By Oke Peter
A Nigeria-based, Africa-focused solar energy provider, Starsight Energy 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 US$20 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 Ltd).
Paul van Zijl, Starsight’s Group Chief Financial Officer, explains: “The DFI facilities were secured when we were a much smaller company when most funders did not show substantial 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”.
The increased difficulty in sourcing US dollars in Nigeria, together with the devaluation of the Nigerian Naira in the parallel market over the past five years, has made US dollar debt increasingly expensive, van Zijl adds.
Starsight’s objectives in securing the Nigerian refinancing have been met successfully:
removal of currency mismatch and associated foreign exchange (FX) volatility from its Nigerian business;
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”, says van Zijl, supporting Nigerian green energy players and the country’s economy. 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.
van Zijl adds: “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.”
“The Nigerian economy has some similarities to that of South Africa – local currency income and local currency expenses necessitate local currency debt.”