AfDB-EMRC SME Forum Session 8 Paul van Aalst - e+co

Investing in Clean Energy Enterprises

in Africa

Paul van Aalst, Director E+Co Europe

AfDB – SME Forum, 7 June 2011 1

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E+Co Invests in “Access to Energy”

Services and Capital 194 local energy enterprises 20 developing countries

$46 million invested $56 million under management $213 million mobilized

7.8 million people served annually 4.8 million tons of CO2 displaced annually 23m ton CO2 displaced over investment life

8 Offices in Africa, Asia, Latin America, NLand USA: 45 Staff

www.eandco.net

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Access to Clean Energy = Market Place

Sustainable: willingness and capacity to pay

Private sector (SME) for sustainable and equitable delivery

Technologies: proven, affordable, flexible

Critical: Financing and Business Support Services– Local investment and support

– Global funding and market development

Fit-for-Purpose Financing

Small and Medium Enterprises

Off grid electrification

– Solar lighting

– Fuel efficient cook-stoves

– LPG

• Financing products:– Debt for investments

– Debt for working capital

– Equity for growth funding

Project Financing

Project Development Funding Grid connected

– Biogas / waste to energy

– Hydro power (small / mid)

• Financing products:– Equity and venture-debt for

project development

– Equity and debt for projects

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Business Development Support

• Active support to sponsor in early stage:– Capacity building of entrepreneur– Small initial investments to sponsor for early stage costs– Support in obtaining licenses and concessions

• Financial engineering to make investment affordable:– Acting as lead-financier– One-off subsidies to for initial costs to make project bankable.– Clustering of small projects into one holding company for investors.

• Using E+Co’s global network – Finding project-partners e.g. tech-providers – Active exchange of Best Practices of E+Co investments in other regions– Arranging co-financing from global network

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Integrating Investment and BDS

• For the SME Investor:– Risk Mitigation– Upside Improvement

• For the Business Sector:– More Robust And Sustainable Enterprises– Job Creation

• For the Financial Sector in Africa:– Stronger Asset Class of SMEs– More Investable Deals

POSITIVE IMPACT JUSTIFIES EXTRA EFFORTS

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Market Place and SMEs (revisited)

Clean Energy as a proxy for other sectors: Health care Health products Education Agriculture, processing

From the previous slide: Sustainable: willingness and capacity to pay Private sector (SME) for sustainable and equitable delivery Technologies: proven, affordable, flexible

Critical: Financing and Business Support Services– Local investment and support– Global funding and market development

Bio2WattBiogas in South Africa

• 3MW biogas plant

• First industrial biogas plant in South Africa

• Cow manure from a feedlot of 20,000 cattle

• Financial structuring support from E+Co and

DBSA during pre-feasibility study: 2007 –

2009

• E+Co initiated matching grant from

SenterNovem of €600,000.

• Benefiting from the long awaited implementation of South Africa’s feed in

tariff regime (REFIT)

• Now closing with USD 3 mln equity and USD 6.5 mln debt.

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E+CoInvestment

E+Co financing: $289,600

• Use of funds: assisting B2W reach financial closure for its 1st biogas plant (BBP)

• Financing instrument: 2nd convertible loan (1st = $186.000)

E+CoValue

Creation

• Introducing seasoned tech-provider from previous E+Co project in Thailand

• Attract significant matching grant financing as pre-construction equity for the BPP project or B2W

• Structuring of project finance• Creating project equity opportunity of US$300,000-$400,000

with >20% return potential in a sector well known to E+Co• Proprietary pipeline of 3 more projects

Bio2Watt

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Zara Solar provides solar home systems to rural households in the Lake Region of Tanzania.

E+Co Loans: US$ 50,000 (2001)US$100,000 (2004)US$200,000 (2006)

Impacts:

• Over 10,000 households served

• Jobs: from 2 to more than 50

• 12,600 tons of CO2 avoided through displaced kerosene.

• Winner of Ashden Energy Award

Zara Solar

Lambark LPG (Ghana)

• Acquired license to purchase LPG directly from the Tema Oil Refinery and retail

directly to households, commercial and automobile customers. This license

eliminates third party operators in the LPG supply chain, expands customer

base, and improves profit margins to 21.5%’.

• Required by license to manage and maintain a minimum of 5 filling stations.

Also required bank guarantees or cash to procure products from the refinery

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• Lambark Gas is a twelve-year-old

liquefied petroleum gas (LPG)

distribution company

• Operates 4 LPG filling plants with a

total storage capacity of 100 metric

tons, 2 bulk LPG haulage trucks and

15 delivery motor cycles

E+CoInvestment

Investment: $350,000• Use of funds: Bank guarantee to CAL Bank which provides a

similar guarantee to Tema Oil Refinery, the company’s supplier of Liquefied Petroleum Gas

• Financing instrument: Credit support

E+CoValue

Creation

• E+Co supported LPG market development in West Africa from pioneering stage years ago.

• E+Co also invests in local dealers of Lambark• This Credit Support helped Lambark obtain and maintain

its preferred status.• Third loan of USD 500,000; Initial loans of $260,00 repaid• Revenue generated from gas in 2008 exceeded the

projected sales in E+Co’s previous authorization by ~28%

Lambark Credit Support

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SERMA (Senegal)

• G-SERM has a Government license

to install, operate and service all the

solar electricity PV installations and

equipment placed by the energy

authority (ASER)

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• 16 year old business engaged in

electrical engineering, electricity

generation, transmission, and

distribution

• The Government of Senegal is

implementing a major rural

electrification program

implemented over a 15-20 year

period

E+CoInvestment

Investment: $146,481• Use of funds: Inventory; disbursements made to PV module

suppliers• Financing instrument: Three-year FCFA denominated loan

remunerated at 10% annually; six month grace period on principal and interests

E+CoValue

Creation

• Supported the planning and funding of Serma’s fee-for-service model. The model also allowed testing of market and operational assumptions used in the development of the rural electrification masterplan in Senegal and the concession program

• G-SERM investment created replicable investment opportunities for E+Co

SERMA

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• Import, retail and install Solar Water Heating and Solar Electricity in South Africa.

• Early stage market development in South

Africa since 1990

• Turnover grew from $2,000,000 to

$ 3,000,000 in difficult market.

• Developed national franchise network, with

30 franchisees.

• The implementation of a consumer based subsidy by Eskom, the South African

electricity public utility, has increased the viability and profitability of the solar

water heating market (SWH) in the country.

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Home ComfortSolar Water Heating in South Africa

E+CoInvestment

E+Co funding: $239,827

• Use of funds: growing Solar Water H division and increasing national presence and market positioning.

• Financing instrument: Senior Debt

E+CoValue

Creation

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Home ComfortSolar Water Heating in South Africa

• Annual revenue has risen to $3M in 2010, despite heavy economic recession in South Africa during 2007-2010

• Home Comfort maintained stable growth, established prominent position in the market and is now preparing for listing in Johannesburg Stock Exchange.

• E+Co working capital allowed Home Comfort develop strategic partnerships in construction and architecture industries.

Thank you.

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www.eandco.netPaul van [email protected] Herengracht 18NL 1018 DP Amsterdam+31 20 47`5257