Starsight is in the process of finalising an agreement with a partner for the expansion which should be concluded by the end of April. The company has “tremendous mid-term prospects,” Lawson says. “We’re just scratching the surface of the potential of distributed solar.”
Private-equity investor AIIM, which is part of Old Mutual Alternative Investments, has a stake of about 39% in Starsight. Helios Investment Partners has a majority holding in the company, which also has debt funding from Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF), Norfund and Finnfund.
The expansion to east Africa will involve a capital increase in which existing shareholders will maintain their existing stakes, Lawson says, declining to say how much will be invested.
Starsight said on 31 March that 2020 revenue grew by a record 74% and that the first quarter of 2021 has seen “exceptionally strong demand” for its solutions. The company, founded in 2015 and led by CEO Tony Carr, currently operates in Nigeria and Ghana.
The prices the company charges for solar power in east Africa will likely be about the same as in Nigeria, though consumers will get a smaller saving as the company will be pricing versus national grids rather than diesel generators, Lawson says. Users in east Africa are more likely to be on an industrial scale, he adds.
Nigeria, which has 19 GW of diesel generation capacity, has great potential for displacement of heavily polluting imported diesel generators. “High level policy support” exists for solar power, and regulators have encouraged take-up, Lawson says.
But the country suffers from a “difficult value chain” which is hindering wider solar power adoption. Construction costs are high, and there are duties on imported panels which are absent, for example, in Ghana.
- It’s hard to get paid on time, and generation companies take payment risks on energy they sell to the state utility, he says.
- Those factors drive up the cost of capital, but the government generally wants to buy solar power for about $0.075 per kilowatt hour (kWh), Lawson says.
- That price is appropriate in markets such as Senegal, South Africa, Morocco and Egypt, which all have better infrastructure, Lawson says. Investors there will accept returns of about 10% to 11%, but need a return in the mid to high teens in Nigeria, he adds.
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AIIF’s African Infrastructure Investment Fund 3 has holdings including stakes in Nigeria’s Uquo integrated gas project, solar power company BBOX, and Zina Solaire in Burkina Faso.
The fund is considering future investments in African telecoms infrastructure, off-grid solar and natural gas infrastructure and bottled gas. Lawson is also interested in “consumer-facing infrastructure” in Nigeria, such as toll roads and cold storage.
“The infrastructure opportunity is a big one,” he says. “Nigeria works when you provide the private sector with an essential service,” as opposed to dealing with the government, which leads to payment problems, he adds.
Simply paying government suppliers on time would have a positive impact on Nigeria’s infrastructure deficit.
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