We’ve seen rural-rural migration into communities our projects are sited -Odunaiye

Havenhill Synergy Ltd is a clean-tech utility company that uses renewable (solar) energy to generate clean, safe, cost-effective and sustainable electricity in urban and rural areas in Nigeria. Olusegun Odunaiya, tells BusinessDay’s Isaac Anyaogu the company’s strategy in a competitive market.

Excerpts

What are the significant milestones you have met so far?

We started out in 2010 as a company that installs majorly power backup systems for residential buildings ranging from 0.6kW to 2kW.

Currently, we have two solar mini-grids: One is 20kW and the other 30kW, and we are working on two more (45kW and 100kW solar mini-grids). We have a pipeline of 129 mini-grids that we intend to develop in the next three years.

Off-grid businesses in Nigeria thrive on account of grants and concessional debt finance, what has been your experience?

We received $100,000 from USADF as seed capital which helped finance the first mini-grid in Kigbe community, Abuja. At Kigbe, as connections increased, we decided to use the appliance finance scheme to help improve the level of electricity access of the members of the community. So,you deploy a mini-grid in a rural community, what are they doing to be able to afford to purchase TVs, Fans, refrigerators and more?

Even if they are given these appliances and their earning capacity remains the same,they may still not be able to pay for the electricity. Gradually,we started learning those lessons and documenting them: What makes a mini-grid work? What determines a viable mini-grid? The commitment, the ability and willingness to pay as well a good business model.

In the course of learning from the first project,we received funding for a second project at Kwaku Community, Abuja. We were able to transfer lessons gotten from the first project into practice and then we raised additional debt financing to complete the second project.

Some commercial users utilised our appliance finance scheme and purchased freezers for their businesses worth N60,000 with a capital of N20,000. Today, they are able to cater

for their households. In addition, we have noticed rural-rural migration into the communities where we have our projects.

Give us an insight into the strategy that has served you well?

We don’t operate in the mini-grid space alone but we also deploy C&I solutions.We have C&I projects that are operational and a pipeline of almost 2MW that we are currently fundraising for. Other projects are necessary to balance the business model.

What about tariffs, how do you structure yours?

The cheaper your capital expenditure, the cheaper your tariff. If you build expensively, your tariff will be high and there is no way the community will be able to pay. Our tariffs are cost-reflective.

For mini-grids in Nigeria, tariff ranges from about N120–N300/kWh (US$0.34–0.86/kWh) for system sizes ranging from 16kW to 100kW according to the Rocky Mountain Institute Mini-Grid Investment Report. Ours have never exceeded N140/kWh.

What are your thoughts on regulation in the sector?

It is rather disheartening that we still have import duties on renewable energy products. This discourages the private sector players in this industry.