PowerGen, a developer in Africa of on-grid and off-grid distributed energy, has secured long term project financing to connect 55,000 people to electricity in rural Nigeria from CrossBoundary Energy Access (CBEA) with construction financing provided by Oikocredit, Triodos Investment Management (Triodos IM) and EDFI ElectriFI (the EU-funded Electrification Financing Initiative).
A release from the organisation said the project is supported by grant funding from the World Bank and the Nigeria Rural Electrification Agency’s Nigeria Electrification Project (NEP), which provides a fixed grant for each customer connected. The electricity will be provided by 28 distributed renewable energy (DRE) systems, designed as solar PV and battery-powered mini-grids.
Oikocredit, Triodos IM, and EDFI ElectriFI are acting as the construction financiers for the transaction, providing $9m 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.
“We’re very excited to continue scaling up distributed renewable energy systems in Nigeria,” said Alastair Smith, Co-founder and Country Director of PowerGen in Nigeria.
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.
PowerGen has already commissioned 6 sites, including the pilot site, Rokota, which was the first to be commissioned under the NEP Performance-Based Grant (PBG) program. The financing will be used to develop and build the remaining sites in the portfolio.
“We continue to believe that mini-grids 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. We see this as the first of many such financings that CBEA plans to do in Nigeria,” said Humphrey Wireko, Associate Principal, CrossBoundary Energy Access
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Nigeria’s poor electrification rate of 45 percent is particularly felt in the rural areas where millions are without power. 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.
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 project developers say it will further empower 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.
The transaction is facilitated by CBEA’s project finance structure, which proves a model for bringing long-term infrastructure capital into the mini-grid 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.
Quentin Antoine, Senior Investment Manager at EDFI Management Company said EDFI ElectriFI is thrilled to join such a strong group of investors backing visionary entrepreneurs who will positively impact thousands of households and local businesses in rural Nigeria.
“This is an important milestone for rural electrification in Nigeria as we aim for big impact by phasing out thousands of diesel generators and build a reliable and renewable source of electricity for 11,000 rural households and entrepreneurs,” he said.
