InfraCredit Mobilises Green Sukuk for Solar Powered Rural Infrastructure Project in Nigeria

 Eromosele Abiodun

InfraCredit, a ‘AAA’-rated specialised infrastructure credit guarantee institution, has announced credit enhancement of Prado Power Limited’s Guaranteed Fixed-Rate Senior Green Infrastructure Forward Ijarah Lease Sukuk under a co-financing arrangement with the £10 million Climate Finance Blending Facility.

The scheme, it said in a statement, was funded by the United Kingdom Foreign, Commonwealth and Development Office (FCDO), the fourth transaction under the Facility.

According to the statement, “The InfraCredit’s Clean Energy Funding Programme seeks to aggregate, de-risk, and unlock domestic institutional investments to support eligible clean energy projects in Nigeria to contribute towards meeting the country’s universal electrification goal by 2030 and the SDG 7 target of ensuring access to affordable, reliable, sustainable, and modern energy for all, whilst putting the country on a path to achieve net zero emissions by 2060.

“The Climate Facility provided subordinated first-loss capital that helped de-risk and reduce the capital cost of the Project by unlocking InfraCredit’s “AAA”-rated Guaranteed Fixed-Rate Senior Green Infrastructure Forward Ijarah Lease Sukuk that crowded in matching investments from domestic institutional investors in a solar mini-grid project for unserved markets, resulting in a blended affordable interest rate.

It is the fourth transaction under the Climate Facility and the first blended local currency Green Infrastructure Forward Ijarah Lease Sukuk for a Solar Powered Rural Infrastructure Project in Nigeria. Green Sukuk is an Islamic Shari’ah-compliant finance instrument for eco-friendly projects, creating a new asset class for climate finance and offering investors non-interest based financial returns.”

Speaking on the transaction, the Chief Executive Officer of Prado Power, Mr. Washima Mede stated, “Prado Power is excited to be supported by InfraCredit and the Climate Finance Blending Facility towards the construction of four (4) mini-grids and productive use hubs across communities in Benue and Akwa Ibom states. For us at Prado Power, it is important that energy infrastructure investments are accompanied by socio-economic improvements in the communities where we operate through job creation and improved livelihood across diverse groups. Through the InfraCredit-backed senior debt and the Facility, we are accessing long-term blended capital that will be used to scale investments in mini-grids and productive use appliances for rural dwellers and smallholder farmers. We would like to acknowledge and appreciate the support of the FCDO and the team at InfraCredit for structuring the transaction with an eye on mitigating risks related to long-term infrastructure finance.”

The British Deputy High Commissioner in Lagos, Mr. Jonny Baxter said: “We are delighted to reach yet another milestone with the UK-funded Climate Finance Blended Facility playing a critical role in mobilizing more green-certified local currency debt for off-grid solar projects in Nigeria. This Project demonstrates the importance of Distributed Renewable Energy in providing efficient and reliable productive use energy access in unserved and underserved regions, boosting economic activities, and ensuring a safe environment.”

The Managing Director/Chief Executive Officer of Rural Electrification Agency (REA), Mr. Abba Aliyu said, “The Rural Electrification Agency (REA) is proud to support this groundbreaking transaction facilitated by InfraCredit and the Climate Finance Blending Facility, marking the first blended local currency Green Infrastructure Forward Ijarah Lease Sukuk for a solar-powered rural infrastructure project in Nigeria. This innovative Shari’ah-compliant financing model not only represents a significant milestone in closing Nigeria’s energy access gap but also aligns with REA’s vision to explore and adopt innovative financial frameworks that de-risk the sector while enhancing project sustainability. By leveraging such models, we aim to attract increased investment and ensure the long-term viability of renewable energy projects.

With over 15,000 connections projected to benefit unserved communities, this initiative highlights the transformative power of renewable energy in driving socio-economic progress and sustainable development. It is a testament to the REA’s commitment to enabling decentralized renewable energy solutions and advancing Nigeria’s universal electrification goals by 2030. Together, we are building a brighter, more inclusive energy future for all.”

According to the Chief Executive Officer of InfraCredit, Mr. Chinua Azubike, “We are pleased to have supported another Distributed Renewable Energy (DRE) company in Nigeria to issue the first Fixed-Rate Senior Green Infrastructure Forward Ijarah Lease Sukuk, for the development of mini-grids for unserved communities with the support of our development partners, through the catalytic first-loss capital from the Foreign Commonwealth Development Office (FCDO) and the Technical Assistance Facility from FSD Africa. Green Sukuk is emerging as a promising finance tool, we are therefore pleased to develop innovative climate-related Islamic finance products accessible to Shariah-compliant investors that effectively tackle the challenges of energy transition, whilst creating jobs and expanding energy access for households and economic productive uses”

The statement added, “7-year Guaranteed Fixed-Rate Senior Green Infrastructure Forward Ijarah Lease Sukuk was financed alongside the UK-funded Facility through a blended instrument and will enable Prado Power to construct, install, and commission four solar–hybrid mini-grids with a total capacity of 850 kWp, including productive use of equipment (PUE) i.e., threshing, hammer milling, de-husking, etc. across Akwa Ibom and Benue states which would ultimately drive the demand for the power generated in the select communities (the Project).

“The Project, upon completion, will electrify up to 15,801 unserved households and small businesses, create up to 242 jobs, and avoid 893.53 tonnes of GHG emissions whilst enhancing access to renewable energy for productive uses. The nominated projects & assets conform to the Climate Bonds Standard Solar Sector Criteria, and the financing has been labelled and certified green by the Climate Bonds Initiative.

“The four hybrid-solar mini-grids will have environmental benefits of climate change mitigation, energy savings, and greenhouse gas reduction and simultaneously have a positive direct contribution to the United Nations Sustainable Development Goals (SDGs) 7, 8, 9, 11, 13 and 17 as identified in the Green Bond Framework. The green debt issue was verified by Agusto & Co as a green verifier, and the guaranteed senior debt was rated “AAA” by Global Credit Ratings.

“The technical, legal, environmental, and social due diligence costs and green verification of the debt instrument were supported by funding provided by FSD Africa under a Technical Assistance Agreement with InfraCredit to support first-time issuer costs for eligible projects that can issue climate-aligned local currency infrastructure bonds. FSD Africa was established in 2012 through funding by the UK Aid from the UK government as a specialist development agency to build and strengthen financial markets across sub-Saharan Africa and to address systemic challenges within Africa’s financial markets, with the aim of sparking large-scale and long-term change. 

“The Project is registered under the World Bank Nigeria Electrification Project administered by the Rural Electrification Agency (REA). The REA  is a rural electrification government agency established to implement, provide, and support decentralised electrification in Nigeria. InfraCredit signed a Memorandum of Understanding (MoU) in August 2022 with the REA to help eliminate long-term financing bottlenecks for off-grid operators in the energy sector by enabling credit enhancement and financing to private sector mini-grid developers to enable adequate power generation and supply to underserved and unserved areas.”