Investing in a Cleaner Future - Part 2
In Part 1 you learned how our royalty-based financing solutions can be used to extract value from an operational project and use it to develop a similar one in the same province. What about allowing a developer to take a stream of cash flows from a few solar projects in Ontario and turn it into a cheaper financing alternative for his social enterprise in Africa? Read on to learn how one of our latest investments had a larger impact than we ever could have imagined.
One of our more recent deals, closed in June 2019, was very similar to the first. Another developer who had started the development of several solar projects in Ontario under the Feed-In Tariff (FIT) program. He just so happened to be the right person, in the right place, at the right time. He was able to sell his projects to a larger IPP who ultimately constructed and now operates the projects. As part of his compensation for selling the projects, he retained a gross revenue royalty on them.
In the years following the sale of the projects, he became involved in several venture capital endeavours but ultimately ended up forming a new company focused on solar energy. However, instead of focusing on solar in Ontario, this new company, Solar Panda, provides small home energy systems to residents in Kenya that include a solar panel, battery, lights, radio and a cell phone charger.
The initiative operates on a lease-to-own model where Kenyans make small payments via their phone. The payments are less than they currently spend on kerosene to light their homes and is paid over a span of 15-24 months. At this time, they now own the system and can decide to use their accumulated credit to finance further upgrades, such as TVs. The ability to have emission-free indoor lighting as opposed to breathing in toxic kerosene fumes has been fantastic for the overall well-being of their customers. Not to mention, they can also charge their phones at home, something they typically would have to travel and pay to do somewhere else.
Why do I mention all this? Even though this company has been immensely successful, in order to grow, they needed additional capital. As you can imagine, it is not always easy to find sources of capital for businesses in Africa. While the developer could have used his quarterly royalty cheque to finance the company's growth at a slower pace, he knew that if he had a larger sum of money today, he could provide more clean energy solutions to more Kenyans tomorrow. So, he contacted us and we entered a similar deal as the first. We purchased his existing royalties in Ontario for a larger upfront sum and he took our money to use for his true passion – improving the quality of life for those who need it most.
This is another example of how our investment indirectly resulted in more benefits than we could have imagined — improving the overall health and well-being of people in Africa while also reducing the dependency on kerosene and the corresponding emissions. Of course, we still have the direct impact of having an economic interest in several solar parks that provide clean energy to thousands of Ontario homes every day.
Stay tuned over the coming weeks for additional post in this series highlighting key examples of our impact and, more specifically, how we are tackling a key target of SDG #7: increasing the share of renewable energy in the global energy mix.