Makeni bioethanol and power project in Sierra Leone

Project profile
August 17, 2015

Our client

A consortium of major development finance institutions active in Africa, comprising Dutch development bank FMO (with Belgium’s BIO as a sub-participant), Emerging Africa Infrastructure Fund Limited, African Development Bank, the German Investment and Development fund DEG, ICF-Debt Pool LLP and the ECA-backed Industrial Development Corporation of South Africa Limited.

Project location

15 km west of the town of Makeni, in the Northern provinces of Sierra Leone.

Project description

The project, undertaken by Addax & Oryx Group, involves the construction, operation and maintenance of a bioethanol plant with an annual capacity of 85,000,000m³ and a 32MW power plant.

The project covers some 14,000 hectares of mostly unused land near Makeni and includes the development of a Greenfield sugarcane plantation, the construction of an ethanol refinery and a biomass fuelled power plant. Sugarcane will be converted into bioethanol to principally meet demand in Europe, as well as domestic markets in Sierra Leone, helping replace dependence on fossil fuels and reduce greenhouse gas emissions. The project is also expected to earn carbon credits under the United Nations Clean Development Mechanism.

15MW of excess power will be supplied to the national grid of Sierra Leone, which will make a significant addition to the overall availability of electricity in the country.

Scope of work

A team from Norton Rose Fulbright advised the lenders on all aspects of this novel project from the review of early drafts of project agreements to drafting the complex finance documents and managing financial close.

As the continent’s first externally financed bioenergy project and the first involvement of European development banks lending to a private project in Sierra Leone, the project involved extensive analysis of the legal regime in Sierra Leone. This analysis covered land issues, dispute resolution procedures, enforcement issues, ratification requirements, as well as a legal review of the project agreements, including ethanol and power off-take arrangements and the various incentives agreements with government entities.

The team led the financing process, drafting the loan and security documents and ensuring lenders’ interests were fully protected in what is a new jurisdiction for them. A key element of the financing related to the implementation and management of the social and environmental aspects of the project, and significant effort was given to making certain the lenders’ requirements in this area were addressed.

The team also advised the lenders on the construction of the project, including the agricultural component as well as the power plant, which involved multiple contracts and increased the complexity of the project.

Key issues

  • It is the first bioenergy project to be brought to financial close in Africa, and the largest post-conflict agricultural project to be developed in Sierra Leone.
  • The Norton Rose Fulbright team has implemented an innovative structure for the project financing that will maximise local development potential and at the same time complies with European Union and other international bioenergy, environmental and social standards. An on-going monitoring system has also been implemented to ensure that the project fully meets its commitments.