VentureBuilder: A New Approach to Building Off-Grid Electrification Businesses in Africa Presentation for UNF’s EAPN webinar: ‘Support required for locally -owned small and medium energy access enterprises’ This material was prepared by Open Capital This material was prepared by Open Capital This material was prepared by Open Capital Advisors, is confidential, and may contain Advisors, is confidential, and may contain Advisors and Catalyst Off-Grid Advisors, is December 2018 proprietary information. It is intended only for confidential, proprietary information. It is intended only for and may contain proprietary the use of the intended recipient and cannot the use of the intended recipient and cannot information. It is intended only for the use of be relied on by any third party. Any the intended recipient and cannot be relied on be relied on by any third party. Any unauthorized use, copying, alteration, or unauthorized by any third party. Any unauthorized use, use, copying, alteration, or copying, alteration, or dissemination of this dissemination of this material, or any portion dissemination of this material, or any portion thereof, is strictly prohibited. material, or any portion thereof, is strictly thereof, is strictly prohibited. prohibited.
The problem: >120 mn African households without electricity today; achieving SDG 7 by 2030 will require a vast departure from usual Continuing with Business 100% Historical as Usual : 65% Business as 90% Usual SDG 7 Met of HHs will have 80% electricity access by 2030 104 million 70% HHs will remain without 60% access (only 20M fewer than today) . 50% $11 billion 40% In capital required for mini- grid and solar home 30% systems 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Source: Catalyst Off-Grid Advisors / Shell Foundation; Achieving SDG 7 – The Need to Disrupt Off-Grid Electricity Financing in Africa 1
Advances in off-grid solar technology have presented a remarkable opportunity to break away from business as usual Dramatically lower costs and ‘pay -as-you- go’ financing models have made solar systems affordable for many rural African households Source: The World Bank / Dalberg; Off-Grid Solar Market Trends Report 2018 2
And funders have reacted strongly, with hundreds of millions now being invested annually into off-grid solar businesses Investment in the Off-Grid Solar Sector 350 300 250 200 Million USD 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 Equity Debt Grants & Crowdfunding Source: The World Bank / Dalberg; Off-Grid Solar Market Trends Report 2018 3
…But there remains a big problem: a striking lack of greenfield distribution activity outside of East Africa Rwanda Nigeria Only a few off-grid energy distributors operating at scale (serving over 20K customers) in a Uganda few markets; all foreign owned Market concentration in Uganda, Kenya, and Tanzania → rest of Africa relatively untapped Côte Kenya d’Ivoire Incumbent vertically-integrated PAYG businesses have struggled to scale into new markets, Ghana underscoring the importance of local-customer and market expertise Tanzania Zambia Source: Catalyst Off-Grid Advisors & Shell Foundation, Achieving SDG 7: The Need to Disrupt Off-Grid Electricity Financing in Africa, https://sun-connect- news.org/fileadmin/DATEIEN/Dateien/New/Shell-Full-Report.pdf 4
Our solution: VentureBuilder – patient capital and tailored Enterprise Development Services for high-potential local distributors Focus on local entrepreneurs with deep Best-in-class PAYG & BoP 1 2 market knowledge & experience distribution expertise, combined with deep industry networks Market failure: large funders focus on • Market failure: typical funders lack • vertically-integrated firms that lack the local capacity to offer non-financial support expertise required to succeed in new markets VentureBuilder solution: • VentureBuilder solution: • Assemble team of leading experts with Partner with locally-owned and – • • strong industry connections managed distributors Provide advisory support and strategic • Invest in strong management teams that • intros for PAYG & BoP distribution understand their customers and market Partner best-in-class HW & SW players • Support local talent with EDS focused on • with high-potential local distributors systems, processes, and capital to accelerate growth Long-term, business building approach Flexible financing grows with 3 4 with focus on EDS investment business needs Market failure: investor goals often • Market failure: early-stage firms too • mismatched with those of early-stage firms small to attract serious investors VentureBuilder solution: • VentureBuilder solution: • Offer a patient, long-term investment • Blended finance approach provides • horizon, with additional support from distributors with access to affordable PAYG & SME development experts human & financial capital EDS, provided both pre and post- • VB partners with distributors when • investment to build OpCo capacity in financing needs are small and can strategy, technical, and operations follow-on with larger investments areas, enhancing returns to VB
Growth plan: Starting with 3 initial markets, but targeting entry into new countries with the some of the highest access deficits in Africa Demonstrate the model Initial focus: Nigeria, Benin & • Burkina Faso 9 months of DD → evaluating • 2018 3 finalists for investments Finalize first investments Scope big new market 2019 Further expansion into high access-deficit markets 2020 Goal of 7-10 OpCo investments onwards by 2022 6
Projected impact: VentureBuilder will demonstrate an approach to scaling energy access across Africa, putting SDG 7 within reach Our mission: VentureBuilder (VB) will unlock the off-grid solar market across Africa using a bottom-up approach to building a portfolio of new solar pay-as-you-go (PAYG) businesses targeting off-grid households. By 2022, VB aims to build a portfolio of OpCos that: Operate at scale in ten Deliver > 1 Reduce GHG Directly impact countries across Sub- million emissions by 0.5 the lives of > 5 Saharan Africa connections mn tons annually million Africans 7
Learn more about VentureBuilder: www.catalystoffgrid.com/venturebuilder/ • https://nextbillion.net/african-owned-off-grid-energy/ • 8
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