Framework for the Distributed Generation Sector in Nigeria Tender, Nigeria - 63964061

Procurement Summary

Country : Nigeria

Summary : Framework for the Distributed Generation Sector in Nigeria

Deadline : 09 Mar 2022

Other Information

Notice Type : Tender

TOT Ref.No.: 63964061

Document Ref. No. : 1279633

Competition : ICB

Financier : World Bank (WB)

Purchaser Ownership : Public

Tender Value : Refer Document

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Tender Details

Expression of Interest are invited for Scoring Framework for the Distributed Generation Sector in Nigeria.

IFCs Energy Sector Strategy views the commercial and industrial (C&I) sub-segment of distributed generation (DG) as a promising business opportunity. In Sub-Saharan Africa, only 74MW of C&I solar is installed, with only, 20MWp in Nigeria. However, sub-Sharan Africa (SSA) markets remain attractive for DG, as they suffer from an unreliable grid and have daily, unpredictable power outages. In Nigeria, An IFC study of rooftop solar estimates demand from C&I customers to grow from 22MW in 2018 to 815MW (assuming 10% penetration) by 2025.

However, this attractive, new market opportunity, requires a different approach to the conventional corporate and project finance business in the energy sector. DG displays different characteristics (size, location, sales strategy, etc.) and is delivered through a multitude of business models that necessitates a differentiated approach compared to utility-scale renewables.

Analyzing off-taker and portfolio credit risk constitutes a particular challenge. In general, utility-scale solar PV projects are selling their generation through a PPA with a single-buyer or directly to spot markets. In the case of DG, to the power producer enters different contracts with more than one buyer, most of the time to a portfolio of clients from different sectors of the economy. At the same time, C&I DG portfolios are made up of mostly unrated offtakers. The lack of adequate credit frameworks in place to evaluate the creditworthiness of C&I related DG business models, DG investments, and their portfolios is hindering a faster DG expansion in emerging markets. Hence, there is a strong need for a standardized approach to alleviate barriers to DG market growth.

IFC is seeking consultancy services from a company (the Consultant) to develop an off-taker credit scoring and portfolio evaluation framework for C&I DG that will be deployed in emerging markets. Such a framework will be piloted with one C&I DG project that IFC recently committed in Nigeria (the Nigeria Project). This will provide IFC with a tool for the analysis and risk assessment of the different off-takers and assessment of off-taker portfolio of different size and characteristics.

The Consultants scope of work will cover of two tasks:

A Off-Taker Credit Scoring:

The Consultant will develop a comprehensive credit scoring tool for C&I DG companies to use when assessing the credit [and technical] quality of new off-takers that they will be adding to their portfolios. This tool should be user friendly (eg. MS Excel based), adaptable to different country and industry contexts, able to accommodate various portfolio and off-taker sizes, and independent of the availability of a third-party credit rating. Among others, such tool should consider both qualitative and quantitative criteria, and cover key credit ratios [and technical KPIs]. The user of this Task A tool will be C&I DG companies.

B Portfolio Assessment Framework:

As they scale-up their business, the size of DG companies off-taker portfolios is growing. The assessment of such large portfolios compared to the assessment of a single off-taker is very different. It is expected that the more sizeable and diversified the off-taker portfolio is the lesser is the risk. As part of Task B, the Consultant will produce a framework on how to evaluate off-taker portfolios of a certain size. Among others, the Consultant will be expected to propose guidelines about how to assess off-taker portfolios, suggest what are the probabilistic / sensitivity models that can be apply, explain how the assessment of portfolios will impact the overall credit quality of the DG company itself.
The user of Task B framework will be C&I DG companies and their financiers such as IFC. Based on this portfolio assessment framework, financiers will consider certain financial covenants (eg. debt to equity, interest coverage, net debt to EBITDA debt service coverage ratio). As part of Task B, the Consultant will propose guidance on how the portfolio assessment should impact these financial covenants.

Both Task A and B will be piloted and developed jointly with the Nigeria Project. The IFC Team will make the necessary introductions and coordination between the Consultant and the Nigeria Project management.

Publication Date: 02-Mar-2022
Expression of Interest Deadline: 09-Mar-2022 at 11:59:59 PM (Eastern Time - Washington D.C.).

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