Executive Officer of Vitol Group, Mr Ian Taylor, said: “This is a transformational project for Ghana at an important time. 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.” 

MIGA’s guarantees will support Vitol Ghana’s commercial borrowing needs for the project and will be issued for up to 15 years, against the risks of Transfer Restriction (including Inconvertibility), Breach of Contract, Expropriation, and War and Civil Disturbance.

“MIGAs political risk guarantee is a key part of the World Bank Group’s long-term commitment to serve Ghana’s rising demand for energy. Moreover, the natural gas from the Sankofa Project underpins the nation’s transition to a low-carbon future,” the MIGA Executive Vice-President and CEO, Mr Keiko Honda, said.

Brief on IFC

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with 2,000 businesses worldwide, we use our six decades of experience to create opportunity where it’s needed most.

About MIGA

MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment in emerging economies by helping mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, war and civil disturbance; and offering credit enhancement to private investors and lenders.