Darway Coast, an enterprise specializing in renewable energy, will gain from a climate finance blending facility valued at N10 billion (£10 million). This was announced on Wednesday, November 9, 2022, by credit guarantor InfraCredit in an official statement released that day.
In a declaration, Darway Coast Nigeria Limited’s green debt issuance—the inaugural transaction under InfraCredit’s clean energy financing program—was noted for its credit enhancement due to a co-financing arrangement with the £10 million climate finance blending facility, financed by the UK Foreign, Commonwealth and Development Office (FCDO).
The financing will be utilized to establish six off-grid communities in the southern Nigerian states of Rivers and Abia with isolated solar mini-grids that have a cumulative capacity of 526.1 kilowatts (kW).
Advantages of the Initiative
Upon its finalization, the initiative will electrify up to 7,711 disconnected households and small enterprises, produce up to 497 temporary and permanent job opportunities, prevent the release of 4,856 tonnes of greenhouse gases (GHG), and enhance accessibility to renewable energy for productive uses.
The proposed projects and assets satisfy the Climate Bonds Standard Solar Sector Criteria, and the financing has secured the Climate Bonds Initiative’s green endorsement.
Vicky Ford, the UK’s minister for Africa, revealed in February 2022 that the government would allocate £10 million (N5.6 billion) via Infracredit to stimulate institutional investment in off-grid clean energy initiatives, including solar mini-grids in Nigeria.
Mitigating Investment Risks
As per the official announcement from InfraCredit, the program will aggregate, mitigate risks, and unlock domestic institutional investments to back eligible clean energy projects in Nigeria, aiding the country in realizing its 2030 objective of universal electrification, as well as the SDG 7 goal of ensuring access to affordable, dependable, sustainable, and modern energy for all, while steering the nation towards a more sustainable future.
Details concerning renewable energy investments in Nigeria indicate that since 2014, funding in clean energy has varied between single-digit, double-digit, and triple-digit millions of euros on an annual basis, according to GET-invest.
The majority of this funding originates from international sources, which accounted for 79% and 86%, respectively, of the sector’s investment in 2017 and 2018.
Nonetheless, by 2025, it is anticipated that 4 million solar home systems will be installed, as outlined in the Nigeria Renewable Energy Master Plan.
Moreover, according to Sustainable Energy For All’s (SE4All) Agenda for Nigeria, solar home systems and mini-grids will possess a combined capacity of 8 gigawatts (GW) by 2030, making up 18% of the nation’s total capacity.
Opportunities for Investment
According to InfraCredit, the UK-sponsored facility marks the first-ever certified blended local currency green debt issuance for a solar mini-grid initiative in Nigeria, allowing domestic institutional investors to directly invest in a 7-year fixed rate local currency debt financing for the project.
The facility is expected to expand through funding from additional development partners to co-finance a pre-evaluated initial pipeline of over $128 million, mobilizing at least N26.8 billion of domestic institutional capital to construct 22.7 megawatts (MW) of isolated off-grid renewable energy projects in 580 underserved communities across 32 states in Nigeria.
Additionally, it will connect 172,535 unconnected homes and small businesses, generate approximately 6,977 new jobs, and reduce greenhouse gas (GHG) emissions by 394,403 tons.
For clarity, InfraCredit and the Rural Electrification Agency (REA) established a Memorandum of Understanding (MoU) in August 2022 to facilitate credit enhancement and financing for private sector mini-grid developers, ensuring sufficient power generation and supply to underserved and unserved areas. This will assist in alleviating long-term financing challenges for off-grid operators in the energy domain.
