Solar developers in Nigeria are aiming to reach financial close on 14 PV projects totaling 1,125MW of capacity this year. But the ambitious programme still has a number of hurdles to clear.

If all the developers are successful, Nigeria would comfortably have the most utility-scale solar capacity financed of any sub-Saharan African country (excluding South Africa).

The Nigerian Bulk Electricity Trading (NBET), the government-owned entity which manages the country's power pool, previously set a long-stop date of 20 January 2018 for financial close, however participants think meeting this deadline is unlikely. Close is more likely to occur in the second quarter of this year.

Some market participants doubt that all 14 will reach financial close. Others say some of the local developers are waiting for international developers involved in the programme to reach financial close and then plan to sell their projects to them. At least one of the larger, international developers has said they are considering buying into other projects.

Take cover

NBET will buy power from all of the projects in the programme for $0.0115 per kWh under 20-year PPAs signed in July 2016. NBET was incorporated in 2010 as part of a wider liberalisation of the Nigerian power market. It purchases all power produced by IPPs and sells on to distribution companies, with its obligations backstopped by the federal government. 

So while there is some comfort for project participants, there are a number of obstacles to financial close. Among the most significant are the World Bank’s granting of partial risk guarantees (PRG) for the projects, and the finalization of the put call option agreement (PCOA) providing protection to lenders in the event of offtaker default.

The PCOA has been under development for some time. It was delayed due to Nigerian currency convertibility issues but is seen as essential for progressing the country’s IPP market.

The put option gives the project company the right to request the utility or government buys shares in the asset in case of buyer default – assuring the recovery of any debt. On the other side, the call option gives the government or offtaker the ability to force the SPV to sell its assets to the government or others.

NBET began rolling out the PCOA documents to the sponsors in November 2017. Details of the PCOA are being finalised with signing expected by the end of February. The PCOA will enable the World Bank’s Multilateral Investment Guarantee Agency (MIGA) to provide political risk guarantees that give comfort to the lenders on the projects – the bank has already made a number of commitments to Nigerian power projects and is reluctant to make more until some of its committed deals are successful, according to sources.

Among the Nigerian projects MIGA intends to support is the 550MW Qua Iboe gas-fired IPP. Once Qua Iboe closes it will prove the bankability of the PCOA and may encourage the solar projects to move forward to financial close.

MIGA is considering PRGs for at least three of the projects, and the African Development Bank (AfDB) is said to be considering a further four. World Bank and MIGA’s reluctance to sign off on PRGs may mean the AfDB-backed projects get a head start toward financial close. The World Bank’s board is expected to approve its planned Power Sector Recovery Programme on 28 February 2018 which would enable MIGA to provide PRGs to the projects, sources say.

The projects

The 14 projects under development cost around $1.5 million to $2 million per MW although total costs will become clearer once EPC deals are finalised. A raft of DFIs including OPIC, IsDB, FMO and AfDB are considering lending to the projects.

NBET is being advised by:

• Hunton & Williams – legal

Pan Africa Solar – 75MW in Katsina state

• Under development by Ontario-based JCM Power and Pan Africa Solar
• Around $146 million total cost
• Lenders include FMO (MLA), DEG, Emerging Africa Infrastructure Fund and Proparco
• PIDG provided €4 million ($4.7 million) grant for transmission infrastructure via EU-Africa Infrastructure Trust Fund
• Sponsors receiving legal advisory from Trinity and local counsel Templars
• EPC to be conducted by Wartsila
• MIGA PRG under consideration

Nova Scotia Power Development Limited – 80MW in Jigawa state

• Under development by Scatec Solar, Norfund, and Africa 50
• Lenders include OPIC, AfDB, Islamic Development Bank, and the Islamic Corporation for the Development of the Private Sector (ICD)
• Sponsors receiving legal advisory from Clifford Chance
• Located in Dutse in the north of the country

Nigeria Solar Capital Partners – 100MW in Bauchi state

• Under development by Nigeria Solar Capital partners (a JV between Industry Capital Advisors and Gigawatt Global) with Globeleq and ARM-Harith Infrastructure Fund
• Lenders include OPIC, AfDB, and CDC
• MIGA PRG under consideration

Nova Solar 5 Farm – 100 MW in Katsina state

• Under development by Azura Power (majority shareholder) with Total New Energies Nigeria and Katsina State Government
• Lenders include OPIC, CDC, IsDB, Islamic Corporation for the Development of the Private Sector (ICD)
• Sponsors receiving legal advisory from Trinity
• Lenders advised by Clifford Chance
• Located in Katsina State, three kilometers north-west of Kankiya along the Kankiya-Katsina highway

Abiba Power – 50MW in Kaduna state

• Under development by Quaint Global Energy (30%) and Access Power (70%)
• Around $100m total project cost
• Lenders include OPIC and EAIF
• World bank PRG under discussion
• US Trade and Development Association proved grant via Power Africa for technical work
• Located in Manchok around 2.5 hours from capital city Abuja

CT Cosmos – 70MW in Plateau state

• Under development by CT Cosmos (a subsidiary of Communication Towers Nigeria)
• Total cost of $150 million to $170 million
• Siemens conducting EPC
• Located in Panyam, Plateau state

Motir Dusable – 100MW in Nasarawa state

• Under development by a JV of Motir and DuSable Capital
• Around $200 million total cost
• Martifer Solar conducting EPC
• Located in southeastern Enugu state

Middle Band Solar One – 100 MW in Kogi state

• Under development by Alten Renewable Energy Development Africa, Green Continent Partners Holding, and Nemoante with support from IFC InfraVentures
• Located in Lokoja

Oriental Renewable Solutions – 50MW in Jigawa state

• Under development by a JV of Oriental Renewable Solutions and GreenWish Partners. The former is a 50% subsidiary of the Oriental Group

Fewer details are available regarding the five other projects in the programme – and their sponsors couldn’t be reached for comment.

Anjeed Kafanchan – 100MW in Kaduna state

• Under development by Anjeed Innova Group
• Located in Kafanchan

Afrinergia Power – 50MW in Nasarawa state

• Under development by Afrinergia Power
• Located in Onyi

En Africa – 50MW in Kaduna state

• Under development by Solar EnAfrica

LR Aaron Power – 100MW in Abuja state

• No details

Kvk Power – 100 MW in Sokoto state

• Under development by Phanes
• Located in Yabo