Oil producing giant Shell has bought Daystar Power, a Nigeria-based company that provides businesses with solar energy solutions, marking its first acquisition of a renewable energy provider in Africa.
The deal value is undisclosed. Daystar took off in 2017 and has raised $97 million through multiple rounds of equity and debt financing. The most recent was a $20 million loan from the International Finance Corporation in July last year.
CEO Jasper Graf von Hardenberg said his company needed to raise more money to meet growing demand but opted to sell to Shell due to the latter’s strong balance sheet and “long history in Africa.” Both parties started discussing a potential deal in 2019.
Shell’s Africa history includes being the first company to begin oil exploration in Nigeria more than half a century ago. Through its joint venture partnerships with Nigeria’s state oil company, it has helped Nigeria develop into one of the world’s largest oil producing countries and maintain a steady status as Africa’s largest economy.
But unresolved trails of oil spills in the Niger Delta have also wrecked livelihoods, fueling backlash from youths who have sometimes resorted to arms bearing to draw attention to their devastated local communities. The best known scandal linked to the spills by oil companies was the 1995 hanging of Nigerian environmental activist Ken Saro-Wiwa by the military regime for protesting oil pollution by major oil companies in his community, Ogoniland.
Last year, Shell paid a community $111 million to settle a spill from the 1970s even as it maintained the incident was caused by other entities. The company wants to sell its onshore oil assets though that process is currently suspended due to another unresolved oil spill.
But as it has fought the negative reputation that has come with its oil business, Shell has positioned itself as a renewables-friendly company in Nigeria. All On, its impact investing vehicle, has funded nearly two dozen renewable energy companies in a mix of debt and equity investments. All On had not invested in Daystar Power, whose operations also extend to Ghana, Togo and Senegal with 32 megawatts of installed solar capacity.
Buying Daystar Power is Shell’s plan to “address a critical energy gap for many who currently rely on diesel generators for backup power,” said Thomas Brostrøm, Shell’s vice president for renewable generation. Diesel prices doubled in Nigeria in the first quarter of this year and have remained high, exerting a great toll on businesses.