The project, which is to electrify 55,000 rural communities in Nigeria, will receive construction financing from other investors such as Oikocredit, Triodos Investment Management (Triodos IM), and EDFI ElectriFI (the EU-funded Electrification Financing Initiative).
To ensure that the project will serve a base of residential, commercial, and productive use, electricity will be provided by 28 distributed renewable energy (DRE) systems, designed as solar PV and battery-powered mini-grids.
PowerGen will design the systems and continue to act as the long-term operator of the project after the transfer to CBEA.
Having already commissioned 6 sites which include the pilot site, Rokota- the first to be commissioned under the NEP Performance-Based Grant (PBG) program- the company will use the latest financing to develop and build the remaining sites in its portfolio.
A unique financing model to electrify rural communities
Oikocredit, Triodos IM, and EDFI ElectriFI will provide $9m of financing for the construction phase of the project. Once operational, CBEA will purchase the portfolio, thereby becoming the long-term owner of the systems and offering the construction financiers an exit.
With CBEA’s ‘take-out at completion’ transaction structure, the construction financiers will be able to segment their investment to the construction phase, while CBEA- the asset owner- segments its investment to the long-term operations phase.
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.
Since this is a first for mini-grids in Africa at this scale, it demonstrates how innovative financing structures can bring private capital into the sector.
Once CBEA becomes the sole owner of the project, PowerGen will step into a long-term contract to operate and maintain the assets and provide customer service.
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.
PowerGen, Oikocredit, Triodos IM, and EDFI ElectriFI were advised in the transaction by Trinity LLP. CBEA was advised by Foley Hoag LLP.
Addressing lack of energy access and implications
Nigeria is Africa’s largest economy yet is bedeviled by poor energy access, particularly in rural areas, where only 25% of people have access to electricity.
With no choice, many underserved communities turn to fossil-fueled alternatives, like diesel generators and kerosene which result in air and noise pollution, greenhouse gas emissions, and other environmental problems.
Combined, these represent an undue burden on the health and financial state of rural populations. As such, the long-term funding from the CBEA finance facility and the construction financing from Oikocredit, Triodos, and EDFI ElectriFI will provide a clean 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 mechanized.
Also, it will make possible the use of other 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.
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 continue transforming lives through smarter power.”
According to Humphrey Wireko, Associate Principal, CrossBoundary Energy Access, “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.
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.”