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United Capital to provide bank guarantees for GENCOs
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- United Capital has signed an agreement to arrange N50.59 billion in bank guarantees for electricity generation companies.
United Capital Plc, a leading investment banking firm, in partnership with the United Bank for Africa (UBA), has signed an agreement to arrange N50.59 billion in bank guarantees for electricity generation companies (GENCOs), a statement said on Monday.
The arrangement involves the assignment of bank guarantees to GENCOs on behalf of the Nigerian Bulk Electricity Trading Company (NBET), which is the government-owned company that purchases electricity from the GENCOs through Power Purchase Agreements for onward sale to distribution companies (DISCOs).
“The transaction enables the Federal Government of Nigeria to demonstrate its clear commitment to the far-reaching power sector reform, ensuring that the entire value chain runs efficiently,” said Oluwatoyin Sanni, United Capital’s Group CEO.
United Capital said the transaction has been structured such that bank guarantees provided by DISCOs to NBET will be reassigned to GENCOs, avoiding the need to issue fresh bank guarantees.
This structure provides several advantages including speed of execution, cost efficiency, and risk mitigation by providing recourse to an alternative source of payment for the GENCOs.
With the enhanced payment security, GENCOs will be able to fund working capital and raise capital expenditure to upgrade their operations in order to meet the electricity demands of Nigeria, the Lagos-based investment bank said.
“The transaction underscores the importance of developing a well-structured power sector that is fair and equally beneficial to the interests of consumers, generators, and distributors,” Sanni said.
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