Starsight Energy keeps it local in Nigeria
Starsight Energy, a Nigeria-based, Africa-focused solar energy provider, announced the conclusion of a competitive local currency agreement with Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF), for a 10-year, NGN8-billion refinancing of USD20-million of current debt with two development finance institutions (DFIs) invested in the energy sector in Africa.
The new facility – Starsight’s second with NIDF – replaces Starsight’s current facilities with Norfund (the Norwegian Government Investment Fund for Developing Countries) and Finnfund (the Finnish Fund for Industrial Cooperation).
According to Paul van Zijl, Starsight’s Group Chief Financial Officer, the DFI facilities were secured when funders did not show much interest in Starsight. “Norfund and Finnfund were invaluable funders to the company in its early guise and we remain very grateful for their support to date. The logic for refinancing the US dollar debt in local currency was just too compelling to ignore,” says van Zijl.
The increased difficulty in sourcing US dollars in Nigeria, and the devaluation of the Nigerian Naira in the parallel market over the past five years, has made US dollar debt increasingly expensive, adds van Zijl.
Objectives met successfully
Starsight’s objectives in securing the Nigerian refinancing have been met successfully. The deal means the removal of currency mismatch and associated foreign exchange (FX) volatility from its Nigerian business; a reduction of its cost of debt in local currency terms and an increase in its debt tenor with favourable debt covenants.
“The Nigerian refinancing, negotiated in just two months amid substantial interest from Nigerian debt-funders, keeps things local, supports Nigerian green energy players and the country’s economy,” says van Zijl. The refinancing was made possible through close collaboration by the Starsight and NIDF teams with the necessary flexibility to ensure closing on the targeted date.
“As we continue to expand in Africa, we closely monitor the local economic situation and currency trends, ensuring our capital structure and FX exposure is optimal for that specific market,” says van Zijl. “The Nigerian economy has some similarities to that of South Africa – local currency income and local currency expenses necessitate local currency debt.”
Starsight is an unlisted provider of solar energy to governments, utilities, and businesses in Africa. Starsight is backed by Helios Investment Partners, which manages geographically diversified portfolios of private equity and credit investments in more than 30 African countries; and African Infrastructure and Investment Managers (AIIM), a member of Old Mutual Alternative Investments, which manages investments in East, West and Southern Africa, with USD2.4-billion equity under management and a track record across seven African infrastructure funds.
Nigeria Infrastructure Debt Fund is Nigeria’s largest and Africa’s first-ever listed infrastructure fund, providing long-term, Naira-denominated financing for infrastructure projects in Nigeria. NIDF enables project sponsors to avoid the unsustainable mismatches of currency and tenor between their financing and their revenues/cash flows.
NIDF’s investor base includes the African Development Bank (AfDB), Nigeria Sovereign Investment Authority (NSIA) and nearly all the pension funds operating in Nigeria.
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