Business Proposal for Solar Energy Solution Business Plan Report

8/9/2019 Business Proposal for Solar Energy Solution Business Plan Report

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Interim Report

Business Proposal

CRESL

(Pay as you go model)


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Contents

Executive summary...................................................................................................................................3

The Market............................................................................................................................................. 3

The Products.......................................................................................................................................... 3

Management..........................................................................................................................................3

Obectives.............................................................................................................................................. !

Mission................................................................................................................................................... !

"eys to Success......................................................................................................................................!

#usiness conce$t...................................................................................................................................... !

%hy is so&ar energy more im$ortant in 'ndia(........................................................................................!

Product and services................................................................................................................................)

So&ar $o*er so&utions............................................................................................................................. )

Products................................................................................................................................................. +

Start,u$ Summary.................................................................................................................................. +

Market.................................................................................................................................................... +

Marketing P&an........................................................................................................................................-

Product /...............................................................................................................................................-

Price /................................................................................................................................................... -

P&ace /.................................................................................................................................................. -

Promotion /...........................................................................................................................................-

Marketing P&an Process........................................................................................................................ --

0uman resources....................................................................................................................................-1

Team.................................................................................................................................................... -1

Organi2ationa& Structure...................................................................................................................-1

Pay Structure.................................................................................................................................... -1

Other #enets...................................................................................................................................-3

Time Period 4or Payment...................................................................................................................-3

Permissib&e deductions..................................................................................................................... -3

R'S" CO5ERE6 786ER SOC'9L SEC7R'T: L9%S '8 '86'9.................................................................-!

;inancia& P&an < 9na&ysis/........................................................................................................................-=

Revenue Proections.............................................................................................................................-=

#reak Even 9na&ysis.............................................................................................................................->

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Strategy Overvie*...................................................................................................................................-+

5ision................................................................................................................................................... -+

Com$etitor 9na&ysis............................................................................................................................. -+

Strategy............................................................................................................................................... 1Risk 9na&ysis........................................................................................................................................... 11

Market Risk A Com$etitive Risk..........................................................................................................11

Techno&ogy Risk................................................................................................................................ 11

Execution Risk...................................................................................................................................11

Ca$ita&i2ation Risk.............................................................................................................................13

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Executive summary

CRESL is a start-up company registered in Kerala as a private limited company, offering solar powersolutions.

The Market

The ndian solar energy sector has !een growing rapidly, in the past few years, ma"orly due to

#overnment$s initiatives such as ta% e%emptions and su!sidies. &ue to technical potential of ',((( trillion

)*h per year and minimum operating cost, Solar +ower is considered the !est suited energy source for

ndia. Today the Solar power, has an installed capacity of . /* which is a!out less than (.0 per cent

of the total installed renewa!le energy of ndia$s1 currently total installed renewa!le energy stands at

02,33.0 /* as per /4RE.

ndia5s power sector has a total installed capacity of appro%imately 0,6,7'2 /egawatt 8/*9 of which

': is coal-!ased, 3': hydro, : is renewa!le$s and the !alance is the gas and nuclear-!ased. +ower

shortages are estimated at a!out 00: of total energy and 0': of pea) capacity re;uirements which isli)ely to increase in the coming years.

The Products

CRESL, will supply, install and operate and maintain solar power systems . The company is offering +ay

as you go model8 charges per an)ing, Engineering

and mar)eting field



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*hatever the precise timeta!le for their depletion, oil and gas supplies will not )eep up with growing

energy demands. Coal is availa!le in a!undance, !ut its use e%acer!ates air and water pollution

pro!lems, and coal contri!utes even more su!stantially than the other fossil fuels to the !uild-up of

car!on dio%ide in the atmosphere. or a long-term, sustaina!le energy source, solar power offers an

attractive alternative energy in ndia. t is environmentally clean, and its energy is transmitted from the

sun to the Earth free of charge and there is no out come any to%ic gases.

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Kera#a :

Kerala is a state which constitutes Sunny shoreline, caressed !y perpetual !luish waves that adorn theendless !eaches, with awe come green groves of coconuts that paint a shying !orderline of natural

harmony. Kerala is a place of high lightning incidence when compared to most of the other parts in ndia

!ecause of its weather patterns and the location of the *estern #hats. Digher population density and

vegetation density result in more casualties. Lac) of awareness also aggravates the situation. The

average temperature in Kerala is 37.( C 80 9. The temperature in Kerala normally ranges from 3

to 23 C 83 to ( 9 on the plains !ut drops to a!out 3( C 86 9 in the highlands. Temperature

during *inter in Kerala is ma%imum of 3C and minimum of 0C. Fvg Summer starts in e!ruary and

continues till /ay, the temperature during Summer in Kerala is ma%imum of 26C and minimum @ 23C.

The Fverage temperature during summer and winter in Kerala is a!solutely fits to use Solar Energy.

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Product and services

o#ar po%er so#utions

*e are targeting medium si?ed solar power installations 80(K* B 0(( K*9 for, Shops and

Esta!lishments, Corporate offices, >an)s, Shopping mall where the day time use is high. Duge initial

cost of installation and dou!ts with R= is a ma"or road!loc) in installing solar power. >ut the rising

cost of commercial electricity and the higher rate of electric usage a!out 0((( an)s.

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Products

CRESL offers supply, install, operate and maintain solar power solution to Shops and Esta!lishments,

Corporate offices, >an)s, Shopping mall with a power re;uirement of 0( to 0(()w and the cost will !e

charged against the actual usage. The rate will !e at par with the #R& power. n future the company is

planning to start manufacture +G panels in its own facility so the cost can further !e reduced

tart&up ummary'

CRESL is planning to rent out a office premises in the outs)irt of cochin city. This office will function as

the main office for all mar)eting, operational activities. The office will !e set up necessary infrastructure,

Testing and /aintenance facilities and e;uipment.

Market

Consumers 8especially younger generation customers9 do show a preference for energy produced from

renewa!le energy sources !ut invaria!ly fail to purchase renewa!le energy in si?ea!le num!ers.

nitial research done over the last 0 month helped us to identify the !arriers to solar purchases, address

consumer concerns, and loo) at ways to provide solar power plant solutions with guidelines that should

!e integrated into their overall mar)eting approach.

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>ased on initial discussions, there are four primary !arriers to solar power plant adoption, and it is

mandatory that all these )ey !arriers are addressed to increase adoption and accelerate the

implementation in the Kerala mar)et.

Cost. Consumers are worried on the huge up-front costs and lengthy pay!ac) periods which are

deterring them from installing solar power plant at their apartmentsAoffices.

Re&iabi&ity. Concerns a!out its performances and capa!ilities on the relia!ility of solar panel

technologies. There is also some perception in the corporate industry that solar might not power the total

energy needs of the !uildingAoffice.

Com$&exity.The time consuming and comple% nature of purchasing and installing solar energy systems

discourages potential customers.

'nertia.The financial comple%ity and the perception that it is a long decision-ma)ing process to setup asolar power plant results in some consumer inertia.

Though the consumers do understand the environmental !enefits, these are not persuasive enough to

increase or accelerate adoption of solar power plants in commercial !uildingsAofficesAapartments.

Therefore, the mar)eting program should create a connection with consumers through mar)eting

messages that would enhance interest and lead to further in;uiry.

/ar)eting messages that are a!le to connect on a financial or value level are the ones which would

succeed.

Some of the steps to !e ta)en to help identify the mar)etAsegment which needs to !e focused are@

/ar)et Segmentation !y 2 categories@

#eographic

&emographic

+sychographic

>y understanding the needs of segment we can tailor the mar)eting mi% to deliver what the consumer

values. Each segment will offer growth and profit opportunities, so the tric) is to deliver the !est offer to

the !est segment8apartment comple%es, commercial !uildings, offices, etc.9.

The goal of the mar)et research would !e to help identify the following@- +roductsAServices and the consumer fit

- Consumer +rofiles

- Consumer Characteristics

- Consumer needs and wants

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Marketing P#an

The classic elements of mar)eting B the +$s@ +roduct, +rice, +lace, +romotion B offer a useful matri% to

assess the solar power plant program. Solar program initiatives should address each of the +$s.

Product (*e can evaluate the +roduct from the perspective of consumers$ rational and emotional attitudestowards solar technology. These attitudes do play a large role in the purchase cycle. Consumer reaction to

solar technology 8e.g., price, relia!ility, ;uality issues9 helps identify the opportunities and the !arriers.Price (This is one of the !iggest !arriers for solar power plant adoption in the mar)etplace. The

government is helping to some e%tent in financing of such plants, and helps overcome the consumer price

concerns. Currently, financing options are increasing the access to solar power and ena!ling it to new

groups of consumers.P#ace (+lace through which the solar is sold, also is an area where solar programs have an important role

through their wor) with installers, developers, and suppliers. >uilding a strong serviceAsupplier networ) iscritical in )eeping up with rising demandH ensuring that consumers can easily find an engineerAinstaller to

setupAfi% the solar plant within the shortest duration.

Promotion (This should !e a primary focus so that it can increase the visi!ility of solar installations and

!roaden the appeal. ased on these studies, the remainder of this report will

09 identify ma"or mar)et !arriers,

39 detail smart mar)eting strategies to address each !arrier, and29 recommend action steps to implement a successful mar)eting plan.

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CustomerResearch

Barriers &Opportunit i

es

MarketingGoals

MarketingPrograms/Tactics (4Ps)

e!elopBu"get

Monitoran"

#!aluate$ales/Resul

ts

Marketing P#an Process

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Managing

irector

#%#CTRC$'P#R$

OR

#%#CTRC*

#%#CTRC*

MR+#T*G

M*G#R

,#%M*G#R

)uman resources

Team

The management would comprise 3 /anagers- /ar)eting /anager and an Electric Supervisor.

There is one Fssistant mar)eting /anager, and one accountant.

There are two highly s)illed electricians.

nitially =ffice will !e in Cochin !e in Cochin.

Organi*ationa# tructure

Pay tructure

/anaging &irector-Rs.((((A- per month I profit share

/ar)eting /anager-Rs.3((((A- 8=ther !enefits !y way of performance lin)ed !enefits to the e%tentof Rs.0(((A- per )ilo watt sold over and a!ove the monthly target.9

The Fssistant /anager 8/ar)eting9 will !e paid a monthly salary of Rs.03(((A- 8=ther !enefits !y

way of performance lin)ed !enefits to the e%tent of Rs.0(((A- per )ilo watt sold over and a!ove the

monthly target.9

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The electricians will !e paid Rs.0((((A- consolidated 8=vertime for a ma%imum of ( hours per

month allowed9 .

Fccountant will !e paid a salary of Rs.(((A-.

Other !ene+ts

C=4


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RIK CO-ERE. /0.ER OCI12 EC/RIT3 21" I0 I0.I1?D9&& covers to be a$$&icab&e on&y a4terone year@

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4inancia# P#an 5 1na#ysis(

Revenue Projections

CRESLRevenue Projections

Years 1 to 5

(Rs)

Year 1 Year 2 Year 3 Year 4 Year 5 Product A

Number of Units 1,12,500 3,37,500 5,62,500 7,87,500 10,12,500

Price per unit 9 9 9 9 9

Tota !"s#$ 10,12,500 30,37,500 50,62,500 70,87,500 91,12,500 %er&ice '

Number of (ustomers 50 50 100 150 200

)ee per (ustomer 0 5,000 5,000 5,000 5,000

Tota !"s#$ 0 2,50,000 5,00,000 7,50,000 10,00,000

Net Revenue 10,12,500 32,87,500 55,62,500 78,37,500 1,01,12,500

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Revenues by

Monts !"uarters

(Rs) Monts Year 1 Year 2 Year 3 Year 4 Year 5 *ont+ 1 0 1,6,375 2,78,125 3,91,875 5,05,625

*ont+ 2 0 1,6,375 2,78,125 3,91,875 5,05,625

*ont+ 3 0 2,30,125 3,89,375 5,8,625 7,07,875

Tota 1st -uarter 0 5,58,875 9,5,625 13,32,375 17,19,125

*ont+ 0 1,97,250 3,33,750 ,70,250 6,06,750

*ont+ 5 0 2,30,125 3,89,375 5,8,625 7,07,875

*ont+ 6 0 2,30,125 3,89,375 5,8,625 7,07,875

Tota 2nd -uarter 0 6,57,500 11,12,500 15,67,500 20,22,500

*ont+ 7 1,01,250 2,63,000 ,5,000 6,27,000 8,09,000

*ont+ 8 1,51,875 3,28,750 5,56,250 7,83,750 10,11,250

*ont+ 9 2,02,500 3,28,750 5,56,250 7,83,750 10,11,250 Tota 3rd -uarter ,55,625 9,20,500 15,57,500 21,9,500 28,31,500

*ont+ 10 1,51,875 3,61,625 6,11,875 8,62,125 11,12,375

*ont+ 11 1,82,250 3,9,500 6,67,500 9,0,500 12,13,500

*ont+ 12 2,22,750 3,9,500 6,67,500 9,0,500 12,13,500

Tota t+ -uarter 5,56,875 11,50,625 19,6,875 27,3,125 35,39,375

Tota for .ear10,12,50

0 32,87,500 55,62,500 78,37,500 1,01,12,50

0

1ssumptions taken(

1= sho$sAcom$&ex - com$&ex starting 4rom Month >A:ear -

9nother 1= sho$sAcom$&ex starting 4rom Month BA:ear -

;rom :ear 1 on*ards minimum o4 1 com$&exes added to customer base

-M% F )cr

.>M% F =cr

.- M% F>+L.= M% F!=L

1 sho$sAcom$&ex F sma&& sho$s F .1= M%F 1= "%h

-"59 A sho$ A day A connected &oad

$er site F1="%9 cost G 1L ?max 11L@

#E coming around 1.= years ?*ith :ear - o4 customers@

Maint 4ee F '8R =AcustomerAyear

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!reak Even 1na#ysis

Rs = 'nitia& 'nvestment- Crore 'nvestment 4rom;ounders H ! Crore #ank Loan

Rs )=

Per "%$ investment

in eui$ment

>>>.>>>>>>)Possib&e "%$ *ith =Crore investment

.= EIciency

333.3333333 8et Ca$acity

-8umber o4 7sage0rsA6ay

1=8umber o4 %orking6ays a Month

- "%0r A :ear

B Rate A 7nit

Rs BTota& Cash inJo* $er

year i4 a&& units so&d

Se&&ing Price B $er unit

5ariab&e cost 9ssumes neg&igib&e variab&ecost

Tota& ;ixed cost Rs =

Tota& ;ixed cost a4terca$ita& subsidy K 3 Rs 3=

!reak even sa#esunits 6 7888888'889 Ty$ica& unitsconsumed by a ma&&

$er month -1 "%0r $er monthTy$ica& unitsconsumed by a ma&&

$er year -!! "%0r $er year8umber o4 ma&&s thatcan be serviced )

0umber o, years tobreak even 6 :

9ssuming a&& units are so&d inrst year itse&4. D 9&& amount in RS

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trategy Overvie%

-ision

=ur vision is to !e a!le to place a CRESL !randed power plant powering every commercial

esta!lishment in ndia and through that !ecome the largest commercial solar power supplier in ndia.

*e will do everything in our capacity to ensure relia!le and sta!le power supply and e%cellent

customer service and support for our customers. *e envision providing ma%imum return on

investment to the shareholder !y increasing profita!ility through adopting new technology and

practices to minimise cost and ma%imise output.

The following will remain as our core values:

Digh ;uality customer service to achieve customer delight

Continuous improvements in service ;uality , value to the customer and share holder wealth

Constant search for the most efficient and cost effective technology alternatives to deliver value to

!oth customers and share holders

Strengthen the !ondage !etween company and its employees so that each can contri!ute to the well

!eing of the other and "ointly strive to achieve company goals and values

Competitor 1na#ysis

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;actor So&arEnergy

Strength %eakness rid E&ectricity 6iese& enset 'm$ortanceto

Products

"ene/abe

ner. product

%tabe and

reiabe

(ustomer

/orries about

reiabiit., cost

impications etc

Pro&en o&er time,

but acs reiabiit.#

(ost can increase

due to scarcit.,

&otae fuctuations

(ost o&erruns due to

fue price +ies, +i+er

maintenance

2

Price

i+ 4nitia

(ost, o/er

&ariabe cost,

ife 25 rs

on term cas+

fo/s

ue initia

in&estment

Pa. per /att and

o&ernment

inter&ention on price

'i initia in&estment,

ife appro# 10 e,

i+ &ariabe cost

Quality

ood :uait.

products

a&aiabe and is

used for ma;or

instaations#

(onstant po/er

25 rs

/arrantee

a&aiabe

'ad imae due

to earier

modes bein

epensi&e and

o/ ife

"easonabe :uait.

/it+ &otae

fuctuations and

occasiona faiures

(onstant po/er

output

5

Selection

A /ide &ariet.

a&aiabe

oba net/or

of supp.

o&t support

ma. not be

t+ere on term

No (+oice# as to

o /it+ oca

pro&ider


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trategy

To !e consistent with our Gision statement, we will !e fine tuning our strategy to deliver highest

return on investment to our customers and shareholders.

Solar energy is a sunrise industry and hence we choose this one, where you have a long

hori?on of profita!le period, and can achieve a!ove average return on e;uity. There are good amount

of government support, which will reduce the cost 8various ta% !rea)s in imports and a 2(: capital

investment su!sidy on installations !elow 0(( K*p capacities9. The life of a solar panel is in e%cess

of 3' years 8/anufacturers give a guarantee of 3' years with at least (: efficiency9. The photo

voltaic process does not re;uire much maintenance and hence the varia!le e%pense is minimal. Fs per

the latest estimates, commercial solar installations with no su!sidy can !rea) even in less than '-

years, even when you are giving electricity under Rs A


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*e will ta)e a small 8around 0(: of the cost9 amount as a security deposit from the customers, which

will !e returned towards the end of the contract term 8minimum ' years9.

The rate chargea!le will !e less than the starting range of the commercial electricity. Flso, we will !e

a!le to run all load from Fm to (6@(( +/ directly from the device and another 3-2 hours from the

stored power from !attery. This will allow us to service 0(-03 hours of their pea) load from Solar, which

will ena!le us to utili?e the full capacity of the power plant. This will !enefit the customer !y driving

down their costs and getting relia!le and fluctuation free electricity. Flso, this will ma%imise shareholder

R= !y efficiently utili?ing the installed capacity to the ma%imum and thus high R=.

nitially, all the components will !e purchased from reputed suppliers. The installation will !e outsourced

to minimi?e varia!le cost. The installed system will !e inspected !y the staff supervisor and will !e

commissioned.

=nce the annual installations go !eyond (.' /*p, we will !egin assem!ling and lamination of the solar

panel assem!ly and inverters. This will ena!le us to drive down the capital costs, and also will ena!le us

to service faulty solar panels and inverters in house to ma%imise usea!le life.

=ur initial targeted mar)ets will !e /a"or cities in Kerala where such large esta!lishments are located.

*e will e%pand to rest of South ndia in another -' years. *e will e%pand to rest of ndia within 3-2

years from then.

n Kerala, our initial operations will !e !y outsourcing most of the wor) e%cept maintenance, mar)eting

and !oo) )eepingAaccounting. This will ena!le us to )eep the varia!le costs to !e in line with our sales.

=nce the sales are consistently increasing, we will start the production of components etc.

or entering other mar)ets, we will use a partnership approach, where the ;uality will !e ensured !y us

!y constant monitoring, while many of the functions will !e done !y local partners, so as to use their

)nowledge of the locality and connections. Li)e /aruti Su?u)i, we will stipulate the maintenance process

and customer complaints will !e ta)en up seriously. uality will not !e compromised and customer

complaints can lead to severe steps, including dropping the partnership. The contracts will have

provisions for this and penalty clauses.



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Risk 1na#ysis

Market Risk ; Competitive Risk

Fs of now, the pay per use for smallAmedium commercial esta!lishment is minimal or nil. So we will

not face much issue here. >ut once our model proves to !e successful, there will !e intense competition as

most of those who are in the sales mar)et can come up to this segment. Flso, at the same time, players in

the higher commercial category can e%pand to this sector.

Mitigation(>y that time, we would have already started increasing our annual sales and hence can

enter in to the manufacturing of the components needed and thus can reduce the costs further. The

company image of ;uality and relia!ility also would have started !uilding up. Ft the same time, we will

also need to strive hard to reduce the varia!le costs, avail low cost capital and should start negotiating

with suppliers to further drive down the costs. *e would have started getting profits out of our early

investments, which can continue free cash flow for the rest of the usa!le period of the panels, and thus

can provide capital for further growth. This will ena!le us to offer a competitive rate due to lower cost of

capital.

Techno#ogy Risk

The solar photo voltaic technology is in place for the past 3( years and the current +G technology

has high relia!ility 83'I years usea!le life9 and low cost. The cost is e%pected to drop another 2': in

another 2-' years due to economies of scale. There is a ris) that a new technology, which may !e more

efficient or cheaper, can come and can cause the cost per unit to !e less than our rates. Flso, even thoughthe grid electricity charges are going up, some !rea) thru can cause it to go lower than our rates.

Mitigation(*e will need to constantly in touch with newer technologies and cost reduction techni;ues,

so that in such a situation, we can switch all new installations to one of these new technologies after

analysing the cost !enefit ratio. Flso, we will try to upgrade our e%isting installations in case if the C>F

of such an upgrade is proven to !e !eneficial. f we )eep our !rea) even as low as -' years, we will !e

safe on e%isting installations as we can respond to price pressures more effectively

Execution Risk

/a"or ris)s which can adversely impact e%ecution of the plan are@

09 There is a ris) that the re;uired s)illed resources will not !e availa!le at the estimated costs

39


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Mitigation(*e will !e outsourcing all the installation activities and will also )eep an option to add

additional service technicians other than the core supervisors and technicians on a per "o! !asis. *e will

provide them initial training and will get agreements on service levels, which will !e lin)ed to their

payments. Close customer feed!ac) mechanisms will ensure good ;uality. To mitigate unavaila!ility of

components, we will use efficient supply chain management mechanisms to )eep inventory at minimum,

!ut have constant reorder points. *e will have agreements with suppliers to supply on a timely manner so

that the ris) can !e transferred to them. or monitoring the usage and anticipated service, we will use

installation and usage remote monitoring using an installed mo!ile S/ at each site which will transmit

information a!out health of the plant and the usage.

Capita#i*ation Risk

*e are planning to invest an initial Rs 0 Crore from our side and will !e loo)ing for >an) loan of Cr, as we

have more installations. >eyond the ' Crore limit, we will !e loo)ing forward to raise the remaining capital

from Genture capitalists and later will !e loo)ing towards a pu!lic issue, once the mar)et sentiment towardsthis model is favoura!le. *e have a ris) that other than the founder$s investment, others might not

materiali?e.

Mitigation(Fs we are )eeping the varia!le costs to the !are minimum, we can continue to operate and

generate cash flows from the initial investments itself. So cash inflow will not !e stopped as in the case of an

outright sale of e;uipment. *e will !e also doing outright sale of solar plants to those who are willing to go

that route, so as to generate additional cash inflow. Flong with this, we will offer a price guarantee for an

e%tended period for those customers who are willing to give a higher deposit and other price !enefits, and

thus can unloc) the capital faster. The deposits will !e credited in their monthly !ills from the th year

onwards and thus can remove the ris) of huge cash outflows at the end of the contract period.

Business Proposal for Solar Energy Solution Business Plan Report

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