How Nigeria’s largest Independent Power Plant is set up to funnel billions to tax haven

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Nigeria’s largest independent power plant (IPP), Azura Edo Power Plant, is a huge suction pipe set up to siphon millions of tax-free dollars through a network of Mauritius-incorporated offshore shell companies to a number of trusts and private equity firms, an investigation by PREMIUM TIMES and the International Consortium of Investigative journalist (ICIJ) has revealed.

A study of the data obtained by German newspaper, Suddeutsche Zeitung, and ICIJ from two offshore secrecy providers (Appleby and Asiaciti Trust) and 19 secrecy jurisdictions showed that promoters of the power plant will earn as much as $28 million before the first light bulb comes alive from power generated by the facility.

The 1.4 terabyte leaked data, now named Paradise Papers, contains 13.4 million records and ranks among the biggest leaks in history.

For 12 months, more than 380 journalists from 96 media organisations in 67 countries pored over the gigantic data, which cover a period of nearly 70 years, from 1950 to 2016. PREMIUM TIMES is the only Nigerian media organisation involved in the investigation.

More than 120 politicians and country leaders, in nearly 50 countries as well as hundreds of business people across the world were identified in the record as users of offshore entities.

The beginning

In October 2014, former President Goodluck Jonathan, a spade in hand, flanked by Adams Oshiomhole, then governor of Edo State, and other dignitaries broke the earth of the sprawling 100 hectares site for the Azura Edo Power Plant for the first time.

The power plant, located at the Ihovbor/Orior Odemwende communities outside Benin City was hailed as the first fully financed private power plant in Nigeria.

The first phase of the IPP, which is planned to take off in 2018, will produce 450 megawatts of electricity but ultimately, the plant is expected to produce 1,500 megawatts.

Mr. Jonathan said the project demonstrated the “strong foundation” on which his administration was “building a sound and sustainable electricity industry, with great expectations for robust growth in the sector.”

Azura Edo was an instant hit with foreign investors and multilateral financial institutions. The gas-fired plant had little problem generating the $1 billion ($700 million for the construction of the plant and $300 million to build associated infrastructure) required to set it up.

The World Bank provided a partial risk guarantee of up to $245 million. The board of the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) approved loans and hedging instruments of up to US$135 million and guarantees of up to US$659 million.

The project received loan financial backing from First City Monument Bank, Rand Bank of South Africa, Standard Chartered Bank, United Kingdom and the Netherlands Development Finance Company (FMO).

Other financial institutions that provided debt financing were Standard Bank of South Africa, SWEDFUNDS International, AB, Sweden, and Overseas Private Investment Corporation, USA.

But after the funfair of the groundbreaking ceremony, work on the project stalled. The Mr. Jonathan’s administration, for undisclosed reasons, withheld its backing of the World Bank facility needed for the plant to take off.

In August 2015, however, the President Muhammadu Buhari administration breathed new life into the plant, signing a $237 million risk guarantees with the World Bank in support of the power plant. The guarantees included a debt mobilization guarantee of $117 million and a liquidity guarantee of $120 million.

“This landmark development confirms the Buhari administration’s commitment to the continuation of the power sector reforms which is anchored on attracting private sector investments, and establishing and supporting institutions that are critical to the reforms,” the Ministry of Power said in a statement.

Similarly, during an inspection tour of the power plant, in April 2016, the immediate past governor of Edo State, Adams Oshiomhole, praised the promoters of the plant.

“It requires a measure of confidence in our country, people, and about our future to initiate a gigantic project such as this. Even while you are at the stage of construction, all of us here are already beneficiaries of that vision,” he said.

It is not hard to see why the Nigerian government is excited about the project. At full generating capacity of 1,500 megawatts, the plant will be producing more than a third of the country’s current total generating capacity.

A cluster of Offshore entities

But while the power plant enjoys a flurry of local and international financial supports and the Nigerian government gushes about its benefits, documents obtained from the database of global offshore law firm, Appleby, showed that Azura Power West Afica, the Nigerian company building the plant is owned by a cluster of offshore entities in Mauritius.

Part of the documents obtained by PREMIUM TIMES from the leaked data are two undated organisational charts of Azura Power West Africa.

One of the charts, which appeared to be the original structure of the company, shows that Azura Power West Africa was wholly owned by Azura-Edo Limited, a Category 1 Global Business Company (GBC1) incorporated in Mauritius.

Azura-Edo Limited is further completely owned by Azura Power Holding Limited, a Category 2 Global Business Company (GBC2) also incorporated in Mauritius.

Azura Power Holding is then jointly owned by two GBC2 companies – Amaya Capital Limited (86.23 percent) and Hollyhock Limited (13.77 percent). Hollyhock Limited is the GBC2 subsidiary of the private equity firm, American Capital Limited.

Amaya Capital is jointly owned by The Principal Investment Trust (40 percent) belonging to Philp Iheanacho the co-founder of Investment firm, Afrinvest, and an ally of the current governor of Edo State, Godwin Obaseki, with whom he co-founded Afrinvest.

The Rasa Trust owns 40 percent of Amaya Capital. The trust belongs to Sundeep Bahanda, a former top executive at Deutsche Bank, London, while David Ladipo, the founder of Lintstock, a corporate advisory company and a former adviser to the Nigerian government on energy, owns 20 percent of Amaya Capital.

The second ownership chart, apparently drafted after the new investors were welcomed into the power project, showed that Azura Edo Limited 100 percent ownership of Azura Edo West Africa had reduced to 97.5 percent.

The Edo State government was also brought on board as marginal co-owner of the company with 2.5 percent stake. The company explains on its website that the 2.5 percent equity was given to Edo State for the providing 1100 hectares of land on which the company is built.

The document further showed that Azura Power Holding divested 50 percent of its equity in Azura Edo Limited to Aldwych Azura Limited, England (9.2 percent), FMO (4.8 percent), Asset & Resource Management Company Limited, ARM (6 percent), African Infrastructure Investment Fund 2 (AIIF2), South Africa (15 percent) and African Infrastructure Investment Fund 2 (AIIF2), Mauritius (15 percent).

Amaya Capital and Hollyhock still held their original equity of the remaining 50 percent of Azura Power Holding.

 

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