Willing buyer-willing seller in captive power schemes best for banks— SEL Capital boss
The Chief Executive Officer, SEL Capital Limited, Mr Segun Opaleye, has given fresh insights on why commercial banks and other financial institutions prefer lending to captive power projects than other segments in electricity sector.
In an interview, he explained that the major problems in the power sector remain illiquidity and poor credit worthy ratings and the temptation of nonperforming loans accumulation.
He said “When you look at the entire value chain, you have the Gas Company, the Gencos and the Discos and government agencies as well”.
“For example, you have a Genco that is supplying about 900 megawatts to the grid but getting paid half of that due to aggregate technical, commercial and collection losses. So, today, no investor will want to lend to any sector that is plagued with illiquidity. For us, we are very careful and that is why we support captive power plant projects.
Opeleye averred that with a captive power plant, “there is a willing buyer and a willing seller,” which encourages a lender to see himself as “Only taking the risk of the off-taker or the buyer”. According to him, “If you see any power project getting funded easily, it is most likely to be a captive power plant because all the illiquidity challenges are not there. So, you really will not go wrong with such”.
SEL Capital Limited chief executive argued further that “As long as those challenges in the sector are not addressed, the sector will not be attractive to lenders”.
Business Hilights recalls that SEL Capital Limited was incorporated to seize emerging business opportunities in the financial services sector.
The key vision of the group is to become a leading Pan-African financial institution, offering financial advisory, wealth management and investment advisory services and provision of funding solutions to individuals and SMEs.
Opaleye added that “We also help project promoters to create bankable projects and access funding for their projects. Our aspiration is to be the gateway and catalyst for mobilising capital for growth and development across Africa.
As part of the company’s 2019 business outlook, the chief executive revealed that “SEL Capital Limited is starting off with consumer finance, SMEs structured finance, all advisory services around project finance, corporate finance and wealth management”.
“We are a one-stop funding solution. We want to leverage our transactions experience working in one of the biggest financial institutions in Africa to drive business growth, which we believe is the required catalyst for growth and development in any economy.
