Leading on-grid and off-grid renewable energy developer, PowerGen Renewable Energy, has secured long term project financing from CrossBoundary Energy Access for its mini-grids project that will connect 55,000 people to electricity in rural Nigeria. PowerGen is developing 28 distributed renewable energy (DRE) systems, designed as solar PV and battery-powered mini-grids.
In addition to providing clean, reliable electricity to thousands of people in rural Nigeria, the DRE systems will also mitigate over 2,000 MT CO2 emissions annually, which is equivalent to removing 500 cars from the road per year.
We’re very excited to continue scaling up distributed renewable energy systems in NigeriaAlastair Smith, Co-founder and Country Director of PowerGen in Nigeria
International finance institutions, Oikocredit, Triodos IM, and EDFI ElectriFI are providing $9m in financing for the construction phase of the project.
The project also received grant funding from the World Bank and the Nigeria Rural Electrification Agency’s Nigeria Electrification Project (NEP), which will provide a fixed grant for each customer PowerGen will connect.
CrossBoundary to acquire the mini-grids portfolio once operational
The mini-grids will be built through a special purpose vehicle (SPV) which will be fully acquired by CBEA once the systems have met the pre-agreed technical standards. PowerGen will build the systems and continue to act as the long-term operator of the project after the transfer to CBEA.
“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,” says Humphrey Wireko, Associate Principal, CrossBoundary Energy Access.
CBEA’s ‘take-out at completion’ transaction structure allows the construction financiers to segment their investment to the construction phase, and CBEA as an asset owner to segment its investment to the long-term operations phase. 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 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.
Improving energy access in Nigeria
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. 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. Together, these represent an undue burden on the health of rural populations, who are already marginalized.
The DRE systems will 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 mechanized, 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.