The Enterprise Imperative
Improving local capacity and delivering modern energy
by strengthening the enterprise-customer connection
Prepared for: USAID
December 2008
Philip LaRocco
Jennye Greene
The Solar Electric Light Co.
Click below for 3 minute video
We can all agree that more SELCOs are needed in order to address
the energy needs of the under-served.
Toyola-Stoves-Ghana
VEV-Wind-Senegal
Lambark-LPG-Ghana
LEDCO-Hydro-Nepal
SME-RE-Biogas-Cambodia
Two Decades of
Successful Enterprise
Experience …
100s of Examples
SEUL-Solar-Uganda
Red CeramicsNatural Gas-Bolivia
MOP-Fruit Drying-Uganda
La Esperanza
Where: La Esperanza, Intibuca, Honduras
What: A 3-stage, 13.5 MW run-of-river hydroelectric project
Stage 1: 485 kW
Stage 2: 950 kW
Stage 3: 13.5 MW
Carbon: One of the first small-scale
carbon monetizations
Impacts: Community development, job
creation, clean energy, tree planting
Presentation Outline
1. The general landscape
2. The case for energy enterprises
3. Transferring knowledge and experience
4. Building a framework
1. The landscape
2. The case for enterprise 3. Transferring knowledge 4. A Framework
2.4 billion people cook with
traditional fuels
1.6 billion people
do not have
electricity
1. The landscape
2. The case for enterprise 3. Transferring knowledge 4. A Framework
Business-As-Usual
$26 trillion in global
energy spending by
2030 and there will
still be…
– 1.4B w/out electricity
– 2.6B using traditional
cooking fuels
9
8
7
6
People
5
(Billions)
4
3
2
1
0
2008
2030
No Electricity
Traditional Cooking
Total Population
Sources: IEA World Energy Outlook, 2008 ; UN Population Projections, 2006
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Limits of Business-as-Usual
1. Geography
2. Cost per grid connection
3. Population growth
In a conventional utility model (RSA), the grid
extension became uneconomic around
R3,000 (yr 2000R)/connection.
At R5,000/connection, market penetration
stops.
This left 20-25% of the market unmet.
Source: www.eskom.co.za
Limits of Business-as-usual
Limits of Business-as-Usual
Back-of-the-envelope
calculations
• Over five years, the 1.6B people without
electricity and the 2.4B people without
modern cooking will spend over $250B on
fuel (mostly kerosene and woodfuels)
• For ~$150B, a solar home system and
modern cook stove could be given to every
household that doesn’t have them.
• Over five years, the fuel savings from
switching would be ~$100B for lighting and
~$50B for cooking
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
A little perspective
Trillions of USD in spending
30
25
20
15
10
5
0
26 Trillion
(IEA estimate of
global spending
through 2030)
150 Billion
(could purchase
modern energy for
every current
unserved HH)
1. The
Lay landscape
of the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Why focus on enterprises?
BUSINESS-AS-USUAL PROBLEMS:
THE ENTERPRISE ADVANTAGE:
•
Classic utility model not serving all
unmet demand … trapped in one size
fits all model
•
Ability to efficiently address unmet
demand … multiple products and
services
•
Grappling with macro issues of growing
energy insecurity … little or no incentive
toward human development
•
Successful enterprise-customer
experimentation since early 90s … built
on quality of life and productive
livelihood growth
•
Dissatisfaction with one-size-fits-all or
one-gap-needs-filling ODA approaches
•
Opportunity for USAID to leverage
scarce resources and take the lead in a
model that recognizes and fills multiple
gaps
•
Need to deal with climate change
adaptation and mitigation overwhelms
energy access issues
•
Economic, social and environmental
benefits in new service delivery
•
The limits of central station, pipe and
wires energy are understood
•
The untapped potential of local
entrepreneurship has been grossly
underutilized
1. The landscape
2. The case for enterprise 3. Transferring knowledge 4. A Framework
Business-as-not-too-unusual
There are NO good reasons why so many people
are un-served. The key building blocks are
available...
Demand/purchasing power
Appropriate technology
Resources for capacity building
Delivery expertise
…under the right circumstances.
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Communicating success
This body of work asks just two questions:
• What can be learned from these small and
growing energy enterprises?
• How do we convert what we know into a
practical tool and set of guidelines for
development practitioners?
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Methodology of this study
1. Assemble a cross-section of real-world
examples
2. From examples, identify criteria linked with
success and failure, replicability and growth
3. Formulate a typology of models (both business
and donor models)
4. Develop a set of implementation tools for
USAID staff to evaluate and improve existing
programs and propose new ones.
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
A wide range of technologies and
organizational structures
• Zara Solar
– (Tanzania; private)
• Barefoot College
– (India; private, donor)
• SELCO
– (India; private)
• Soluz
– (Dominican Republic,
Honduras; private)
• RAPS
– (South Africa; )
• Toyola
– (Ghana; private)
• Multi-functional Platform
– (Mali, govt’, donor)
• SME-RE
– (Cambodia; private)
• Stiftung Solarenergie
– (Ethiopia; donor)
… And many, many others.
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Expertise drawn from many
varied sources
•
•
•
•
•
•
•
•
•
•
•
Eric Usher, UNEP
Ellen Morris, Arc Finance
UNDP, MFP
Bunker Roy, Barefoot College
Christine Eibs Singer, E+Co
Dan Shepherd, IADB-MIF
Stacy Swann, IFC
Harish Hande, Selco-India
Harald Schutzeichel, Stiftung Solarenergie
Suraj Wahab O, Toyola
Mohamed and Mona Parpia, Zara Solar
…And many, many more
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Frameworks Being Used
1. The “Balanced Implementation Model:”
It is the combination of and balance among three
variables…
•
•
•
Policy & enabling environments
The availability of suitable technology
Capable “enterprise-like” delivery
… that account for an initiative’s success.
2. The “Enterprise-Customer Connection:”
The most critical interaction in the value chain is between
the “enterprise” (delivering party) and the customer
(receiving party).
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Our Objective:
Balanced implementation
Potential Impact
An Out-ofBalance
Initiative…
Too much
policy push…
Policy
Technology
Too little
companion
technology
push …
Way too little
implementation
push …
Enterprise
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Balanced implementation strives for proportionate
and appropriate emphasis on the key variables
Policy
Technology
Enterprise
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
The balanced implementation
model
Policy
Technology
Impact
Enterprise
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Case Study: FENERCA
• FENERCA (2000-05) was a USAID
program that sought to create a pipeline of
RE business proposals by strengthening
the capacity of entrepreneurs, local
financial institutions, NGOs and
governments.
• USAID was the primary source of
programmatic funds ($5.3 M)
• FENERCA was largely successful in
following a balanced implementation
approach.
FENERCA Highlights
Enterprise:
• 162 enterprises received development
services
• 62 bankable proposals created
• 21 businesses operational by 2005 (+8
awaiting fund disbursement)
• >$36 M in financing mobilized
FENERCA Highlights
Technology:
• 1,850 people trained in subjects related to
clean technology (entrepreneurs,
government officials, NGO decisionmakers, and staff of financial institutions)
• Of the 21 enterprises created,
– 13 solar
– 5 small hydro
– 3 biomass
FENERCA Highlights
Policy:
• Policy document produced related to policy
opportunities for RE in CA
• 3 meetings held with regional energy
authorities
• Assistance given to Honduran Congress in
drafting legislation providing incentives for
RE development
The Enterprise-Customer
connection
E
(Enterprise)
C
(Customer)
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
The Enterprise-Customer
connection
Entrepreneur (e)
Demand (d)
Technology (t)
Knowledge (k)
Services (Es)
Finance (Ef)
E
(Enterprise)
C
(Customer)
Services (Cs)
Finance (Cf)
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Policy
&
Enabling Environment
Entrepreneur (e)
Demand (d)
Technology (t)
Knowledge (k)
Services (Es)
E
(Enterprise)
C
(Customer)
Finance (Ef)
Financial
Services (Cs)
Finance (Cf)
Social
Environmental
1. The
Lay of
landscape
the land 2. The case for enterprise 3. Transferring knowledge 4. A Framework
Case Study: Toyola Energy Ltd.
• Manufacture and distribution of
improved charcoal cookstoves
in Ghana
• Started business in 2006
• Stoves exhibit ~40% fuel
efficiency and retail for ~$10.
• Projected sales of 300,000
over the next 5 years
Toyola Energy Ltd.
• Entrepreneurs:
– Suraj and Ernest
• Technology:
– ICS is mature and
appropriate technology
• Services:
– Artisan training provided
by EWW
– Business development
provided buy E+Co
• Financing:
– E+Co has made 2 loans
and an advance on future
carbon revenues
• Customer demand:
– Charcoal is expensive,
stoves have short payback
period
• Knowledge of product:
– EWW provided extensive
advertising
• Services:
– Risk-free trials of stoves
– Refurbishing possible
• Financing:
– Relatively low cost
– Some micro-credit
available
Toyola Energy Ltd. - Outcomes
• Financial –
– Profitable and fast-growing business, able to meet its
loan obligations
– Potential carbon revenues are significant
• Social
– Employment opportunities for 150+ people
– Reduced indoor air pollution
– Cost savings for households and chop bars
• Environmental
– Less pressure on forest resources
– Reduced GHG emissions
USAID 
Toyola Energy Ltd.
Balance Sheet
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Assets
73,833
63,829
57,172
63,961
62,693
Liabilities
62,205
47,699
32,892
18,675
5,553
Equity
11,628
16,130
26,148
45,286
57,139
Domestic units
5,300
8,480
11,024
14,331
18,630
Price Per Unit(US$)
6
6
6
6
6
Commercial Units
2,583
3,875
5,425
7,052
8,462
Price Per Unit
20
20
20
20
20
Total Revenue
80,812
124,13
2
169,12
1
219,85
8
271,71
1
Cost of Sales
44,314
68,061
92,741
120,56
4
148,97
6
Gross Profit
36,498
56,072
76,380
99,294
122,73
6
Gross Profit %
45.2%
45.2%
45.2%
45.2%
45.2%
Operating Expenses
30,800
33,880
47,432
66,405
92,967
EBITDA
5,698
22,192
28,948
32,890
29,769
Interest E+Co 1
2,212
3,650
2,262
1,397
239
EDS Rec Fees
644
1,288
1,288
1,288
644
Depreciation
11,533
11,533
11,533
2,800
2,800
Taxes
0
0
0
7,103
7,599
Net Income
-8,692
3,861
9,359
18,498
11,530
Net Cash Flow
4,225
149
6,572
19,587
25,602
IRR 1
10%
Income
Statement
Balance sheet projections
for first loan, Nov. 2006
Balance sheet projections
for second loan, Dec. 2008
Toyola Energy Ltd.
Projections
Nov-07
2008
2009
2010
2011
2012
Assets
109,924
219,258
201,952
184,677
177,647
179,891
Liabilities
68,575
147,274
109,359
69,628
37,294
12,445
Equity
41,349
71,984
92,593
115,049
140,354
167,446
15,732
42,800
47,080
51,788
62,146
74,575
#Units - Domestic Stoves
Price Per Unit
$8.00
$8.00
$9.60
$11.52
$13.82
$16.59
#Units - Commercial Stoves
1,107
2,730
4,368
5,242
7,862
9,435
Price Per Unit
$ 25
$ 25
$ 30
$ 36
$ 43
$ 52
153,531
410,650
510,132
601,242
803,073
1,011,872
92,718
290,160
368,880
423,048
575,419
704,543
60,813
120,490
141,252
178,194
227,654
307,329
Total Revenue
Cost of Sales
Gross Profit
Gross Profit %
39.61%
Operating Expenses
29.34%
27.69%
29.64%
28.35%
30.37%
36,283
63,786
85,184
122,478
171,727
251,834
24,530
56,704
56,069
55,716
55,927
55,495
Interest
2,857
12,956
10,724
7,910
4,322
1,505
Depreciation
12,300
17,866
17,866
17,866
17,866
17,866
Taxes
EBITDA
2,624
7,247
6,870
7,485
8,435
9,031
Net Income
6,749
18,635
20,609
22,456
25,305
27,093
Net Cash Flow
(68,532)
55,522
1,710
(3,885)
(3,471)
(4,444)
IRR
8.31%
Wikispace
For more information, progress
updates, or in order to leave your
feedback, please visit our wikispace
entitled EnergyAccess. We want to
hear about your examples and
insights.
Email philip.larocco@eandco.net or
jennye@gmail.com for instructions.
Have a nice day and
Thank you for your attention!
Goals
1. Create improved, cost-effective service
delivery of modern energy.
2. Leverage the largely untapped resource
of small and growing businesses in order
to do so.
3. Promote activities that can achieve scale
and are replicable.
Investors Managed
Accounts
Borrowings –
People + Planet
Notes
Capital
Debt
Equity
Donations –
Grants &
Energy Cures
Services
Carbon
Revenues
Operations
End-user
Finance
SME
Entrepreneurs
&
MFIs
Principal, Interest & Dividends
Development Benefits
Environmental Benefits
Investors Managed
Accounts
Borrowings –
People + Planet
Notes
Donations –
Grants &
Energy Cures
$1.07
$0.23
$1.00
$0.20
Capital
Debt
Equity
$0.10
Services
1/6th 12%, 9 y
2/3rds 10%, 7 y
Carbon
Revenues
Operations
1/6th 11%, 5 y
End-user
Finance
SME
Entrepreneurs
&
MFIs
Principal, Interest & Dividends
Development Benefits
Environmental Benefits
10.7%
Provision for financial losses
9.2% of P + I + D … 10.7% becomes 8.7%
On $1.00 …equals 7.3% on $1.07
9.00%
7.3% base case
Borrow $1.07
Invest $1.00
Grants + Carbon
= $0.23
8.00%
7.00%
6.00%
5.00%
Return
4.00%
3.00%
2.00%
1.00%
0.00%
100% 94.25% 88.50% 82.75%
77%
% of full
cost borrowed
Sensitivity of Return to Amount Borrowed of each $1.30 Required
10.7% hurdle rate, 9.2% losses, 1.30 formula
Schedule and Deliverables
Week
Tasks
Deliverables
Dec. (wk. 1)
Finish case studies;
Submit preliminary
presentation, outline
Dec. (wk. 2)
Start Interviews
Continue interviews
Dec (wk. 3)
Evaluate progress
Dec. (wk. 4)
Consolidate research
Jan. (wk. 1)
Begin writing
Jan. (wk. 2)
Continue writing
Jan. (wk. 3)
Format
Submit text for peer review
Jan. (wk. 4)
Edit, revise
Deliver final materials (texts,
case studies, presentations,
multimedia) on flash drives