In Nigeria, a developer has secured project financing to establish 28 distributed renewable energy (DRE) systems, designed as solar PV and battery-powered minigrids with an aim to connect 55,000 people to electricity in rural areas.
PowerGen is partnering with CrossBoundary Energy Access (CBEA), Oikocredit, Triodos Investment Management and EDFI ElectriFI to facilitate the development.
Oikocredit, Triodos IM and EDFI ElectriFI are acting as the construction financiers for the transaction, providing $9 million of financing for the construction phase of the project. Once operational, CBEA will purchase the portfolio, becoming the long-term owner of the systems and providing the construction financiers with an exit.
CBEA’s ‘take-out at completion’ transaction structure allows the construction financiers to segment their investment to the construction phase, and CBEA as an asset owner to segment its investment to the long-term operations phase. This is a first for minigrids in Africa at this scale and shows how innovative financing structures can bring private capital into the sector.
PowerGen will build the systems and continue to act as the long-term operator of the project after the transfer to CBEA. The project will serve a base of residential, commercial and productive use customers.
Alastair Smith, Co-founder and Country Director of PowerGen in Nigeria: “We’re very excited to continue scaling up distributed renewable energy systems in Nigeria in partnership with Oikocredit, Triodos IM, EDFI ElectriFI, and CBEA. With their support, alongside that of Nigeria’s REA, the World Bank, Power Africa’s Nigeria Power Sector Program, and the communities themselves, we are eager to continuing transforming lives through smarter power.”
PowerGen has already commissioned six sites, including the pilot site, Rokota, which was the first to be commissioned under the NEP Performance Based Grant (PBG) programme. The financing will be used to develop and build the remaining sites in the portfolio.
Nigeria is Africa’s largest economy but is plagued by poor energy access, particularly in rural areas, where only 25% of people have access to electricity. This has led many to turn to fossil-fueled alternatives, like diesel generators and kerosene. The result is poor air quality, greenhouse gas emissions, and noise pollution. Together, these represent an undue burden on the health of rural populations, who are already marginalised.
The long-term funding from the CBEA finance facility and the construction financing from Oikocredit, Triodos Groenfonds, Hivos-Triodos Fund (both managed by Triodos IM), and EDFI ElectriFI makes possible an alternative to harmful sources of power.
The DRE systems developed, as a result, will provide clean, reliable electricity to 55,000 people and will mitigate over 2,000 MT CO2e annually, which is equivalent to removing 500 cars from the road per year.
PowerGen’s service further empowers communities to increase local economic activity by reducing the cost of power and increasing access to productive power, which enables agricultural processing to be mechanised, the use of power equipment such as welding machines and electric cooking appliances, and enabling electric mobility. These benefits are critical as low-income individuals manage the economic downturn brought on by the COVID-19 pandemic.
Innovative financing to bring minigrids to rural Nigeria
The transaction is facilitated by CBEA’s project finance structure, which proves a model for bringing long-term infrastructure capital into the minigrid sector at scale. The systems are being built into a special purpose vehicle (SPV) which will be fully acquired by CBEA once the systems have met the pre-agreed technical standards. Oikocredit, Triodos IM, and EDFI ElectriFI are able to provide construction financing because they have a contracted exit from a long-term financier. Once CBEA becomes the owner of the project, PowerGen will step into a long-term contract to operate and maintain the assets and provide customer service.
PowerGen, Oikocredit, Triodos IM, and EDFI ElectriFI were advised in the transaction by Trinity LLP. CBEA was advised by Foley Hoag LLP.
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About Africa Minigrid Developers Association
Humphrey Wireko, Associate Principal, CrossBoundary Energy Access: “We’re excited to work with such strong partners to reach an agreement to finance and own this portfolio of minigrids in Nigeria. We continue to believe that minigrids are a key tool for bringing power to over 200 million people in Africa, and this project finance structure is the best way to attract the $187 billion of investment that these assets need. This transaction is a testament to the fantastic work being done by many stakeholders to help facilitate off-grid investment in Nigeria. We see this as the first of many such financings that CBEA plans to do in Nigeria.”
Estefanía Matesanz, Senior Investment Manager Private Equity, Triodos IM: “This equity investment in PowerGen’s minigrids project can be considered a landmark investment with major strategic importance both for Triodos IM and the African minigrids sector development. The success of this investment results from the combined expertise, creativity and synergies created by PowerGen together with Oikocredit, EDFI ElectriFI, Triodos IM, and CBEA. We are pleased to be able to contribute to the access to energy in emerging countries with clean and affordable technologies through this deal.”