On 4th October 2017, Detail Commercial Solicitors (DETAIL) hosted a workshop at Transcorp Hilton, Abuja on the topic “Developing and Financing Off-Grid Solutions in the Nigerian Power Sector.” The workshop formed part of the 6th Annual Powering Africa: Nigeria Investment Summit, which held 4th – 6th October, 2017 and sought to bring together Nigeria’s power industry players to consider investment opportunities to grow the Nigerian power sector.

Given recent regulatory changes and challenges in the on-grid space in Nigeria, the workshop provided attendees with insights on the prospects of developing off-grid solutions to increase Nigeria’s power generation capacity and project funding considerations. The workshop discussions covered three key segments: (1) legal and regulatory; (2) financing and investor considerations; and (3) project development considerations from a project developer’s perspective.

Segment 1: Legal and Regulatory Considerations

On the legal and regulatory segment, Ifedayo Adeoba, a Senior Associate at DETAIL presented on the legal and regulatory framework and opportunities for off-grid power generation in Nigeria. The presentation highlighted the various challenges of on-grid power generation; the existing regulatory framework for off-grid power generation; the prospects and challenges of off-grid power generation; and key recommendations on the way forward. Some of the identified prospects for off-grid power generation include the potential to power government facilities; PPPs with State Governments; potential to grow industrial clusters and small cottage industries; captive power generation for industries; and rural electrification through mini-grids and stand-alone systems, amongst others.

The legal and regulatory segment also featured a presentation by Dr. Abdussalam Yusuf – Asst. General Manager, Renewable Energy, Nigerian Electricity Regulatory Commission, who provided further insights on the recent declaration of eligible customers by the Minister of Power, Works, and Housing. Dr. Yusuf gave an exposition of the Mini-Grid Regulations, including potential barriers to investments in mini-grids, and recommendations on eliminating the barriers. Dr. Yusuf also provided a walk-through of the simplified online application process for mini-grid registration/permit. The potential market impact of mini-grids was also brought to fore, including increased generation capacity; potential impact on non-eligible customer tariffs; and impact on disco revenue, amongst others.

Segment 2: Financing and Investor Considerations

The second segment of the workshop, which discussed financing and investor considerations for power development projects was facilitated by Abiodun Oyeledun, Senior Associate, DETAIL with speakers Abiodun Oni, Head: Power & Infrastructure, Stanbic IBTC Bank and Chinua Azubike, Chief Executive Officer, InfraCredit. The speakers emphasized that key considerations for financiers and investors into off-grid projects include assessing the legal and regulatory framework for off-grid projects; creditworthiness and available guarantees; and bankability of the projects with long-term sustainable off-takers.

Mr. Oni emphasised that Nigerian commercial banks are currently constrained from lending to the power sector because a lot of the acquisition loans financed by the Nigerian banks are still outstanding and any further exposures may take the banks beyond their sector limits as prescribed by the CBN. He, however, noted that the banks were eager to invest in off-grid projects with a preference for short-term funding. For longer-term funding and a possible exit for any financing provided by commercial banks, Mr. Azubike noted that there is available funding from the capital market and institutional investors (such as pension funds and insurance companies) who would be willing to invest in brownfield projects with a proven track record. In his view, inadequate corporate governance is one of the major reasons that most project companies are unable to obtain funding from the capital market. He further noted that as part of its mandate, InfraCredit was looking to provide credit enhancements to infrastructure projects to assist such developers in unlocking financing from the capital market.

Segment 3: Project Development Considerations from a Project Developer’s Perspective

The third segment of the workshop which focused on project development considerations from a project developer’s perspective was facilitated by Bolaji Fasehun, an Associate at DETAIL with speaker Ifeanyi Orajaka, Managing Director, GVE Projects Ltd, a developer focused on mini-grid solutions for rural communities in Nigeria. GVE Projects was used as the case study in discussing project development considerations from a developer’s perspective. Mr. Orajaka highlighted the achievements of GVE Projects, having raised US$4.2million towards several projects within rural communities in six states: Rivers, Niger, Gombe, Anambra, Plateau and Akwa Ibom. The session afforded project developers present at the workshop with insights from GVE’s experience developing and operating mini-grid projects in rural communities.