Herbert Smith Freehills has advised Standard Bank Group and CfC Stanbic Bank on the project financing of the US$150 million Kinangop wind farm project under development in Kenya, which reached financial close last month.
Standard Bank's CfC Stanbic in Kenya led the debt arranging. The sponsors are African Infrastructure Investment Fund 2 (AIIF2), and Norfund, the Norwegian investment fund for developing countries, both of whom are providing the remaining US$60 million of the capex in equity. AIIF2 is majority-owner through a joint venture between Macquarie and Old Mutual Investment Group. The local partner is Aeolus Kenya, an independent power producer and member of the Power Africa initiative led by the US. Spain's Iberdola secured the €85 million EPC contract in October.
This deal is particularly interesting as it is the first independent large-scale wind farm to reach financial close in sub-Saharan Africa (outside South Africa). The developers intend to build the 60MW plant at Kinangop to the north of Nairobi, and it is expected to come on line in mid-2015. The Kenyan government will be the main buyer of the power produced. The deal is also significant because of the absence of significant development financing or multilateral risk support, making it a ground-breaking commercial bank financing with sovereign offtake risk.
The core Herbert Smith Freehills team was led by Finance partner Martin Kavanagh assisted by senior associate Joanne Elson and associate Lucy Johnson (Finance), with significant assistance from the Real Estate team through Tim Healey and Chidi Egbochue. In all some 34 HSF lawyers worked on this matter across finance, real estate, corporate, tax, insurance and disputes. Ashurst advised the sponsors.
Martin Kavanagh commented: "Following our involvement in the project financing of the integrated Kwale sugar plantation, refinery and power plant last year we are delighted to have closed another innovative power-finance deal in Kenya, which enabled us to showcase the firm's extensive depth of expertise in energy and emerging markets. It is particularly pleasing to have advised on a transaction which is likely to open the door to future deals in the country using the same bankable model."
