Hydrocarbon Value Chain Investment Program (HYVIP) FAQ
HYDROCARBON VALUE CHAIN INVESTMENT PROGRAM (HYVIP) FAQ
Q: What is the Method of Application for the partnership?
A: The first step is that the project promoter completes the technical analysis, concept designs, business case, schedule, funding structure, risk mitigation, value proposition, support required, costing, etc for the project of interest before approaching the Board. This pre-work should be compiled and send to the Board with a cover letter stating the project highlights, the nature of the partnership required from the Board and the value proposition. The submission would then be reviewed and subjected to the HYVIP Process.
Q: What if I want support from the Board in form of loan instead of equity?
A: The Board is not a bank and cannot disburse loans directly. Requests for loans will be referred to one of the Board’s partner banks for review, evaluation, securitization, disbursement, and management in line with the best practice within the Nigerian banking industry.
Q: Is it true that the Board will exit the partnership at some point?
A: Yes, the Board will exit the partnership at some point. The role of NCDMB is to catalyze the realization of the project after which it will exit at a pre-agreed time. The Board’s equity holding will be evaluated at the point of exit and typically offered to the pioneer partners on the ‘right of first refusal’ basis or sold to other interested investors or via the Nigerian Stock Exchange.
Q: What is the typical equity participation by the Board?
A: There is no single target as every partnership transaction has its unique proposition. Typically, NCDMB will not be expected to make equity contribution that is greater than the promoters of the project. The equity derivable to the Board will be ascertained as part of its review of the proposal and agreed based on the funding structure of the partnership under consideration.
Q: Is the maximum loan/equity investment $10million?
A: The $10million max is applicable to products under the NCIFund scheme domiciled with the Bank of Industry (BOI). It should be noted that the Board’s investment can be as low as $1million (or even lesser) and can also be more than $10milion depending on the project objectives, the benchmarked cost of the project, the funding structure, and other factors taken into consideration by the Board. It is also important to note that the Board’s Fund is not limitless or meant for commitment to deliver capital intensive projects. The Board’s intervention is to serve as a catalyst to bring projects into fruition and not to take up full or disproportionate funding of projects being promoted by investors.
Q: What is the Level of Local Content required?
A: A minimum of 30% in the value of goods and services for the project must be provided by local sources or indigenous Nigerian businesses. The Board will also follow up with the project implementation to ensure that local participation of Nigerian businesses is maximized as much as possible. Partnership with NCDMB is not an excuse to flout the provisions of the NOGICD Act (2010).
What category of sub-contracts should the 1% NCDF apply to with regards to the amount?
It applies to all contracts without any minimum limit.
Q: Any preferred location of facility?
A: The project must be located in any part of Nigeria, but preferably close to the source of feed stock and/or product offtake to minimize logistics/other costs and enhance project profitability.
Q: Any limitation to the size of facilities?
A: The range of capacities of modular reﬁnery projects within the scope of partnership consideration shall be in the range of a minimum of 1,000bopd and a maximum of 5,000bopd especially for the topping plants largely dedicated to production of AGO. In some very few cases, the Board may partner to establish higher capacity modular refineries if the project fundamentals are justifiable.
Q: Ownership structure of project promoters
A: Company must have at least 51% Nigerian Ownership and must be promoted by a company which is already in business as a going concern in the Oil and Gas Industry.
Q: Do you become member of the Board of Director of the new establishment?
A: Yes. The Board will typically nominate 2 management staff of NCDMB into the Board of Directors of the company in which it has taken equity participation. A new Special Purpose Vehicle (SPV) could be formed to manage the new company or shares of the existing company could be allotted to NCDMB based on the agreed equity distribution. A shareholders agreement and share subscription agreement will be executed as part of the key documentation required before fund disbursement.
Q: Can NCDMB fund the entire transaction?
A: No. There has to be some level of commitment by the project promoter before NCDMB gets involved.
Q: Can the partnership be deployed for CSR projects?
A: No. The HYVIP process is primarily meant for profitable partnerships that will enable development of Nigerian Content while at the same time growing the fund for others to benefit. The process is domiciled in the Commercial Ventures Division of the Board while there are other Divisions in the Board that handle CSR projects.
Q: What are L2 and L3 Cost Estimate and Schedule?
A: There are various Levels of Accuracy used in cost estimating and project planning: Level 1 is at project initiation/initial concept, Level 2 is at Feasibility, Level 3 is at Project Definition/FEED while Level 4 is at Detailed Design. It is recommended that project promoters utilize the services of certified professionals and consultants in the preparation, evaluation, and review of their investments proposals to ensure the credibility of their assumptions, models, and projections.