1.2 billion people around the world currently lack access to electricity, so TRINE seeks to solve this problem by closing the gap between private capital in developed countries and local solar partners in emerging markets. The organisations founding goal is to end energy poverty but finding a long-term solution is key. The for-profit nature of TRINE as a business and its projects deployed as investments means that its projects are economically viable as well as having a social and environmental impact in the long run. TRINE has embarked on crowdfunded campaign to bring clean energy to 5,880 people in Harambee, Kenya. Its partner, Raj Ushanga House (RUH), will use the loan to purchase and distribute 1,200 Azuri Solar Home Systems.
Regarding TRINE’s project in Harambee, Kenya, what is your involvement in this?
Our company is actually called Azuri and my role is I am the General Manager of East Africa. Azuri is headquartered in Cambridge and is an offshoot of the University of Cambridge, involved in the pay-as-you-go solar space providing offgrid solar solutions for rural Africans. We’ve been operating for around three years and I am heading the operations in East Africa. This whole space is growing quite exponentially because for many decades the government has been trying to implement off-grid solutions into Africa, relying on aid from the World Bank etc. We saw an opportunity to provide cost-effective solutions directly to the customers. We do this on a microfinance basis and the industry is exactly where the mobile telephone industry was about 10-15 years ago, when not many people could afford the landlines and pre-paid mobile came on board. A very large percentage of Africans now own a mobile phone.
In terms of the product we provide, it’s a small stand-alone lighting system with a small 10 watt solar panel, an LED light, rechargeable radio, phone charger and a torch. If a customer was to buy this upfront, it would cost around $300, which not many people can afford so through micropayments we allow customers to pay on a daily, weekly or monthly basis. After the customers have paid off the unit, they own it themselves and after that, they enjoy those energy services free of charge. This industry is now growing exponentially, much faster than the electrification industry in this part of the world. In Kenya, for example, over the last couple of years, there have been about three quarters of a million units installed, in a country with a population of 45 million, thus 10 million + households, of which only a couple of million have access to electricity. So there are 7-8 million that are still using kerosene lighting.
Over the last couple of years we’ve managed to transform the industry with a 10 percent penetration of the market. Azuri have taken a good market share of that, but there is still some way to go. As well as providing energy solutions, we also provide microfinance solutions to the customer, so our working capital is quite long and requires quite a substantial amount of upfront funding. There are many people who have raised some equity on their balance sheet and are using that to provide microfinancing. That’s not sustainable, so our aim is to raise structured or unsecured debt from a financial institution who lend that money with the product or the asset being used as the collateral, and on the back of that we can then lend to the customers.
One of the projects to make this is happen is TRINE, which is effectively a crowd financier who raise the funds from multiple investors in the western world who want return on investment as well as making some sort of social impact. This is the first project we have with TRINE, where they are raising around 160,000 euros over the next three months to finance around 2,000 customers in Kenya.
That money is in euros and will raise hardly any interest so TRINE is offering an annual return of 5.5 percent on the euro lending to the investors. The term of the loan is over two years. On the back of that lending, Azuri will deploy these products in the market, making a social impact over that time. We will then repay TRINE in order that they can pay that 5.5 percent back to the investors.
I am presuming the same situation exists in other African countries, such as Kenya, Tanzania, Uganda and Zambia, but could this project be adapted to suit other regions of the world?
Sure. Africa is quite right for this because, first of all because there is a real need, and secondly because, like other countries, the use of the mobile phone, not only for making calls but also to make financial payments, is well advanced. The industry we are in is a mixture of energy provision, energy financing and technology. As we speak, all those three elements are advancing quite well in Africa. There are certainly pockets in places like Asia, where this can also be deployed, markets like Myanmar, Pakistan etc. India and China are very big markets but there are other macro factors that come into play there. For example, in India the government provides kerosene subsidies, which is sad because the consumers don’t have the incentive to move over to clean energy, so there are some challenges in those parts of the world. In other countries where the country characteristics are right and there is demand, there is no reason why this model should not be replicated.
Assuming it is a long-term project, what is TRINE’s ultimate long-term ambition? What will it be doing in, say, five or ten years’ time?
TRINE is indeed a long-term project. This is a trial we are doing with them and already there is quite a good response. We have estimated that investors will put in their money over a three-month period, January to March, to raise the 160,000 euros. We are already mid-way with that, with 70 percent of the funds raised. My expectation is that by the end of the month we should be complete. The idea is that we will continue replicating this in the short term. TRINE is also in the process of doing their fundraising and have got on board some additional corporate investors, doing much more aggressive marketing to promote this crowdfunding concept. We are seeking to increase these crowdfunded sources of funds exponentially. In the next 3-5 years there is the potential to raise tens if not hundreds of million dollars through these means.
One other thing is that we started by providing technology like lighting and radios, but now that the technology is there and the demand is clear, we are also rolling out higher-end appliances as well. For example, in December we introduced the first solar-powered TV, fully integrated with a satellite dish and satellite package via the same micro-financed basis. So more and more rural Africans are now gaining access to the kind of luxuries that people enjoy in the urban world and thus the potential to replicate this model for more higher-end services is definitely there.