Presentation by Lindsay van Landeghem - Smart Villages Arusha workshop - June 2014 The workshop in Arusha explored the East African/Tanzanian environment for village energy, local case studies, challenges and opportunities, with a view to formulating policy recommendations for policymakers, funders, NGOs and other stakeholders the region. An important part of the workshop, and indeed the whole Smart Villages initiative work programme, was to gather evidence from existing projects that have provided or facilitated sustainable off-grid energy solutions in the developing world.The workshop gathered more than 50 experts, including policymakers, NGOs, off-grid energy entrepreneurs and others to look for solutions to providing energy to villages off the grid.

1. GVEP International
Introduction and Market Overview

2. 1
Contents
Introduction to GVEP International
Challenges Experienced and Addressed by SMEs
Market Trends and Investor Feedback

3. GVEP International
Overview
› Mission: Working with local businesses in developing
countries to accelerate access to modern energy.
› Value Proposition: Sustainable businesses are longer
lasting than the effects of direct donations.
2
› Impact: Over the past 5 years, GVEP has provided more
than 4 million people with access to clean energy,
created 3,000 local jobs, saved 2.7m tonnes of CO2 and
leveraged US$38m in support of energy enterprises.
› Background: Launched in 2002 as a World Bank initiative;
registered as a UK charity in 2006. Current headcount of 80.
› Locations: HQ in London (UK), field offices in Barbados,
Senegal and East Africa (Kenya, Tanzania, Uganda, Rwanda).

4. 3
Funding Partners Program Partners
GVEP International
Collaborating with Broad Network of Partners

5. 4
Micro-Enterprise Support: Business skills capacity
building and mentorship; technology training;
market building activities; enterprise
development support to increase productive use
of energy; access to micro-finance.
SME Advisory: strategic planning, investment
advisory, operations/logistics support, financial
planning and analysis, marketing and sales
support, M&E advisory/impact assessment,
project development support.
Market Research: research conducted and
published related to cookstoves and briquettes,
solar-enabled mobile phone charging, solar
product demand.
Access to Finance
› Investment readiness and capital
raising strategy.
› Introductions to providers of
grants, debt and equity.
› Lending facilitated through credit
enhancement in the form of loan
guarantees (both at micro-finance
level with MFIs and SME level with
commercial banks).
› Training of financial institutions,
both MFIs and commercial banks.
› Direct grant support
GVEP International
Activities

6. Peter George
Head of Advisory Services
Energy financial advisory, investment
Merrill Lynch, ArcLight Capital
Davinia Cogan
SME Advisor
Impact investing, inv. funds, micro-finance
Kiva, ING, Social Stock Exchange
Gregory Miller
SME Advisor
RE analysis, energy/impact investment
Big Society Cap., SNV, E+Co, New Energy Finance
Belinda Mills
Project Dev. Specialist
RE project dev/mgmt, wind, biomass
Windlab, Envitech Solutions
Samantha Carter
Engineering Fellow
Wind and biogas projects
Fichtner Consulting Engineers, EWB
Wakar Kalhoro
Financial Access Manager
International law and finance
StanChart, Hogan Lovells, Allen & Overy
5
Advisory Services
Team Profile
Katrina Gordon
Intern
Financial management, micro-finance
Boeing, Kiva
Lindsay Van Landeghem
SME Advisor
Mgmt consulting, M&E
BTS USA, Innovations for Poverty Action

7. • As of May 2014, in our first year of operations, the Advisory Team has completed 69
engagements with 53 clients, and has 32 engagements currently in progress with 31 clients
Advisory Services
Portfolio of Engagements
6
48%
10%
16%
18%
8%
By Country
Kenya
Rwanda
Tanzania
Uganda
Other/Non-Specific
39%
5%
2%
5%
4%
14%
20%
6%
5%
By Engagement Type
Capital Raise Support
Financial Planning and Analysis
Human Resources
Marketing and Distribution
Operations and Supply Chain
Project Development
Strategic Advisory
Technical Advisory
Other
›Specialized in East Africa: ~50% of our projects
are in Kenya, reflecting the deeper market there.
›Access to Capital is Key: ~40% directly related to capital
access, reflecting the needs of companies in the sector.

8. 7
Contents
Introduction to GVEP International
Challenges Experienced and Addressed by SMEs
Market Trends and Investor Feedback

9. 8
Challenges SMEs Experience in the Field
Working Capital
End-User Financing Distribution
Access to Market Data
Seed Capital
After-Sales Service

10. 9
Challenges
Seed Capital
ComplicationSituation
› Require access to capital to
prove out business concept
Resolution
› Investors and creditors are not
comfortable releasing capital
until a proof of concept has
been established
› The pilots and feasibility
studies that are necessary to
prove out a business model are
often expensive
› Access capital via friends,
family, and angel investors that
the company is familiar with to
launch product pilots
› Access grant capital to develop
product pilots and feasibility
studies
› Utilize crowd-funding sites to
source capital for innovative
initiatives
› Utilize pro-bono service
providers to provide technical
support for pilots and
feasibility studies

11. 10
› Access to international and
local debt facilities
› Increasing number of
international actors seeking to
provide working capital to
energy SMEs (e.g.
responsAbility Working Capital
Facility, Deutsche Bank Global
Climate Partnership Fund,
AlphaMundi Bastion Fund,
SunFunder)
› Offset risk perceived by local
banks through education and
increased communication with
financial institutions, credit
enhancement such as loan
guarantee facilities, currency
risk insurance, etc.
› International debt facilities
typically target larger loans
than are required by SMEs in
East Africa
› Local financial institutions are
risk averse and have high cost
of capital
› Renewables are perceived as
high risk sector, and banks are
unfamiliar with innovative
repayment models
Challenges
Access to Working Capital
ComplicationSituation Resolution

12. 11
Challenges
End-User Financing
› Facilitating the purchase of
energy products given limited
purchasing power
› Lack of access to working
capital in order to finance in-
house consumer finance
facilities; payment track record
and scale of customer base is
key
› Lack of adequate data
pertaining to the credit profile
and repayment rates of end-
users
› Third-party consumer finance
through local MFIs is
challenging; lack of capacity,
incentives to market energy
products
› Access sufficient capital to
develop in-house credit facility
for distributors and/or end-
users (via mechanisms denoted
in previous slide related to WC)
› Create payment models, tech
which facilitate gradual
repayment (PAYG, hire-
purchase, modularity)
› Develop end-user credit
profiles using proxy data from
local telecoms, and other
collection methods (i.e. remote
monitoring, customer surveys,
data collection via sales agents)
ComplicationSituation Resolution

13. 12
› Distribute products to hard-to-
reach areas with limited
transport infrastructure
› Developing the infrastructure
to transport goods through in-
house methods can be
prohibitively expensive, given
vehicle, fuel, and staffing costs
› However, utilization of couriers
is expensive, especially when
limited numbers of products
are distributed
› Utilize local transport to
distribute goods to local agent
network
› Co-distribute goods with other
small product companies via
public or private means
› Partner with companies that
already have established
distribution networks (MNOs,
Coca-Cola, Unilever)
› Develop challenge funds to
incentivize accelerated
distribution (e.g. SNV results-
based financing initiative)
Challenges
Distribution
ComplicationSituation Resolution

14. 13
› Provide effective after-sales
service to remote customers,
especially to build confidence
in renewable energy products
and companies
› Returning faulty products to a
central hub can be more costly
that distributing products, as
returns are infrequently
transported in bulk
› Limited number of high-
capacity, trained individuals to
address issues on the ground
› Store additional stock with
agents in remote areas, and
replace units as needed; return
units to central hub for repair
and redeployment
› Develop simple products that
local talent can easily repair
› Provide training to local talent,
and provide access to training
manuals in hard-copy or via
smart phones
› Utilize call center to source
customer complaints, and
coach end-users through
repairing simple issues
Challenges
After-Sales Service
ComplicationSituation Resolution

15. 14
› Facilitate access to data about
the market, competitors, and
consumers
› Investors and creditors
require a proof of
demand/competitive
advantage to finance
start-ups
› Companies must be able
to construct credible
financial projections
› Develop internal infrastructure
to track consumer data (i.e.
remote monitoring systems,
M&E surveys, data collection
via sales agents)
› Encourage local REAs to act on
established mandates
pertaining to data aggregation
and sharing
› Promote market knowledge-
sharing via workshops and on
online forums
› Solicit market data/feasibility
studies from consulting firms
providing relevant services
› Data around consumer
preferences and product
demand that exists in more
sophisticated markets is largely
unavailable for BoP consumers
in East Africa
› Given that the nascent state of
the market, few companies are
public; data that would allow
companies to project or
benchmark performance does
not exist or is not public
Challenges
Access to Market Data
ComplicationSituation Resolution

16. 15
Contents
Introduction to GVEP International
Challenges Experienced and Addressed by SMEs
Market Trends and Investor Feedback

17. 16
Market Trends
› End-user financing mechanisms (PAYG, modularity, hire-purchase) permit BoP
access where several years ago upfront costs were prohibitive
› Increasing interest in local manufacturing, particularly in stoves market; limited
technical capacity, quality control, and higher costs than Asia are barriers
› Access to local debt highly inaccessible given risk perceptions/rates, collateral
requirements, short tenors, lack of capacity; USAID and DCA in Ke/Tz are, for
example, trying to overcome this barrier (GVEP-sponsored facility)
› Large capital raises by established players (i.e. M-KOPA, Off-Grid: Electric, d.light)
shows that all types of capital are available, though early-stage gap still exists
(CIC seed fund, AECF, donor initiatives, and impact funds trying to address)
› Increasing interest in mini-grids as a means to deliver scalable access amongst
donors, investors and SMEs; certain markets are esp attractive given the
conducive regulatory environment established with help from actors like WB, IFC

18. 17
Market Trends
Mini-Grids
Still defining scalable business models:
Mini-grid sizes tested by our clients range
from 1-2kW to >500kW with different
pricing strategies; some use ABC model,
others do not
Vague regulation: Regulatory frameworks
for mini-grids are underdeveloped and grid-
extension is priority over off-grid solutions;
regulatory frameworks differ quite
dramatically depending on country
Relatively little private sector involvement:
Most significant dev. driven by gov’t, donors,
NGOs and local communities; clearly this is
beginning to change with increased private
sector activity
Lack of financing
Similar returns to grid-connected
generation, but higher perceived
risks (no offtake insurance, etc.).
Therefore:
› Lack of project development
funding
› Few local lenders offer long-
tenor debt financing at
feasible rates
› Few active international
lenders, equity isn’t well
matched (SME investors want
tech co’s, project investors
want grid-connected)
› grants introduce delays and
uncertainties

19. 18
Investor Concerns
› Mini-grid Specific: Few developers with track records; Time to financial close long, given
permitting, insurance challenges; financing difficult to secure; challenges associated with
offtake (history of late payments by national utilities); remote nature of mini-grids poses
distribution and maintenance challenges
› Management Team: Perceptions of management team capabilities, including remotely-
based management, inexperience in East Africa or with successful previous start-ups, and in
some cases educational quality / limited skill sets
› Proof of Concept: Lack of proven concepts, due to very early-stage capital cap, where
companies have fully-demonstrated competitive advantage of their technology/business
model, a strong understanding of the market, and consumer demand
› Consumer Willingness-to-Pay: Investors find it difficult to differentiate and identify possible
„winners“ amongst product companies with high upfront costs and without a strong end-
user financing/distribution model
› Importance of Returns: Many investors seek market-rate returns, and energy companies
serving the BoP are relatively lower-return that other sectors; in other cases, open to lower
returns, but recognition that only companies that survive over long term (typically ~10% of
start-ups) will deliver even concessionary rates of return

20. 19
› SMEs continue to innovate to address some of the challenges inhibiting scale-up, including some of
which have been outlined in this presentation
› Regulators to improve policy, law and regulatory framework to enhance businesses’ ability to operate
effectively in the market and to unlock sources of commercial credit
› Donors engage with SMEs and fill gaps where private sector financiers will not participate; for projects
that are too small for institutional investors, aggregate capital via portfolio facilities (e.g. mini-grid dev.
facilities, working capital funds, etc.)
› Various parties continue to attract private capital by mitigating risks, such as credit risk (through
insurance, guarantees) and currency risk (through hedging/“de-dollarization“ of the energy sector)
› Continued creation and aggregation of data in order to promote best practices and to enhance
companies‘ ability to model and forecast with more precision
› Continued investment in incubation, business development, and advisory support in order to
promote the growth of businesses and facilitate the flow of capital
Way Forward

21. Thank you
We would be pleased to work with partners
engaged throughout the renewable energy
sector.
Please contact Lindsay Van Landeghem for more
information at:
lindsay.vanlandeghem@gvepinternational.org