Africa’s energy sector is at a pivotal moment, with transformative projects reshaping its landscape. A prime example is the recent transaction involving Maamba Energy Limited (MEL), which primarily centred around securing financing for its ambitious Phase II Project. This project seeks to double MEL’s thermal power plant capacity from 300 MW to 600 MW, leveraging coal from the nearby Maamba mine. By focusing on financing rather than the expansion itself, the transaction underscores the critical role of financial innovation in driving energy growth. Key stakeholders, including the National Pension Scheme Authority (NAPSA), two leading commercial banks, and other local investors, have come together to support this initiative, signalling a strong commitment to strengthening Zambia’s energy infrastructure.
This transaction centres on an off-take model via a power purchase agreement and financing for MEL’s Phase II Project in Maamba, which includes the design, development, construction, and operation of new power generation assets. Under a Master Facility Agreement, at least two leading commercial banks are to contribute over USD 50 million to the project, which is valued at approximately USD 400 million. Given Zambia’s strong reliance on hydroelectric power and acute power shortages made worse by climate change which led to an unprecedented drought, this expansion is of the essence.
August Hill & Associates is playing a central role in shaping the transaction, providing comprehensive legal advisory services to one of the commercial banks at every critical stage. From meticulously reviewing the Master Facility Agreement between NAPSA and MEL, to expertly drafting the Commercial Terms Agreement between the commercial bank and MEL, our firm is ensuring that the transaction is underpinned by a robust legal framework. Additionally, we are delivering incisive legal opinions that are integral to the transaction’s execution, solidifying our reputation as a trusted legal partner in high-stake deals.
In light of Zambia’s ongoing electricity crisis characterized by extensive load shedding, this project is expected to alleviate power shortages and provide a more stable energy supply for residential and industrial consumers. By expanding beyond hydroelectricity, Zambia strengthens resource management and mitigates climate-related risks to the energy infrastructure. Additionally, the project supports regional infrastructure development, crucial for economic growth and investment.
Collaborating with legal teams from all stake holders posed challenges as the parties negotiated terms and aligned their interests. The transaction required a thorough review of legal documents, including a credit facility with a letter of credit and an escrow agreement to streamline financial transactions among the parties.
The successful completion of the Maamba Phase II project is set to significantly enhance Zambia’s energy landscape, marking a vital step toward regional sustainability and energy independence. Transactions such as these are key to building a stable and sustainable energy future as Africa addresses its energy challenges.