Wednesday, 12 February 2014

CBN releases fresh guidelines for N300bn power fund

CBN headquarters, Abuja
CBN headquarters, Abuja
The Central Bank of Nigeria has released fresh guidelines that will shape the disbursement of the N300bn Power and Airline Intervention Fund.
According to the eight-part guidelines obtained by our correspondent, any power or airline company that defaults in the payment of the loan shall be charged the commercial interest rate (over 20 per cent) on the amount of default, instead of the seven per cent stipulated in the Fund.
Also, any Deposit Money Bank or Development Financial Institution that fails to disburse the fund within 14 days of receipt to the power or airline firm shall be charged the maximum lending rate of the bank as a penalty for the period that the fund was not disbursed.
The CBN’s guidelines read, “Diversion of funds by the participating banks shall attract a penalty at the banks average lending rate at the time of infraction. In addition, such participating banks shall be barred from further participation under the fund.
“Non-rendition of returns or the rendition of false returns shall attract the penalty stipulated by Banks and Other Financial Institutions Act, Section 60.
“Any participating bank that fails to disburse the fund within 14 days of receipt to the borrower shall be charged the maximum lending rate of the PB as a penalty for the period that the fund was not disbursed.

“In the event of a default in loan repayment (principal and interest), the participating banks shall have the right to charge commercial interest rates on the amount of default.”
Apart from airlines, the new guidelines state that any company operating in Nigeria and is engaged in “aircraft hangar projects capable of servicing existing commercial jets and next generation aircraft series for ‘C’ and ‘D’ checks in Nigeria” shall be eligible for the PAIF.
Under the power sector, the CBN stated that any corporate entity involved in electricity power supply value chain that includes power generation, transmission, distribution, gas-to-power projects and associated services, is eligible for the loan.
The document listed the types of loans available under the PAIF as: long term loans (for new power projects); refinancing of existing loans (power and airline projects); refinancing of existing leases (power and airline projects); working capital (for existing power and airline projects only); and refinancing of aircraft hangar projects.
It also stated that the Asset Management Corporation of Nigeria may, by the special approval of the CBN management, be allowed to participate with respect to acquired projects of national economic importance.
According to the CBN, all Deposit Money Banks and Development Finance Institutions, excluding the Bank of Industry are eligible to participate in the PAIF as participating banks.
While the BoI remains the managing agent and shall see to the day-to-day administration of the fund, the African Finance Corporation will act as the technical adviser, according to the guidelines.
The CBN, however, noted that the BoI would send out notices to all DMBs and DFIs for submission of refinancing/restructuring requests on behalf of eligible airlines and power companies.
The guidelines further read, “Eligible projects can be promoted by private or public sector sponsors (or a combination of both) but must be structured either as profit-oriented businesses or a public service, provided that contract cash-flows or financing support exist to ensure repayment of principal and interest, as well as long-term viability.
“The refinancing of existing loans for captive power projects for corporate entities that are not power companies will only be eligible if the investments are not older than two years from the date of the application. For the avoidance of doubt, this restriction will not be applicable to captive power projects implemented and managed by power companies. Gas-to-power promoters must tender verifiable evidence of off-taker purchase agreements for their projects to be eligible.”
Source: The Punch

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