Havenhill Synergy Limited has secured Nigeria’s first long-term private capital fund deployed to the development of mini-grids electricity solutions for rural areas.
Denominated in naira the N1.89 billion, eight-year tenure infrastructure financing has come with a successful financial close with Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF), the first listed infrastructure debt fund in Africa’s most populous country. This is meant for the construction of 22 mini-grids that Havenhill Synergy has undertaken under the Nigeria Electrification Project.
Before this mini-grids financing deal, the sector relied mostly on minimal short-term financing which does not really support the business model. Traditional banks hardly even played in this sector
Naira-denominated credit facility gives the sector a better financial outlook and returns on investments. Naira-denominated debt means that the business is protected from the erosion of value and high cost of capital associated with loans denominated in foreign currency.
“This is an innovative deal. It sends the right signal out to investors who would have been watching this space,” Olusegun Odunaiya, CEO at Havenhill Synergy Limited told BusinessDay in an exclusive phone interview. “It shows what is possible in the sector.”
Odunaiya estimates that in the next five to 10 years Nigeria would be home to between 2, 000 and 3, 000 mini-grids servicing rural communities.
These mini-grids in rural areas have social and economic multiplier effects that translate into increased income and improved living standards for host communities because electricity is available and affordable.
Students have light to study at night. Hospitals can stay open for longer hours and preserve vaccines. Agricultural produce and products are preserved and wastage curtailed.
Additionally, Havenhill Synergy targets 1 million such rural customers in commercial and productive rural communities. What makes these types of rural communities viable is that with economic activities the residents of the host communities would already be spending on electricity generators, kerosene, and candles, which cause environmental pollution and health hazards and are also more expensive than the electricity from the mini-grids solution. This is already leading to a rural-rural migration.
Anshul Rai, the CEO of NIDF noted that the Fund prides itself in being the leader in financing of clean energy and energy access projects in Nigeria and contributes to the achievement of UN’s Sustainable Development Goals.
“In multiple projects such as Havenhill, our unitholders can see their capital in action and generating not only financial returns but also making a strong, positive impact on the daily lives of their fellow citizens,” Rai said.
For many years, energy developers have believed that mini-grids offer a cost-effective solution for providing communities and businesses in sub-Saharan Africa with low-cost, reliable, and clean power—particularly in places out of reach of existing power grids, David Lawrence, a communications consultant, argued in an article published in June 2020, on the website of the International Finance Corporation.
Many developers say that the sector has not grown quicker because more public sector reforms and donor support are required before private investors will start putting together deals. Now, they believe, even as countries grapple with the COVID-19 response is time to get those conditions in place for the longer-term rebuilding.
Towards 2030, standalone systems and mini-grids could provide almost 50 percent of the new electricity access as this represents the least cost solution to connect about 450 million (41% of the population) people on the African continent. In Nigeria, over 40 percent of its 200 million people have no access to the conventional grid.
To bridge the energy access gap in Africa, governments will require a successful mix of strategies that integrate grid extension and improvement, mini-grids, and standalone generating systems.
Mini-grids are cheaper and cleaner than owning generating sets. They use renewable energy resources and bring the generation closest to the community where the electricity is consumed, minimising technical losses. Some of these mini-grids are solar hybrid using diesel generators as backup.
