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Christian Schattenman, Bamboo Finance

The Off-Grid Energy Investment Opportunity and Risks

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Christian Schattenman, Bamboo Finance

  1. 1. 127 October 2015 Investing with Impact 27 October 2015 Bamboo Finance Investing In Off-Grid Energy
  2. 2. 227 October 2015 Content About Bamboo Finance
  3. 3. 327 October 2015 A Global Private Equity Firm • Impact Investing and Microfinance pioneers • Management team with track record • Diversified portfolio by geography and stage • Demonstrated returns with exits delivering IRRs from 18 - 39% • Tangible significant social impact with top quintile rating by third party • Strong investor base – 75% institutional investors $280M Private Equity 38 Investments >20 Countries 4 Regional Hubs Bamboo Finance is a commercial investor specializing in low-income consumer business models that produce and deliver essential products and services in frontier markets. 3 Funds
  4. 4. 427 October 2015 • Invest in companies that reach underserved regions in emerging markets profitably • Focus on affordable healthcare, education, housing, financial services, agribusiness and renewable energy • Fund innovative distribution and financing models • Expand and strengthen local economies, communities and businesses • Integrate impact measurement alongside financial performance from the beginning • The company delivers or supports the delivery of essential products and services to low income consumers in emerging markets • The usage of the product/service results in increased income or reduced expenses and better quality of life • The company generates employment/income in local communities • Map impact objectives, governance, policies, distribution channels, supplier integration, human resource practices and incentives to the company’s business model • Establish a set of output indicators that the company will report on a quarterly basis • Take a board seat and contribute to social and financial performance ongoing • Support the use and advancement of third party impact measurement systems and initiatives INVESTMENT CRITERIA AND IMPACT MANAGEMENT INVESTMENT STRATEGY INVESTMENT CRITERIA IMPACT PROCESS & TRACKING About Bamboo Finance
  5. 5. 527 October 2015 FIRST GENERATION OF FUNDS Oasis Fund Fund size # of Investments #of Exits US$ 195 Million 30 Investments 4 Exits US$ 53 Million 16 Investments 2 Exits* Strategy The Bamboo Financial inclusion fund invests in a range of microfinance institutions and funds serving the lower socio-economic segments in emerging economies The Oasis Fund invests in commercially viable companies that provide access to housing, healthcare, education, energy, financial services and agriculture Portfolio sample Financial inclusion Fund I * Represents Debt Investment and Partial Equity Exit About Bamboo Finance
  6. 6. 627 October 2015 About Bamboo Finance A portfolio of 38 investments across more than 20 countries XAC BANK (Mongolia) APOYO INTEGRAL (El Salvador) EFC (Zambia)EDPYME NUEVA VISION (Peru) SICSA AAVISHKAAR AFRICAP FASO (Uganda) APOYO INTEGRAL (Mexico) BANCO FIE (Bolivia) FIE GRAN PODER (Argentina) BANCO WWB CALI (Colombia) CREATION INVESTMENTS APOYO INTEGRAL (Guatemala) CFE (Panama) SVASTI (India) ASMITHA (India) MIBANCO (Peru) AMfB (Nigeria)BANCO POPULAR (Honduras) BAI TUSHUM (Kyrgyzstan)CHF (Romania) CHF (Lebanon) CFE (Tanzania) EAMF (Cameroon) EASL (Ghana) CFE (Uganda) FINAE (Mexico) BILLE (Brazil) IMMERSION (Pakistan) GREENLIGHT PLANET (India) VAATSALYA (India) HUSK (India) VORTEX (India) JOMA (Vietnam, Laos) KOPO KOPO (Kenya) VIDAGAS (Mozambique) CARECROSS (South Africa) Financial Inclusion Fund Investments Oasis Fund Investments Offices Bogotá (Colombia) Geneva (Switzerland) Singapore Luxembourg ORB (India) Nairobi BRIDGE (Philippines) COAST COCONUT(Kenya) MODERN FAMILY DOCTOR (India) BRAZIL+ BBOXX (UK, East Africa)
  7. 7. 727 October 2015 Content The Off-Grid Energy Opportunity
  8. 8. 827 October 2015 Solar Makes Sense… Solar is the best energy solution for off-grid:  Geographical spread of countries in South East Asia and large rural off-grid markets in Africa make solar the most appropriate technology.  Distributed solar energy is cheaper than extending the grid and will drive off-grid electrification in Sub- Saharan Africa, South Asia & Southeast Asia.  Africa has been leapfrogging telephony and banking. The same will happen to energy.
  9. 9. 927 October 2015 Large Underserved Market… Large underserved market for fast growing companies:  The off-grid SHS (solar home system) and appliances market size is estimated to be USD 50 billion. This market size grows significantly if adding business opportunities around the provision of content (internet, e-learning, entertainment, etc).  A new breed of fast growing off-grid energy companies is seeking capital to expand.
  10. 10. 1027 October 2015 Social & Environmental Impact… There is a significant development impact:  Energy is the basis of development. Clean energy is the basis for sustainable development.  Investments in off-grid energy have the potential to create a virtuous cycle in which energy access enables economic development which triggers more demand for energy.  We can’t afford that the 1.3 billion off-grid people develop with traditional polluting energy. If we want to reduce carbon emissions and fight global warming, we have no choice but to invest in renewable energy for off-grid communities
  11. 11. 1127 October 2015 Stanford Energy Club, Berkeley Energy & Resources Collaborative, Oct 2014 “…This exciting development…may also foreshadow how the energy system of the future will look. As these systems continue to develop they will be able to meet increasingly greater energy needs, such as enabling the use of refrigerators, and spur increasingly complex types of economic development…” “… Africa’s leapfrogging of the traditional energy infrastructure…” …Confirmed By Many Experts Report on the Off-grid Lighting Status for Southeast Asia and the Pacific, Nov 2014 “…population of Southeast Asian countries…is around 507 million, of which nearly 111 million (around 22 per cent)…do not have access to grid electricity…” “…due to the geographical location…generation of electricity through solar energy is the most appropriate one.” “…A full transition to energy efficient off-grid lighting in Southeast Asia would result in energy savings of 19.3 million barrels of crude oil energy equivalent; cost savings of USD 1,423M; and a CO2 reduction of approximately 7 million tonnes.”
  12. 12. 1227 October 2015 Recent Off-grid Energy Deals Several off-grid solar firms raised US$44 million in the first two months of 2015 from major strategic and financial investors, continuing from the US$64m raised in 2014. This includes debt and equity investments and shows increasing exit pathways for SFA portfolio. US$10mn US$12.5mn Warner Phillips US$12.6mn Some of the investors in 2014 US$7mn US$2.1mn US$0.5mn US$2mn
  13. 13. 1327 October 2015 Energy Access Sector Overview Energy poverty has moved from being only a huge development problem to a large market opportunity driven by developments in renewable technologies, mobile penetration, economic development, population growth, price of fossil fuels, mobile financial services etc. Slow grid extension demands for off-grid solutions ! • Grid extension is a resource intensive long-term effort facing multiple challenges • Long distance transmission lines are not cost effective in rural, less densely populated areas • This is even more the case if terrain is difficult (mountains, islands, etc.) • It is therefore expected that 70% of rural areas will be connected with either mini-grids or with stand-alone off-grid solutions Key Growth Drivers Active SIM Connections 3G penetration rate Smartphone penetration rate 56.9M Mobile Money Users 56.9M Renewable Technology Prices Kerosene & Diesel Costs Un-electrified population in Africa:  More than 500m people as of today  Expected to grow by 2030 to 700m as rapid population growth is outpacing the many positive efforts to provide access  Nearly 80% of those lacking access to electricity across sub-Saharan Africa live in rural areas. Un-electrified population in South & South-East Asia:  More than 800m people as of today  Most of these households depend on conventional fuel burning that pollutes and damages, both their health and environment, indicating a great need for clean and affordable products. Un-electrified population 2009: 1.3 billion people 2030: still 1.3 billion people, with 700 million alone in Sub-Saharan Africa
  14. 14. 1427 October 2015 Climbing the energy ladder requires appropriate energy sources offering a growing investment opportunity… Market Potential Market size estimates (AT Kearney 2014): • Today’s solar portable lamp market volume : $200M • Short-term solar portable lamp market volume : $2.71Bn • Mid-term Solar Home System (SHS) market volume : $6Bn • Long-term SHS and accessories market :$50Bn including devices aiming at powering • Radio • Television • Others (e.g. fans, refrigerators, tablets, smart phones, etc.) • Large additional market opportunity: provision of content from movies to music, internet, etc. …exemplified by exponential growth of off-grid energy companies:  Example 1: Company selling solar lamps growing from $1m business to $21m in just 3 years  Example 2: Company offering SHS with PAYGO technology selling 300’000 systems within 3 years.  Example 3: The Bamboo’s latest investment in company expected to sell 100’000 SHS within 2 years inter-connected Households Portable Low High PL SHS Mini- grids Cost of Solutions Modern Productive Basic Low High Energy level Use Market potential Time Horizon Today Short-term Mid-term Long-term
  15. 15. 1527 October 2015 Content Bamboo Off-Grid Solar Energy Experience
  16. 16. 1627 October 2015 Bamboo Off-Grid Energy Examples Bamboo Finance has a track record of successful investments in off-grid energy companies. Current portfolio companies show strong growth and significant value increases through third party transactions. February 2012 January 2015 Bamboo invests in Series A round of Greenlight Planet. Fidelity invests in Greenlight Planet in Jan 2015 at significantly higher valuation than Bamboo. "Greenlight Planet has established itself as a product leader with a strong brand in the fast-growing off-grid energy segment. We are excited to partner with Greenlight Planet and its exceptional management team as the company embarks on its next phase of growth." – Kabir Narang, Managing Director of Fidelity Growth Partners India Greenlight Planet September 2012 January 2015 Bamboo purchases shares of Orb from Zouk Ventures. "We have reviewed many solar businesses now entering the African market, and we found Orb's diversified range of solar products, designed and manufactured by Orb to the highest standards of quality, to be very compelling. This, combined with Orb's unique branch network for the sale, installation, and service of residential and commercial customers gave us confidence that Orb will serve the Kenyan customer and its banking partners well. The investment fits well in FMO's renewable energy strategy for Africa.“ – Robert Voskuilen, Senior Investment Officer, FMO Orb Energy October 2012 August 2014 “Where Husk is going is very positive, it is not fixating on one technology, it is fixating on solutions.” – Daniel Kammen, energy researcher at the University of California, Berkeley. Bamboo invests in Husk Power Systems in October 2012. Husk Power Systems February 2015 February 2020 “Bboxx records customer usage data in minute detail. Gathering data on customers' energy usage behavior is the only way we can learn how to provide energy as a reliable service. We believe this innovation is central to unlocking the pay-as-you-go business model and making solar energy an accepted, trusted and financeable product in the eyes of the off-grid world.” – Sandhya Hegde from Khosla Impact Bamboo invests in BBOXX in February 2015. BBOXX FMO invests in Orb Energy to support Africa expansion at a significantly higher valuation than Bamboo. First Solar Inc. invests in Husk to support expansion to solar mini grids at a significantly higher valuation than Bamboo. Company expected to show strong growth over a 5 years holding period. Exit to strategic or financial investor.
  17. 17. 1727 October 2015 Content Risks & Mitigation
  18. 18. 1827 October 2015 Focus on Downstream Bamboo invests in innovative businesses downstream the energy value chain: no upstream risk Product design and engineering International distribution Manufacturing National distribution Retailing Manufacturers Consumer financing Distributors and retailers Consumers • Need capital for R&D in product tailoring to BoP customers and to pass along good terms to logistics and distributors • Distributors and retailers need to finance upstream and downstream • Huge working capital needs because of long transport and distribution times • More than 50% of consumers need to finance their off-grid product R&D (Solar/PV cell) Not in investment scope ! Bamboo doesn’t invest in capital intensive technology risk of upstream solar
  19. 19. 1927 October 2015 Portfolio Diversification Portfolio mix of Businesses models and products:  pico-solar / SHS against up-front payment  SHS with consumer financing, energy service model  project finance, mini-grids  B2B services and products using solar energy  Enabling businesses Active portfolio risk management with focus on diversification
  20. 20. 2027 October 2015 Portfolio Diversification Active portfolio risk management with focus on diversification Geographic diversification:  Investing in a diversified portfolio across Sub-Saharan Africa  and Southeast Asia  Invest in companies that have multi-country and region approach to further increase geographic diversification on individual investment level
  21. 21. 2127 October 2015 Portfolio Diversification Active portfolio risk management with focus on diversification FX and country risk reduced by investments in international companies exemplified by BBOXX:  Headquarters in London  Quality management and procurement team in China  Regional finance and operations team in Rwanda  Distribution with sales & tech staff in Kenya, Uganda, Rwanda  Franchise partners and sales presence in over 30 countries  Accesses LC financing for customer receivables: securitization of receivables in LC, financing from local banks and MFIs
  22. 22. 2227 October 2015 Content Thank You ! Christian Schattenmann Email: