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News Jan 19, 2018

Development and Financing of CTRG Power Plant

Shearman & Sterling is advising the sponsors, Sasol Limited and Electricidade de Moçambique (EDM), on all aspects of the development and financing of the Central Térmica de Ressano Garcia S.A. (CTRG) joint venture project. The CTRG project is a 175MW gas-fired IPP comprising 18 Wartsila gas engines. EDM holds a 51% stake in the project, with Sasol holding the remaining 49%.

The financing includes A and B loans from the International Finance Corporation, a direct loan from Proparco and a PRI-covered loan from Absa Bank Limited. This will be the first project financing investment by these development finance institutions (DFIs) and Absa in a Mozambican power project.

The rationale for the CTRG project is to use Mozambican natural gas produced from the Pande and Temane gas fields operated by Sasol to generate a stable and competitively priced source of power for Mozambique. All of the project's power generation capacity is sold to EDM under a long-term power purchase agreement.

CTRG will also be these DFIs' first investment in Mozambique which is solely reliant on revenues generated by a domestic purchaser. This is also Sasol’s first project financed IPP and the first major investment in a Mozambican domestic infrastructure project since the beginning of the country’s economic crisis in 2016.

Partner John Inglis commented, “This is a major signal to the international investor community that investment in Mozambique infrastructure designed to service the Mozambican public is viable. This creates a precedent for a number of other power projects that have been under development while the CTRG financing was being completed.”

The CTRG project is the first joint venture for the sponsors and Sasol’s first international IPP. Sasol has been one of the largest investors in Mozambique since the 1990s, and the commitment shown to the development and financing of this project, including the extent of additional support provided to address Mozambique’s macroeconomic issues, is a testament to their commitment to Mozambique.

The firm started advising the sponsors on this transaction in April 2012, at the time the commercial documentation for the transaction was being negotiated. Financial close for the refinancing was achieved on January 2, 2018.

The Team

The Shearman & Sterling team below was supported by a number of other associates and trainee solicitors who assisted on the transaction over the years.