Lekki Port, a $1.5 billion public private partnership project, has received a major boost with the recent conclusion of the due diligence required by one of its key investors, the Nigerian Ports Authority (NPA).
With this development, the much anticipated funding from shareholders expected to fuel rapid construction of the Lekki Port will now be ploughed into the project, so that the next phase of development can commence in earnest.
The deep seaport is a $1.5 billion public private partnership project between the Federal Government (represented by the Nigerian Ports Authority), the Lagos State Government and the Tolaram Group.
A Shareholder’s Agreement to this effect was signed in December 2012 amongst all three parties.
LASG’s equity and that of the Tolaram Group are in place, whilst NPA is in the process of making its equity contribution into the project. It is standard procedure for due diligence to be conducted by shareholders before infusion of equity into a project.
NPA has carried out and concluded its due diligence on the project through a credible auditor, KPMG, to ensure accountability, transparency and value for money of the project, which is essential and crucial to a project of this magnitude.
The NPA on its part has also gotten its Federal government budget approved by the House of Assembly.
Federal Executive Council approval for the project and issuance of the Finance Guarantee was received in December 2013.
Chief Finance Officer, Lekki Port, Mr. Sandeep Parasramka while shedding light on major developments, particularly as it concerns the company’s drive in ensuring that Lekki port becomes operational by 2018, said “Apart from getting the concession from NPA to build Lekki Port, Tolaram has put together leading global consultants such as Standard Chartered Bank, the Louis Berger Group Inc., Delta Marine Consultants, BMT Asia Pacific, TBA Netherlands, Jardine Lloyd Thompson Pte Ltd and GMaps, following which the EPC contractor, China Harbour Engineering Company (one of the foremost builders of ports with a track record of delivering projects on time), has been appointed to build the port and the container terminal has been sub-concessioned to International Container Terminal Services, Inc, Philippines, a leader in the container terminal operations with a footprint across the globe.
The project will make Nigeria the gateway to the West African region and will be one of the most efficient and modern maritime facilities, catering for containerized, liquid and dry bulk cargo par international standards.
Lekki Port will have significant positive macroeconomic impact estimated at $361bn over the entire concession period. It is expected to contribute more than $200bn to the government treasury while also creating close to 163,000 new jobs in the economy.
“The stage we are in now is structuring the financial terms, which will take a short period before funding is made available to Lekki Port. It is only normal that when you do such a large financing of a huge project such as this, it takes more time than building a house” said Mr. Parasramka.
Conventionally, projects of this magnitude are undertaken through project financing on a non-recourse basis. This requires the lending parties to agree on appropriate terms of lending and conduct stringent due diligence. These processes take time and are essential to achieve the debt financing. The good news for Lekki Port is that they are at an advanced stage, with the due diligence completed and financing terms well underway.
With the magnitude of processes and resources required to complete a large infrastructure project, it is inevitable that there will be time overruns, and Lekki Port is no exception. However, we understand that all shareholders are very committed to ensuring that the scheduled operational date of 2018 is very much on course and are making rapid progress towards this, with the view to kick-off construction works in the last quarter of 2014.
Reacting to recent speculations in some online and print media, the Executive Director Finance & Administration of NPA, Mr. Olumide Oduntan stated categorically, that the sale of land transaction between LASG and the port promoters does not affect the Deep Sea Port project as the land in question is not the land designated for the port site. It is a separate and distinct transaction that does not include NPA nor have any relationship with the project. Simply put, the transaction was a creative way for LASG to fund its shares in the Lekki Deep Sea Port project.
He expressed satisfaction with the pace of the development of the project and noted that the NPA is finalizing documentation and internal processes (including a due diligence report prepared by KPMG Professional Services) after which it plans to infuse its equity contribution into the project.
In conclusion, he noted that this is a project that NPA is 100% in support of, and it will revolutionize the maritime sector and contribute to resolving the congestion of ports in Lagos State and Nigeria.