AfrElec: Nigeria’s PowerGen secures $9mn project financing for mini-grid project

Nigerian power developer PowerGen has secured project financing to build 28 distributed renewable energy (DRE) systems using solar PV and battery technology in rural areas.

PowerGen is partnering with CrossBoundary Energy Access (CBEA) and investors Oikocredit, Triodos Investment Management and EDFI ElectriFI to facilitate the development, which will connect 55,000 people to electricity and prevent 2,000 tonnes per year (tpy) of CO2, PowerGen said in a statement.

The deal is structured so that Oikocredit, Triodos IM and EDFI ElectriFI act as construction financiers for the transaction, providing $9mn 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.

This is a first for mini-grids 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, said: “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.”

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

Power Gen’s statement said that transaction is being 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.