Alagbaka Power Limited, a public private partnership between Ondo State Government and Advad Limited, at the weekend opened application list for subscription for a N4.2 billion bond issuance.
The net proceeds of the bond issue will be used to build and operate 4.5 megawatts power plant in Alagbaka, Ondo State. The independent power plant (IPP) will supply electricity to the state secretariat and other offices in Alagbaka under a design, build, own and operate public-private-partnership.
Alagbaka Power is offering a N4.2 billion senior secured seven-year fixed rate bond due 2029. Minimum subscription to the issue is N10 million and, thereafter, in multiples of N1 million.
Application list for the bond closes tentatively tomorrow while subscribers are expected to provide full funding the next day after closure.
The Ondo State Government is the guarantor of the issue, which has an indicative fixed interest rate or coupon of 19 per cent. The bond will be repaid on the basis of semi-annual repayment of interest only in the first 18 months and semi-annual repayment of interest and principal subsequently until maturity.
The bond is rated Bbb- by Agusto & Co and it is ranked as a direct, senior, secured and unconditional issue.
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In 2019, Alagbaka Power, which was sponsored by Advad Limited, had signed a 25-year power purchase agreement (PPA) with the Ondo State Government to construct a 4.5 megawatts IPP to supply electricity to the state secretariat and other offices in Alagbaka under a design, build, own and operate, public-private-partnership.
The PPA contained an offtake provision that guaranteed a 2.5 megawatt (mw) “take or pay” by the state to cover payments for 2.5mw electricity supplied by Alagbaka Power whether or not taken by the state.
Subsequently, Ondo State passed an Executive Council and House of Assembly resolution approving the PPA and pledged an Irrevocable Standard Payment Order (ISPO) from its federal allocation (FAAC) receivables with United Bank of Africa (UBA) to cover payments for the 2.5mw electricity supplied during the duration of the PPA.
A breakdown of Ondo State’s revenue for the year ended December 31, 2021 showed that the state grossed N109.6 billion. Statutory allocation (FAAC) accounted for 44.4 per cent while internally generated revenue (IGR) accounted for 35.4 per cent. The state’s share of value-added tax accounted for the balance of 20.2 per cent. Preliminary reports indicated that the state recorded about N58.2 billion in first half 2022, on track to outperform its 2021 performance.