Nigeria: progressive finance and mini-grids join 1000’s – ESI Africa

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Image: Andre Nery ©

In Nigeria, a developer has secured project funding to set up 28 decentralized renewable energy systems (DRE), which are designed as solar PV and battery-powered mini grids and aim to supply 55,000 people in rural areas with electricity.

PowerGen is partnering with CrossBoundary Energy Access (CBEA), Oikocredit, Triodos Investment Management and EDFI ElectriFI to facilitate development.

Oikocredit, Triodos IM and EDFI ElectriFI are acting as home financiers for the transaction and are providing $ 9 million in funding for the construction phase of the project. After commissioning, CBEA will buy the portfolio, become the long-term owner of the systems and enable the mortgage lenders to exit.

CBEA's Take-out at Completion transaction structure allows home financiers to segment their investments into the construction phase and the asset owner CBEA to segment their investments into the long-term operational phase. This is a first for minigrids of this size in Africa and shows how innovative financing structures can bring private capital into the sector.

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PowerGen will build the systems and will continue to act as the operator of the project after the handover to CBEA. The project will serve a base of residential, commercial and productive customers.

Alastair Smith, Co-Founder and Country Director of PowerGen in Nigeria: “We are very excited to continue expanding distributed renewable energy systems in Nigeria in partnership with Oikocredit, Triodos IM, EDFI ElectriFI and CBEA. With their support, together with the Nigerian REA, the World Bank, the Nigeria Power Sector Program of Power Africa and the communities themselves, we strive to continue changing lives through smarter energy. “

PowerGen has already started up six sites, including the Rokota pilot site, which was the first to go live under the NEP Performance Based Grant (PBG) program. The funding will be used to develop and build the remaining locations in the portfolio.

Nigeria is the largest economy in Africa, but it suffers from poor access to energy, especially in rural areas where only 25% of the people have access to electricity. This has led many to turn to fossil fuel alternatives such as diesel generators and kerosene. The consequences are poor air quality, greenhouse gas emissions and noise pollution. Taken together, these pose an undue burden on the health of rural populations, who are already marginalized.

Long-term funding through the CBEA Finance Facility and construction funding through Oikocredit, Triodos Groenfonds, Hivos-Triodos Fund (both managed by Triodos IM) and EDFI ElectriFI provide an alternative to harmful power sources.

The DRE systems developed in this way will provide 55,000 people with clean, reliable electricity and reduce over 2,000 MT CO2e annually, the equivalent of removing 500 cars from the road each year.

PowerGen's service also empowers communities to increase local economic activity by lowering electricity costs and improving access to production electricity, enabling the mechanization of agricultural processing, the use of electrical appliances such as welding machines and electrical cooking appliances, and the enabling of electric mobility. These benefits are critical as low-income people navigate the economic downturn caused by the COVID-19 pandemic.

Innovative funding to bring mini-grids to rural Nigeria

The transaction is facilitated by CBEA's project finance structure, which is proving to be a model for delivering long-term infrastructure capital on a large scale to the minigrid sector. The systems will be built into a special purpose vehicle (SPV), which will be fully taken over by CBEA as soon as the systems meet the previously agreed technical standards. Oikocredit, Triodos IM and EDFI ElectriFI can offer mortgage lending as they have a contractual exit from a long term financier. Once CBEA becomes owner of the project, PowerGen will enter into a long-term contract for the operation and maintenance of the facilities as well as customer service.

PowerGen, Oikocredit, Triodos IM and EDFI ElectriFI were advised on the transaction by Trinity LLP. CBEA was advised by Foley Hoag LLP.

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Via the Africa Minigrid Developers Association

Humphrey Wireko, Associate Principal, CrossBoundary Energy Access: “We are excited to be working with such strong partners to reach an agreement to finance and own this minigrid portfolio in Nigeria. We continue to believe that minigrids are a key tool to power more than 200 million people in Africa, and this project finance structure is the best way to attract the $ 187 billion investment these assets need. This transaction is testament to the fantastic work many stakeholders are doing to facilitate off-grid investments in Nigeria. We see this as the first of many such financings that CBEA is planning in Nigeria. “

Estefanía Matesanz, Senior Investment Manager Private Equity, Triodos IM: “This participation in PowerGen's minigrid project can be seen as a landmark investment of great strategic importance for both Triodos IM and the development of the African minigrid sector. The success of this investment results from the combined expertise, creativity and synergies that PowerGen has created together with Oikocredit, EDFI ElectriFI, Triodos IM and CBEA. We are delighted to be able to contribute to access to energy in emerging countries with this deal with clean and affordable technologies. “



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