Project description
This summary covers an application by ECOF Kaduna Ltd (trading as Konexa) of Mauritius and Climate Fund Managers of the Netherlands (or any of their subsidiaries/ affiliates and countries yet to be identified) for their equity, shareholder loan, and/or quasi-equity investments in the ECOF Kaduna Limited integrated electricity distribution and off-grid electrification project and in the Konexa Solar 1 Ltd solar park in the Federal Republic of Nigeria. The investors seek cover for up to USD 85.5 million against the risks of expropriation and war and civil disturbance (including temporary business interruption) for a guarantee period of up to 20 years.
The project consists of the generation, distribution, and marketing of electricity in the Zaria Road and Kudenda areas (i.e., Konexa’s sub-franchise area) of Kaduna City, Kaduna State in northern Nigeria pursuant to a sub-franchising arrangement whereby the Kaduna Electricity Distribution Company Plc (KAEDCO) has granted Konexa the rights to operate under its distribution license in a portion of KAEDCO’s concession territory. The project consists of the construction and operation of a 2.5 MWp solar photovoltaic plant, 8 mini-grids, and approximately 285 solar home systems (SHS), the upgrade / replacement / installation of network distribution equipment, the rollout of smart metering infrastructure, and the implementation of an integrated cutting-edge information and operations technology platform. These interventions will serve to significantly improve energy access and power quality to all customers in the sub-franchise area.
The project is expected to deliver an average of 214 GWh annually, including 123 GWh per annum from new renewable energy resources (the 30 MW Gurara hydro plant and the 2.5 MWp embedded solar PV plant). The sub-franchise area has a population of 150,000 people with approximately 6,600 customers currently connected to the grid, including approximately 80 commercial and industrial customers. The project is expected to connect an additional 1,017 new households and SMEs to off-grid solutions (mini-grids and solar home systems).
Environmental Categorization
The project is a category B under MIGA’s Policy on Environmental and Social Sustainability. Click here to view the Environmental and Social Review Summary.
Development Impact
The project’s primary development impacts will stem from improved consumer quality (better reliability and quality of power, and transparency around pricing), improved consumer access (reaching new clients via grid extensions and densification, mini-grids and SHS), and improved environmental effects by increasing the supply of renewable energy generation (hydro and solar for on-grid and solar for off-grid), and by displacing liquid-fuels based generation. In terms of foreign investment effects, the project is highly innovative and demonstrates that foreign investors can invest in an otherwise troubled sector amid significant reform. Nigeria’s power sector historically has not been financially viable as tariffs are heavily subsidized, thus discouraging outside investment. However, the project’s sub-franchising and integrated distribution models, supported by cost reflective tariffs, a willing buyer willing seller model, better transparency on pricing, and smart meters should demonstrate a financially viable approach for private sector participation in the distribution sector. Further, the project’s innovative approach to reaching new underserved customers through mini-grids and SHS can demonstrate the viability of inclusiveness.
