Pioneering efforts to electrify remote villages
OnePower Lesotho (Pty) Ltd has a mission to electrify off-grid communities. Since its foundation in 2015, the company has developed economically viable, affordable and reliable clean energy solutions for rural areas, giving families, schools, health clinics, and domestic businesses the resources needed to grow and thrive.
OnePower’s flagship initiative is a mini-grid portfolio to bring electricity to 11 of Lesotho’s mountain villages which have previously not had any connection or energy source other than diesel generators. The idea is innovative: rather than looking at each mini-grid in isolation, the company has bundled construction and operation into a more efficient portfolio approach. The combined installed capacity will be over 1.5MW. Solar tracking equipment is being manufactured within the country, a testimony to OnePower’s commitment to create domestic, green energy jobs.
It is exceptionally difficult to generate shareholder returns with a single mini-grid project. Bundling mini-grids into a sizeable portfolio helps achieve economies of scale, especially in operations: a call center, backend IT infrastructure for collections, and a service team can all be more efficiently deployed across a number of locations.
Such a bundle, however, is more challenging to finance, calling for an innovative financing approach and a more complex financial model that takes into account the many variables of a mini-grid portfolio. The permits and concessions required also need to be aligned with regulations and the national rural electrification strategy. During this lengthy process, the GET.invest Finance Catalyst accompanied OnePower as a trusted advisor.
As there were no concessions for mini-grids in Lesotho so far, GET.invest consultants assisted OnePower in successfully negotiating a concession agreement for a pilot project with the Ministry of Energy and Meteorology. The dialogue with the Ministry was greatly supported by the Delegation of the European Union in Lesotho. After translating new concepts like ramp-up periods, connection charges and future capital expenditure into financial terms and an investment proposal, the advisors also helped the OnePower team and its investors negotiate investment terms in order to successfully raise debt and equity capital for the project.
To date, OnePower Lesotho is the only mini-grid concessionaire in Lesotho approved by the regulator to sell electricity at a negotiated, affordable tariff. The first step to achieving this was a pilot project, a single mini-grid in the village of Ha Makebe in the Berea District, the first community to be electrified from OnePower’s mini-grid portfolio. This project’s development and execution represented a major milestone for rural electrification in the country, providing the Government with reassurance that the business model works and giving investors confidence in the developer’s technical capability to succeed in the rugged terrain of mountainous Lesotho.
In December 2021, EDFI ElectriFI, the EU-funded Electrification Financing Initiative, and the Renewable Energy Performance Platform (REPP), managed by Camco Clean Energy, each invested LSL 75m (~ €4,4m) split between equity and senior debt. The deal as such represents one of the largest mini-grid transactions ever to be completed in sub-Saharan Africa and demonstrates the pioneering spirit and great endurance of all parties involved during the complex journey towards reaching financial close.
With the financing agreements signed and the grant support of UNCDF and USAID, the roll out of the additional mini-grids, connecting an estimated 20,500 people to modern energy services, can now begin.
Disclaimer: This story was last updated in January 2022.