Husk Power seeks $400m to boost Nigeria operations

Husk Power Systems, a firm which develops mini-grid systems that rely on solar power and battery storage, aims to raise up to $400m from the capital markets this year in a bid to significantly expand its presence in Nigeria and break into new African markets, a senior executive at the company says.

“We’re going to the capital markets targeting $400m this year in order to deploy our solutions at scale and speed,” William Brent, chief marketing officer at Husk, told African Business.

He noted that the company is engaging a diverse lineup of investors, including the International Finance Corporation (IFC), local currency debt partners, and private funds, to mobilise this capital. The firm is targeting both equity and debt investors.

Mini-grids are small-scale power grids that typically serve populations in isolated or rural areas that are harder to reach with the main power transmission and distribution network. In Husk’s case, power is generated from solar units and backed up by battery storage, providing a reliable solution to rural communities unconnected to the grid or inadequately served by it due to endemic disruptions to power supply.

Husk has in recent years benefited from investor support, highlighting the emergence of solar mini-grids as an investable asset class within Africa’s energy sector. In October 2023, it secured $43m in equity from its Series D funding round – the largest deal for any private solar mini-grid developer in Africa – along with $60m in debt financing.

Tenfold Nigeria expansion plan

Brent says that the company’s new fundraising drive will primarily support its massive expansion in Nigeria, where it has been operating since 2020. Currently, Husk operates 50 mini-grid systems in Nigeria, the largest footprint of any private solar mini-grid provider in the country. The goal, according to Brent, is to increase this fleet tenfold “over the next few years.”

“We’re looking to expand to 500 solar mini-grids in Nigeria over the next few years and are currently building around five new ones every month,” he said, acknowledging that this goal is “very ambitious.” However, he stressed that the ambition matches the scale of the problem the company is addressing.

“Around 90 million people in Nigeria, the highest in sub-Saharan Africa, do not have access to electricity. The need is enormous.”

Moreover, solar mini-grids are cleaner and more affordable than costly and polluting diesel generators, which many people in rural areas rely on.

“Users report a 30-50% reduction in their monthly electricity bill just by switching from diesel to solar mini-grids,” he said.

Brent said that Husk has been able to monetise the carbon emissions avoided from its operations through carbon offsets and renewable energy certificates, enabling the company to develop an additional revenue stream beyond its core operations.

The Nigerian expansion, he said, will consolidate these gains. Weighing in on Nigeria’s current macroeconomic environment and how it impacts Husk’s investment objectives in the country, Brent admitted there are challenges.

“We look forward to the stabilisation of the currency and for inflation to be brought under control,” he says.

Continental push

Husk has also set its sights on expanding into additional African countries, starting with the Democratic Republic of Congo (DRC). In January, the company announced its entry into the DRC with the support of a $500,000 grant from Acumen’s Hardest-to-Reach (H2R) initiative. This funding will help Husk establish a corporate presence in the DRC, secure necessary government approvals, and build a pipeline of new projects.

Husk’s entry into the DRC coincided with the outbreak of violent clashes between government forces and M23 rebels in the eastern part of the country. When asked whether this new wave of conflict would impact its planned investments in the country, Brent stated that the market opportunity in the DRC “remains attractive.”

“What’s happening in Goma is not happening in many parts of the country. There is still opportunity in DRC. However, we have to wait and see as it’s a market that we’re still learning,” Brent said.

Besides the DRC, Husk is exploring “four or five more countries” in Africa, according to Brent. The focus in these unnamed countries, as in Nigeria, will primarily be on connecting rural consumers who lack access to the grid.

Critics of rural electrification initiatives often argue that rural consumers lack the disposable income to pay for off-grid solutions, rendering business models like Husk’s commercially unviable. However, Brent said that this is a common misconception.

“There are many different demographics in rural markets. Some don’t have purchasing power, but there’s a large portion with disposable incomes who are hungry for energy solutions that they cannot get from the grid or diesel generators,” Brent said. “They have buying power and are willing to spend $15-20 per month on electricity that is reliable.”

Partnerships are key

Brent argued that partnerships with state utilities involved in energy distribution and transmission – as the company is doing in Nigeria – can prove integral in accelerating the adoption of its solar mini-grid solutions in additional countries in Africa.

Through these partnerships, Husk builds and operates the mini-grids while the distribution companies provide the transmission and distribution infrastructure to bring the power to end users. Husk then takes on managerial responsibility for the connected area, including overseeing operations, maintenance, and bill collection.

Partnerships with development partners are also crucial, Brent said, citing the support that the World Bank has offered to the firm in Nigeria.

Indeed, Husk is a key partner in the Nigeria electrification project, funded by the World Bank and administered by the country’s rural electrification agency. This partnership has been particularly instrumental to Husk’s rapid growth in Nigeria.

The company is part of a growing cohort of private energy companies that have partnered with development finance institutions, investors, and governments to accelerate the implementation of the World Bank and African Development Bank’s Mission 300 – a concerted push to connect 300 million Africans to electricity by 2030.