Latest / Voices and Visions / Episode 8. Financing Energy Access in Africa | Benjamin Gatemi

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Episode 8. Financing Energy Access in Africa | Benjamin Gatemi · Voices and Visions

• 0:01
  SPEAKER_00: This is Voices and Visions.
• 0:03
  SPEAKER_00: Kenya is truly the land of manifestations.
• 0:06
  SPEAKER_00: A podcast profiling Africa's business polls through the people shaping it.
• 0:10
  SPEAKER_00: I don't think Kenya gets enough credit for how well it manages relationships.
• 0:16
  SPEAKER_00: Recorded in Nairobi, this season looks beyond headlines and funding rounds to understand how capital moves, how trust is built.
• 0:22
  SPEAKER_05: As much as I have a lot of respect for what Starbucks has done for the coffee community in the world, they wouldn't survive here.
• 0:27
  SPEAKER_00: And how companies scale in real conditions.
• 0:33
  SPEAKER_00: This podcast is produced by Tutopasa Agency.
• 0:36
  SPEAKER_00: Welcome to the Silicon Savannah.
• 0:42
  SPEAKER_00: Today I'm joined by Benjamin Gatsemi Gitonga.
• 0:45
  SPEAKER_00: He's a director at METIO, climate finance and energy investment platform focused on accelerating access to clean energy across the continent.
• 0:53
  SPEAKER_00: This is one of Africa's defining challenges.
• 0:55
  SPEAKER_00: How do you deliver reliable clean energy to the hundreds of millions of people who still don't have access?
• 1:00
  SPEAKER_00: And how can you build a business at the same time that can survive commercially?
• 1:03
  SPEAKER_00: At METIO, Benjamin works at the intersection of renewable energy deployment, financial structuring, but also market development.
• 1:10
  SPEAKER_00: They have to support companies and projects across off-grid commercial, industrial, and utility scale power.
• 1:18
  SPEAKER_05: Thank you.
• 1:20
  SPEAKER_00: So today we're gonna talk about a topic that I have absolutely uh no experience in and no knowledge of.
• 1:27
  SPEAKER_00: So I'm really glad that you're here because we're gonna be discussing energy access and renewable energy.
• 1:33
  SPEAKER_00: Um and I'd really like to start by maybe firstly understanding a little bit more about your background.
• 1:39
  SPEAKER_00: So what you've done and what you guys are doing at NETL.
• 1:43
  SPEAKER_05: Great.
• 1:44
  SPEAKER_05: So um by way of introduction, my name is Benjamin Gethonga.
• 1:49
  SPEAKER_05: I have predominantly been an investment bank called Colita Banca.
• 1:54
  SPEAKER_05: And um, prior to uh joining the energy and climate finance uh sector, I used to trade stocks, I used to manage uh a fund that invested in government bonds.
• 2:06
  SPEAKER_05: But I think uh I was looking for something more exciting, more impactful, something that's offering real-time solutions in the world.
• 2:17
  SPEAKER_05: So uh I have been privileged to live in areas that are purely of grid in Kenya.
• 2:22
  SPEAKER_03: Yeah.
• 2:23
  SPEAKER_05: Uh but what that means is that uh I've lived in areas that are not connected to the grid.
• 2:27
  SPEAKER_03: Yeah.
• 2:28
  SPEAKER_05: So what you have to do is to have to survive on complementary energy uh modes.
• 2:33
  SPEAKER_05: For instance, you have to use a paraffin pad.
• 2:38
  SPEAKER_05: You have to use uh battery to power your lamps.
• 2:42
  SPEAKER_05: So battery solar, so but battery solar.
• 2:44
  SPEAKER_00: Yeah.
• 2:45
  SPEAKER_05: Uh the challenge with this is that uh it can only run for so long before it then shuts off and then you're in complete darkness.
• 2:52
  SPEAKER_05: So, what does that translate to?
• 2:53
  SPEAKER_05: It means that uh uh these lost uh kind of uh activities that you could have done when you had the light.
• 3:00
  SPEAKER_05: Um, there's uh lost access to information during those periods that you don't have uh access to light.
• 3:05
  SPEAKER_05: So uh I cannot uh overemphasize the importance of uh having access to energy.
• 3:12
  SPEAKER_05: So the living experience of being in an off-grid area uh combined with my experience in the financial services sector, it's a perfect match.
• 3:27
  SPEAKER_03: Yeah.
• 3:27
  SPEAKER_05: Because then uh having those two two phases of life then helps me to uh really drive investments toward that, towards that energy inclusivity.
• 3:37
  SPEAKER_00: Yeah.
• 3:37
  SPEAKER_00: I remember when I was um in Zambia and there was at the time, so this was this was like eight years ago, I think, but at the time they were uh running uh solar products into the country, battery solar, um, chargeable.
• 3:52
  SPEAKER_00: Uh and I'd never thought about that, but then someone explained it to me that thanks to these kind of project uh products, kids that go to school when they get home, they have light so they can do their actual homework.
• 4:02
  SPEAKER_00: So even access to just having light to be able to continue your education, right?
• 4:07
  SPEAKER_00: Within the access of energy.
• 4:09
  SPEAKER_00: Um, I think that's uh a beautiful example that we can use.
• 4:14
  SPEAKER_00: So if we look at the size of um this potential untapped market, we can say, but also the size of how many people currently don't have access to energy.
• 4:25
  SPEAKER_05: Uh so here in Kenya, I would say uh we're looking at 15 to 20 percent of the population that is still uh disconnected from the grid.
• 4:35
  SPEAKER_04: Okay.
• 4:35
  SPEAKER_05: So um 15 to 20 percent is such a huge number.
• 4:38
  SPEAKER_04: Yeah.
• 4:39
  SPEAKER_05: So well, you've been able to cover at least uh 80% of the population.
• 4:43
  SPEAKER_05: Yeah, it's that 20 that 20% that last final that lacks uh the final connectivity.
• 4:50
  SPEAKER_05: So um looking at it from a government point of view, government uh push point of view, yeah, are we working towards ensuring that that 20% is actually also included so that that kid, as you rightly mentioned, who's coming back home to do the homework, yeah, is able to do the homework.
• 5:08
  SPEAKER_00: Yeah, and charging your phone to be able to do payments.
• 5:11
  SPEAKER_05: And being able to um actually receive a phone call from your son who is working in the city, being able to store your horticultural produce in a in a freezer, in a fridge so that doesn't go bad.
• 5:24
  SPEAKER_05: So those are the simple kind of nuances that we're looking at because it's that connectivity that will help address all these small issues that um ultimately face the common person in the country.
• 5:37
  SPEAKER_05: So from a government point of view, um, I would say that uh these uh deliberate and cost uh effort to actually ensure that the 20%, the 15% that is still disconnected actually gets connected.
• 5:51
  SPEAKER_05: And how is it being done?
• 5:52
  SPEAKER_05: So uh if you go back to 2013-2014, it was the last uh mile project by the World Bank and the Kenya government to actually ensure that every household gets connected to electricity.
• 6:07
  SPEAKER_05: So this was uh um kind of um a joint mission where the World Bank um collaborated with the Kenya government, uh providing funding to ensure that the grid is actually extended to reach those areas that it's not been there before.
• 6:22
  SPEAKER_05: So while that was successful, uh looking back, we still now are talking about the 20%.
• 6:28
  SPEAKER_05: So how do we reach this 20%?
• 6:30
  SPEAKER_00: But what what happened?
• 6:31
  SPEAKER_00: So was it that the the grid wasn't extended far enough?
• 6:34
  SPEAKER_05: So the grid was excellent, but um you have to appreciate that uh the Kenyan communities can be quite diverse.
• 6:42
  SPEAKER_05: So for instance, you have communities whose coactivity back from the old ages, pastoralism.
• 6:50
  SPEAKER_05: So they'll move from one place to another.
• 6:52
  SPEAKER_05: So today I'll take a l uh a power line all the way to uh Lokicha, it's a town in Kenya.
• 6:58
  SPEAKER_05: Yeah, but the residents of Lokicha might move.
• 7:02
  SPEAKER_05: Yeah, move from place to place with the animals.
• 7:04
  SPEAKER_01: Yeah.
• 7:05
  SPEAKER_05: So if they go to another town that doesn't have uh grid access, uh how do they survive?
• 7:10
  SPEAKER_00: So how do you become how can you be a nomad in uh this world that has energy?
• 7:15
  SPEAKER_00: So I I sometimes consider myself a digital nomad.
• 7:18
  SPEAKER_02: Yes, right?
• 7:19
  SPEAKER_00: But I'm connected everywhere.
• 7:20
  SPEAKER_00: Yeah.
• 7:20
  SPEAKER_00: I have my phone, my laptop, a few chargers, with me, uh, an e-sim that goes everywhere.
• 7:25
  SPEAKER_02: Yeah.
• 7:25
  SPEAKER_00: But then you look at a very different type of nomad community that then therefore still requires, but then the product would be off-grid access, right?
• 7:34
  SPEAKER_05: Precisely.
• 7:35
  SPEAKER_00: Okay, so charging your phone with a solar battery?
• 7:37
  SPEAKER_05: You have to charge your phone with a solar battery.
• 7:39
  SPEAKER_05: Then you have a couple of lamps that are still uh powered by the solar battery.
• 7:43
  SPEAKER_03: Yeah.
• 7:44
  SPEAKER_05: So this helps you to uh access light, access power constantly um throughout the day, throughout the week.
• 7:51
  SPEAKER_05: So that's where the off-grid kind of products come into play.
• 7:54
  SPEAKER_03: Yeah.
• 7:55
  SPEAKER_05: And um, how have we seen this been rollout in the country?
• 7:58
  SPEAKER_05: So we have uh very many companies that have actually uh tested out their products in the market.
• 8:04
  SPEAKER_05: Yeah.
• 8:05
  SPEAKER_05: And some of these are actually our portfolio companies as needed.
• 8:08
  SPEAKER_05: So a good example is Sanking.
• 8:10
  SPEAKER_05: Another company is uh solar panda, who actually sell uh what we call uh distributed uh renewable energy products.
• 8:20
  SPEAKER_03: Yeah.
• 8:21
  SPEAKER_05: Um typical example is uh product that includes uh 10-watt solar panel or a five-watt solar panel that comes uh along with a TV, that comes along with a uh battery pack, that comes along with uh five light bulbs, that comes along with a radio, all solar powered.
• 8:41
  SPEAKER_05: So you get the whole package.
• 8:43
  SPEAKER_05: If you look at that whole package, effectively people are able to access news on a TV.
• 8:48
  SPEAKER_05: Yeah people are able to access news over the radio.
• 8:52
  SPEAKER_05: The kids are able to have some light to do their study.
• 8:55
  SPEAKER_05: Yeah, and um that's what would call a kind of um inclusive energy access.
• 9:01
  SPEAKER_05: Yeah, we might not be able to reach uh the entire population through um through uh the grid going to them, but we are still able to address these small pockets of people who are in different parts of the country through off-grid products.
• 9:16
  SPEAKER_02: Yeah.
• 9:17
  SPEAKER_05: Um another example of an off-grade product would be uh national park that's tucked away somewhere south in the Mara.
• 9:26
  SPEAKER_05: So we cannot take a grid to the national park.
• 9:28
  SPEAKER_00: No, it's not very friendly for nature.
• 9:30
  SPEAKER_05: It's not friendly for nature, yeah.
• 9:31
  SPEAKER_05: But we still have uh visitors, tourists who want to go visit the park, uh spend a night there or spend two nights there.
• 9:38
  SPEAKER_05: Then we have the kind of large, larger scale uh off-grid solar projects that uh tend to serve such kind of customer.
• 9:47
  SPEAKER_05: Like a generator, then or so uh now in this case it's renewable energy, so you're not using a generator.
• 9:52
  SPEAKER_00: Okay, sorry, yeah, I'm learning.
• 9:53
  SPEAKER_00: Yeah.
• 9:53
  SPEAKER_00: I'm learning.
• 9:54
  SPEAKER_00: Okay, tell me more.
• 9:54
  SPEAKER_05: Yeah.
• 9:55
  SPEAKER_00: So then what would it be?
• 9:56
  SPEAKER_00: What is the product?
• 9:56
  SPEAKER_05: What we would do is that uh I would have a battery pack and some solar panels.
• 10:00
  SPEAKER_05: Yeah.
• 10:00
  SPEAKER_05: So the solar panels would actually uh collect power and that is stored in a battery.
• 10:05
  SPEAKER_05: And that that power could be used to um actually uh run the uh off-grid camp.
• 10:11
  SPEAKER_05: Um now the challenge is that um when it comes to such kind of bigger projects, then we also have a limited number of uh potential uptake because uh not every uh other place in Kenya will require such kind of projects.
• 10:28
  SPEAKER_05: So those those are some of the um challenges when it comes to scaling bigger off-grid projects, um, especially um in very specific uh kind of cases.
• 10:42
  SPEAKER_05: You might need it, yeah.
• 10:43
  SPEAKER_05: Yes.
• 10:44
  SPEAKER_00: But tell me a little bit more about uh, because you mentioned two portfolio companies.
• 10:47
  SPEAKER_00: What do you guys do at NITIO?
• 10:49
  SPEAKER_00: What is NITIO?
• 10:50
  SPEAKER_05: Uh at NITIO, uh we actually uh identify ourselves as a climate climate finance uh platform.
• 10:56
  SPEAKER_05: Okay.
• 10:56
  SPEAKER_05: So we started off in 2018 and our go-to-market product was uh data solutions product.
• 11:02
  SPEAKER_03: Yeah.
• 11:03
  SPEAKER_05: Uh and this kind of leverage partial uh kind of data AI to come up with uh predictive uh models that could help uh drive investments into the off-grid space, uh, do credit analysis on uh the underlying customers and then help us or help uh potential investors to understand the underlying credit risk of uh call them aggregators or intermediaries who then sell these products to last mile kind of customers.
• 11:32
  SPEAKER_04: Okay.
• 11:33
  SPEAKER_05: So uh the data the data product has really kind of helped create a business case, probably as needier because we also run a fund, which I'm going to speak about uh in the next uh few minutes.
• 11:44
  SPEAKER_05: Yeah, it helps investors like ourselves and other investors uh build business cases for uh customers in the renewable energy sector, specifically in the off-grid space.
• 11:56
  SPEAKER_01: Yeah.
• 11:56
  SPEAKER_05: So um that's the databatic of the business.
• 11:59
  SPEAKER_05: Then we also have a fund that we kind of uh run, online investment vehicle.
• 12:04
  SPEAKER_05: It's an open-ended vehicle called Facility for Adaptation, Inclusion and Resilience.
• 12:09
  SPEAKER_04: Okay.
• 12:10
  SPEAKER_05: And uh what we do is that we deploy uh deploy capital to renewable energy companies to uh ultimately ensure energy inclusivity and at the end of the day, uh kind of work towards the climate goals.
• 12:28
  SPEAKER_00: So a climate tech investor, maybe I could also see it that way.
• 12:32
  SPEAKER_05: Yes.
• 12:32
  SPEAKER_00: Then and what what do you guys deploy?
• 12:34
  SPEAKER_00: Is it is it equity?
• 12:36
  SPEAKER_00: Is it uh debt funding?
• 12:38
  SPEAKER_00: How do you how do you help them?
• 12:39
  SPEAKER_00: Is it loans?
• 12:40
  SPEAKER_05: Yeah, so we deploy debt funding, so we provide loans to companies in that renewable energy space within the solar space.
• 12:47
  SPEAKER_01: Yeah.
• 12:47
  SPEAKER_05: So these could be loans to um off-grid companies that sell solar home system uh kids.
• 12:53
  SPEAKER_05: Yeah, uh, it could be funding to uh commercial and industrial uh companies that set up uh solar PV plants maybe for an industrial park.
• 13:02
  SPEAKER_03: Yeah.
• 13:02
  SPEAKER_05: It could be loans to um an e-mobility company that's uh leveraging use of solar to power the charging infrastructure, yeah.
• 13:11
  SPEAKER_05: Uh, then kind of offsetting use of petrol and diesel for commercial activities.
• 13:17
  SPEAKER_01: Yeah.
• 13:18
  SPEAKER_05: So um it's such kind of uh thematic investing that we do at NIDIO through our vehicle fare.
• 13:26
  SPEAKER_00: Yeah.
• 13:26
  SPEAKER_00: And then so we spoke quite a bit about solar.
• 13:29
  SPEAKER_00: What other is is wind uh something that is being built here as well?
• 13:34
  SPEAKER_05: So uh in Kenya, yeah, uh we have uh I think uh one of the largest wind plants.
• 13:40
  SPEAKER_00: I th I heard that it was run by Dutch people.
• 13:43
  SPEAKER_00: Is that true?
• 13:43
  SPEAKER_00: The largest wind farm run by a Dutchman?
• 13:45
  SPEAKER_05: It's called Electro Canal Wind Park Project, yes.
• 13:48
  SPEAKER_00: So is it is it it's is the owner Dutch?
• 13:51
  SPEAKER_05: Uh it has a consortium of investors at the moment.
• 13:54
  SPEAKER_05: Oh, currently, okay.
• 13:55
  SPEAKER_05: There could have been some Dutch investors at some point.
• 13:57
  SPEAKER_00: I heard that from someone.
• 13:58
  SPEAKER_00: Like the largest wind farm in Kenya was owned by a Dutch, and I was like, of course.
• 14:02
  unknown: Yes.
• 14:02
  SPEAKER_00: Typical.
• 14:03
  unknown: Yep.
• 14:03
  SPEAKER_00: Something about wind, yeah.
• 14:04
  SPEAKER_00: We have we have huge wind parks.
• 14:06
  SPEAKER_00: Okay.
• 14:06
  SPEAKER_05: So this is the largest one in uh I think it's possibly one of the largest in Africa.
• 14:11
  SPEAKER_00: Okay, wow.
• 14:11
  SPEAKER_05: Yeah, so it's uh located in the northern part of Kenya.
• 14:14
  SPEAKER_05: Um, so where there's a very good kind of wind corridor.
• 14:17
  SPEAKER_00: Yeah.
• 14:18
  SPEAKER_05: So uh the project is if my memory serves me right, it's over 50 megawatts.
• 14:23
  SPEAKER_05: So it's substantial.
• 14:25
  SPEAKER_00: Um tell me what 50 megawatts means because you're gonna lose me there.
• 14:28
  SPEAKER_00: How many houses does that how many, what am I looking at?
• 14:31
  SPEAKER_05: Can we can we can so uh 50 megawatts is quite substantial.
• 14:35
  SPEAKER_05: So um for instance, a house that's using uh 10 kilowatt hours of power, yeah, uh let's say in a day, okay.
• 14:45
  SPEAKER_05: Uh that you need almost like probably 100,000 houses to kind of cover that.
• 14:56
  SPEAKER_05: That that's not I I I I might not have gotten it statistically correct, but uh another way to kind of contextualize it, uh you must have heard of the Tesla gigawatt factory in the US.
• 15:09
  SPEAKER_05: That's like purely covered, the roof is purely covered by solar panels.
• 15:14
  SPEAKER_05: So assuming that's like a one gigawatt plant, yeah, then you have uh so 20 such wind wind projects to uh power that Tesla factory.
• 15:26
  SPEAKER_04: Okay.
• 15:26
  SPEAKER_05: Yeah.
• 15:27
  SPEAKER_05: Wow.
• 15:27
  SPEAKER_05: So only 20 can power a full Tesla factory.
• 15:31
  SPEAKER_05: So that tells you this project is substantial.
• 15:33
  SPEAKER_00: Okay, I like the analogy.
• 15:34
  SPEAKER_00: Well, thank you.
• 15:35
  SPEAKER_00: Yeah, okay.
• 15:36
  SPEAKER_00: Well, let's talk a little bit more about um so there's three mainstreams in in the energy sector when it comes to projects, right?
• 15:43
  SPEAKER_00: We spoke about um off-grids, we have commercial and industrial, and we have independent power producers.
• 15:50
  SPEAKER_00: So can you tell me a little bit?
• 15:51
  SPEAKER_00: So, firstly about like off-we've talked a lot about off-grid.
• 15:54
  SPEAKER_00: So I'm assuming it's one of the most mature mature solutions or most scalable solutions as well, is it?
• 16:02
  SPEAKER_05: So uh I would say the first thing that we need to ask ourselves is uh how do you define maturity?
• 16:08
  SPEAKER_05: Yeah.
• 16:09
  SPEAKER_05: So maturity could be uh the extent of coverage, yeah.
• 16:13
  SPEAKER_00: But maybe also is the business model completely validated?
• 16:16
  SPEAKER_05: Yeah, how well it's been tested and validated.
• 16:19
  SPEAKER_00: Yeah.
• 16:19
  SPEAKER_05: Um, it could be um the demand for the product also.
• 16:24
  SPEAKER_03: Yeah.
• 16:24
  SPEAKER_05: Um people now at a point where they no longer want to continue buying more or utilizing more of that product and then want to shift to something different.
• 16:34
  SPEAKER_01: Yeah.
• 16:34
  SPEAKER_05: So uh there could be different permutations.
• 16:37
  SPEAKER_05: But that being said, I think uh the off-grade market in Kenya has come a long way.
• 16:41
  SPEAKER_05: And I would say uh we are at a point where we are starting to experience maturity, then uh it's a matter of how can we uh kind of tailor uh products to also complement the core solar lighting kits.
• 16:59
  SPEAKER_03: Yeah.
• 16:59
  SPEAKER_05: So uh some of some of these uh compli uh complementary uh approaches that we've seen include like uh bundling up uh additional products that offer value beyond the lighting.
• 17:12
  SPEAKER_05: And that charging, it's that uh entertainment.
• 17:15
  SPEAKER_00: Um those are all those extra things you said that come with a light pack.
• 17:19
  SPEAKER_05: Yes.
• 17:20
  SPEAKER_00: Are is is any of this also subsidized by the government to get access to this as a as a as a Sam a Kenyan resident who needs off-grid solar products?
• 17:29
  SPEAKER_05: Is it subsidized or so uh in Kenya specifically, uh there's no direct government subsidy.
• 17:36
  SPEAKER_05: Uh back then there used to be a subsidy through the World Bank.
• 17:39
  SPEAKER_05: Yeah, you must have heard of the mission uh 300, uh that's been quite a big topic uh recently.
• 17:45
  SPEAKER_04: Okay.
• 17:46
  SPEAKER_05: So this is geared towards providing uh subsidies to ensure uh universal energy access to people across sub-Saharan Africa.
• 17:55
  SPEAKER_05: So we continue seeing a lot of subsidies uh flowing into different markets.
• 17:59
  SPEAKER_05: Yeah, some of the biggest beneficiaries of uh these subsidies are the companies that uh are actually operating in the off-grade space.
• 18:09
  SPEAKER_00: In off-grid.
• 18:10
  SPEAKER_05: Yeah.
• 18:11
  SPEAKER_00: Okay, and then how about the commercial and industrial um producers?
• 18:16
  SPEAKER_00: I how because uh you know it sounds big, sounds scalable, sounds required.
• 18:21
  SPEAKER_00: Yeah.
• 18:22
  SPEAKER_00: So how does that how does that look?
• 18:24
  SPEAKER_05: So the commercial and industry uh solar sector in the Kenyan context is one of the most uh developed, or I would call it uh one of the most mature.
• 18:34
  SPEAKER_05: Kenya currently uh has an output of 3.3 gigawatts giving.
• 18:40
  SPEAKER_05: Yeah out of that, uh approximately 600 megawatts comes from solar.
• 18:46
  SPEAKER_05: So uh that's quite substantial.
• 18:48
  SPEAKER_05: And um, what has been the driver behind uh this immense success of the CNI sector?
• 18:55
  SPEAKER_05: One is the bankability of the projects.
• 18:58
  SPEAKER_05: So uh as a developer, as an energy company, uh you're looking to do a project that uh will deliver uh return both ways.
• 19:09
  SPEAKER_05: So return to your investors in terms of ROI, uh, return to your customers in terms of cost savings.
• 19:16
  SPEAKER_03: Yeah.
• 19:16
  SPEAKER_05: So how cheaper is the solar power that you are uh providing to a manufacturer who is doing uh avocado processing uh compared to uh the cost of power that they are paying uh to uh the national utility that's Kenya power.
• 19:34
  SPEAKER_03: Yeah.
• 19:34
  SPEAKER_05: So it's that cost savings that will um um help that avocado manufacturing plant to make the decision to uh lease uh a solar plant from you as a renewable energy company.
• 19:50
  SPEAKER_00: To say, okay, I'm going for renewable sources?
• 19:53
  SPEAKER_05: Yes, or I'm complementing the power I'm getting from the grid with renewable energy source.
• 19:58
  SPEAKER_05: Uh and it's probably because of one reliability to the cost savings.
• 20:03
  SPEAKER_00: And that price difference is good for them?
• 20:05
  SPEAKER_05: That's there there is a is there are you able to compete currently then on the I mean uh at a discount of around five cents, uh five dollar cents to to the to the to the utility.
• 20:18
  SPEAKER_05: I mean that's substantial to uh a company that's operating at a large scale.
• 20:24
  SPEAKER_03: Yeah.
• 20:24
  SPEAKER_05: Yeah, so it's a good cost savings.
• 20:26
  SPEAKER_03: Yeah, yeah.
• 20:27
  SPEAKER_05: Yeah, and ultimately you'll own the you'll own the the equip the solar equipment, which will continue operating for given 20, 25 years.
• 20:36
  SPEAKER_05: So you probably pay for the for the equipment for five years or seven years, then uh any amount of on top of that is uh pure cost savings.
• 20:47
  SPEAKER_00: Okay.
• 20:47
  SPEAKER_05: Yeah.
• 20:48
  SPEAKER_00: Yeah, because there's still this substantial upfront investment that often people have to make, right?
• 20:52
  SPEAKER_00: Also to get access to off-grid products because you're still buying some type of hardware access as well.
• 20:59
  SPEAKER_00: Um which of course then then then also brings you to how how people can pay for access.
• 21:04
  SPEAKER_00: Yeah.
• 21:05
  SPEAKER_00: And that that's what you meant as well with bankability, probably.
• 21:08
  SPEAKER_05: Yeah.
• 21:08
  SPEAKER_00: So if we look at more the access side, right?
• 21:11
  SPEAKER_00: So if if I'm a I'm a customer to to be able to get my hands on the type of project uh products.
• 21:17
  SPEAKER_00: So if we go back to off-grid, for example, that I'm able to buy it using my my mobile money and get it on a loan.
• 21:23
  SPEAKER_00: Is that possible?
• 21:24
  SPEAKER_05: So uh it's possible.
• 21:26
  SPEAKER_05: You're able to uh get it financed.
• 21:29
  SPEAKER_00: Yeah.
• 21:29
  SPEAKER_05: And get it financed just means you pay a small deposit, then so there are credit options as well for getting access.
• 21:36
  SPEAKER_05: Yeah, there are there are credit options where you pay a deposit, then pay uh maybe small daily, uh weekly or monthly instalments to whoever is the asset financier.
• 21:47
  SPEAKER_05: And this is uh very much successful in Kenya because of the mobile money in PESA.
• 21:52
  SPEAKER_00: Yeah, so it's an easy way to keep track of that and also quickly get it back the money.
• 21:57
  SPEAKER_00: It's not like once a year someone pays back.
• 21:59
  SPEAKER_05: Yeah.
• 22:00
  SPEAKER_00: Or just a monthly mortgage payment.
• 22:01
  SPEAKER_00: Yeah.
• 22:01
  SPEAKER_05: Yes.
• 22:02
  SPEAKER_00: Okay.
• 22:02
  SPEAKER_05: But really, when you talk about bankability, we're talking about the willingness and the ability to uh pay by the uh ultimate customer.
• 22:11
  SPEAKER_03: Yeah.
• 22:11
  SPEAKER_05: So when it comes to an off-grade customer, it's the ability to uh make those daily payments.
• 22:17
  SPEAKER_03: Yeah.
• 22:17
  SPEAKER_05: So if it's uh 10 Kenya shillings per day, uh it's the ability to afford that 10 Kenya shillings per day uh continuously until the end of that loan life.
• 22:28
  SPEAKER_05: Um it's also the willingness to pay for that 10 Kenya shillings because I could be able to pay, but I'm not going to pay for it because uh, I mean, what are you gonna do to me?
• 22:38
  SPEAKER_05: I have 10 guys lining up to sell me the same kind of uh product.
• 22:42
  SPEAKER_05: So uh that willingness to pay really goes down to validating the business model, the success of the business model because it's that uh specific aspect that has made the CNI business very successful in Kenya because the target customers are able and they're willing to pay because there's value to be derived out of the projects.
• 23:05
  SPEAKER_05: So uh from that angle, I think uh CNI sector in Kenya has been one of the most uh successful business models when you compare it actually to the off-grid business model.
• 23:16
  SPEAKER_05: It doesn't mean that the off-grid business model hasn't been as successful, but uh more capital has flown into the off-grid and investors have been able to realize the return of the investment with much more predictability compared to the off-grid sector.
• 23:32
  SPEAKER_00: Yeah, so more has flown into industrial and then yeah.
• 23:35
  unknown: Okay.
• 23:36
  SPEAKER_00: And then there's this other thing, which is independent power producers.
• 23:39
  SPEAKER_00: Yep.
• 23:40
  SPEAKER_00: What are the what are those?
• 23:41
  SPEAKER_00: What is an independent power producer?
• 23:43
  SPEAKER_05: So essentially, an independent power producer is a private entity or maybe a renewable energy company that decides fine, uh, I have the capital, I have the ability to actually deploy new renewable projects.
• 23:57
  SPEAKER_05: Yeah, deploy a renewable energy product.
• 23:59
  SPEAKER_04: Okay.
• 23:59
  SPEAKER_05: But uh uh I would like to draw your attention to something you call uh the least cost power development plan.
• 24:08
  SPEAKER_05: Okay, tell me more.
• 24:09
  SPEAKER_05: So it's LCBTP, LCPDP.
• 24:12
  SPEAKER_05: Okay.
• 24:12
  SPEAKER_05: So this is a strategy by the Kenya government to ensure that uh there's uh universal electricity access to all its people, but at the least costs.
• 24:25
  SPEAKER_04: Okay.
• 24:26
  SPEAKER_05: So um why is this important?
• 24:29
  SPEAKER_05: Because it kind of sets the roadmap for any investments, infrastructure investments that go to the renewable energy sector.
• 24:37
  SPEAKER_04: Yeah.
• 24:37
  SPEAKER_05: And why is this also important?
• 24:39
  SPEAKER_05: Because for an IPP or the independent power producer to actually make the decision to invest into a renewable energy project, then it has to have some alignment with the overall government strategic plan, which is the LCPDP.
• 24:56
  SPEAKER_05: So it would be um kind of uh blind for an IPP to invest into a project that ultimately delivers a higher tariff than the current prevailing tariff by the national utility.
• 25:10
  SPEAKER_03: Yeah.
• 25:10
  SPEAKER_05: So uh IPPs have to operate within the framework set by the government.
• 25:18
  SPEAKER_05: Yeah, for their business models to actually make sense, which is very good.
• 25:22
  SPEAKER_00: Yeah, and for access as well for people, right?
• 25:24
  SPEAKER_00: So it's also protecting energy prices.
• 25:26
  SPEAKER_05: Yes.
• 25:26
  SPEAKER_05: But we also need to appreciate uh there are some structural challenges that are faced by IPPs.
• 25:32
  SPEAKER_04: Okay.
• 25:32
  SPEAKER_05: So today, as an IPP, uh, I need to um, or let's say 10 years ago, I was setting up a solar, uh, a solar project in Kenya, the prices of uh panels was up there, uh the cost of labor was up there, yeah, maybe the uh foreign exchange rate was to my favor.
• 25:52
  SPEAKER_05: But uh the overall capex cost that I would have incurred would be substantially higher than what I would incur today.
• 26:01
  SPEAKER_05: So um if my tariff uh was freely floating and I'm selling power to the national utility, uh back then I would probably be selling uh power to the national utility at 12 cents per kilowatt hour.
• 26:18
  SPEAKER_03: Yeah.
• 26:19
  SPEAKER_05: Right now, with uh the fair prices of um everything coming down in the solar space, I would probably be expected to sell that at seven cents uh per kilowatt hour.
• 26:30
  SPEAKER_04: Okay.
• 26:30
  SPEAKER_05: But has that uh kind of offset the initial cost that I incurred when setting up my plant?
• 26:38
  SPEAKER_00: Yeah.
• 26:39
  SPEAKER_00: So um But so you're not really incentivized to send it to the city.
• 26:42
  SPEAKER_00: You've not been incentivized.
• 26:43
  SPEAKER_05: But you also need to appreciate that uh when a government is setting uh all putting uh policies, strategic plans in place, yeah.
• 26:52
  SPEAKER_05: Uh one of the goals they try to uh ensure is consistent is uh cross-cutting uh kind of policies that do not seem to favor one party over the other party.
• 27:05
  SPEAKER_00: But do protect the individuals that require access, and then of course, on the other hand, the company.
• 27:09
  SPEAKER_05: Yes.
• 27:10
  SPEAKER_05: So uh as an IPP, uh you have to uh really uh work out your business model to ensure that first it aligns with the uh with the um with the policies and uh put in place by the government.
• 27:23
  SPEAKER_03: Yeah.
• 27:24
  SPEAKER_05: Number two, then uh you have to ensure that your financial uh proposition uh to your investors and to you yourself as an investor, then ultimately has some kind of defined uh timeline or pathway to actually deliver X return over X number of years, as opposed to maybe just saying within the next five years I need to exit this project, I'll have made all my money.
• 27:47
  SPEAKER_00: Yeah, that's not true.
• 27:48
  SPEAKER_05: Things don't always work like that.
• 27:49
  SPEAKER_00: Yeah, yeah.
• 27:49
  SPEAKER_00: I think especially because you still have to make these certain types of infrastructural innovations to be able to provide the access.
• 27:55
  SPEAKER_00: Okay, yeah.
• 27:57
  SPEAKER_00: So um, and then and you guys at NETO, uh, if we look at these three sectors, your current portfolio versus your ambitions, yeah, where do you where do you deploy most in?
• 28:08
  SPEAKER_05: So uh currently our portfolio is heavy in the off-grid sector.
• 28:11
  SPEAKER_03: Yeah.
• 28:12
  SPEAKER_05: And uh so when we started off the fund, uh we were kind of uh heavily leveraging the learnings, the expertise, the data that we had already uh kind of uh used and gotten access to in the off-grid space.
• 28:27
  SPEAKER_05: So it made sense to have a product that is directly complete, complementary to the data product that we had.
• 28:36
  SPEAKER_05: So we deployed a good number of loans in the off-grade sector.
• 28:39
  SPEAKER_05: Yeah then fast forward, uh as the market continued to expand, as the fund continued continued to grow in size, yeah, then we also included the commercial and industrial uh solar sector.
• 28:50
  SPEAKER_05: So that's also one of the other sectors that uh we are currently deploying capital to.
• 28:56
  SPEAKER_00: Um is there an average ticket size for each?
• 28:58
  SPEAKER_05: Yes.
• 28:59
  SPEAKER_05: How much is that?
• 28:59
  SPEAKER_05: So at the moment, uh our average ticket size ranges anywhere between$1 million to$5 million.
• 29:06
  SPEAKER_00: Okay, this is quite large.
• 29:07
  SPEAKER_05: Yeah, it's substantial, and that also speaks to uh the profile of clients that uh we've been working the journey with.
• 29:13
  SPEAKER_05: So we started off when they were um customers who could only absorb$100,000 uh in debt.
• 29:19
  SPEAKER_05: Then this includes$500,000.
• 29:22
  SPEAKER_05: So now we are in the range of$1 million to$5 million, so it also speaks to the growth of the industries, the growth of the companies over there.
• 29:29
  SPEAKER_00: Yeah.
• 29:29
  SPEAKER_00: Nice.
• 29:30
  SPEAKER_00: And so across these three sectors, so you've already said that you know, for those independent power producers, it's hard to build a profitable business model due to regulations.
• 29:38
  SPEAKER_00: Are there any other structural issues or regulatory issues that make it really difficult for any of these three business models to become profitable?
• 29:47
  SPEAKER_00: So you said the demand for off-grid is is a bit difficult to get right.
• 29:52
  SPEAKER_00: Yeah, yeah.
• 29:52
  SPEAKER_05: Specific, yeah, specific off-grid projects, uh, especially the large-scale kind of projects.
• 29:57
  SPEAKER_05: Yeah.
• 29:57
  SPEAKER_05: So the demand is actually very limited.
• 29:59
  SPEAKER_05: Yeah.
• 29:59
  SPEAKER_05: For the distributed project.
• 30:00
  SPEAKER_00: And fluctuating probably as well.
• 30:02
  SPEAKER_05: Yeah, for the distributed renewable energy projects, then uh these are the solar pego kits.
• 30:07
  SPEAKER_05: Yeah.
• 30:07
  SPEAKER_05: Then the quest it's a question of uh how do you price the risk and um yeah, what's the willingness and the ability of those customers to actually pay for that.
• 30:15
  SPEAKER_05: Yeah.
• 30:16
  SPEAKER_05: So uh with companies that have actually uh broken even uh on that specific model.
• 30:22
  SPEAKER_05: So I would say that whereas some companies still struggle, others can other companies who've gotten it right are actually uh been able to uh generate a decent return from that sector.
• 30:34
  SPEAKER_05: Then when it comes to APPs, uh it doesn't mean that the uh the companies are not able to build a profitable business model.
• 30:40
  SPEAKER_05: It's only that you have to do more time, yeah.
• 30:43
  SPEAKER_05: You have to so at the at the beginning of it all, yeah, I would call it the trifactor effect.
• 30:50
  SPEAKER_05: You need to understand the policy, the policies that are in place.
• 30:54
  SPEAKER_05: A good example is the LCPDP that I highlighted.
• 30:56
  SPEAKER_05: Yeah.
• 30:57
  SPEAKER_05: So understand the policy.
• 30:58
  SPEAKER_05: Then once you understand the policy, this kind of uh guides your financial proposal and the technical proposal.
• 31:04
  SPEAKER_05: So the financial proposal.
• 31:05
  SPEAKER_00: This is the trifactor, you said?
• 31:06
  SPEAKER_05: Yes, the trifactor.
• 31:07
  SPEAKER_00: So tech, finance, and policy.
• 31:09
  SPEAKER_05: And policy.
• 31:10
  SPEAKER_05: So policy sits at the apex.
• 31:12
  SPEAKER_00: That's you start with that one.
• 31:13
  SPEAKER_05: Yeah, okay.
• 31:14
  SPEAKER_05: Then you have the technical that helps you uh kind of um design uh an optimal plant uh depending on the um demand versus the supply, right?
• 31:27
  SPEAKER_05: So once you have the technical right, then this is going to kind of inform your financial assumptions.
• 31:34
  SPEAKER_03: Yeah.
• 31:34
  SPEAKER_05: So instead of uh kind of projecting uh 20% IRL uh within uh five, six years, then it comes down to uh 10% IRL over the next 15 years.
• 31:47
  SPEAKER_05: So when you get the trifecta effects right as an IPP, then the business model is actually going to uh work it out.
• 31:55
  SPEAKER_00: Okay, yeah.
• 31:56
  SPEAKER_00: That's very interesting.
• 31:57
  SPEAKER_00: This um so one of the things is um we we've talked about um bankability, but also underbanked.
• 32:06
  SPEAKER_00: Yeah.
• 32:07
  SPEAKER_00: So these are people who don't have access to any type of um financial resources in that sense, right?
• 32:15
  SPEAKER_00: How how would you reach those?
• 32:16
  SPEAKER_00: Because or is that um because it it's that sounds like a kind of a vicious cycle, right?
• 32:23
  SPEAKER_00: So I don't have a phone, then I don't have a solar product to charge my phone with, uh, and I don't have money to buy a phone, and then if I don't have the phone, I can't buy my off-grid solar project that I need to charge my phone, right?
• 32:36
  SPEAKER_02: Yeah.
• 32:36
  SPEAKER_00: So how where do you start that process when there's when you start from zero?
• 32:41
  SPEAKER_05: Interesting question.
• 32:42
  SPEAKER_00: Uh I mean like how do how do we be able to do that?
• 32:45
  SPEAKER_05: Somebody has to provide the funding.
• 32:46
  SPEAKER_00: Someone there's something has to start.
• 32:48
  SPEAKER_00: So you either have to give someone an off-grid product, yeah, or you have to give them money, or you have to give them a phone and a charger.
• 32:54
  SPEAKER_00: Yes.
• 32:55
  SPEAKER_00: And then you then then Bob's, you want to Bob Bob's not your uncle, but yeah, yeah.
• 32:59
  SPEAKER_05: But probably if somebody gave me the money to buy a product, uh my first instinct won't be to buy the product, it would be to buy foods.
• 33:08
  SPEAKER_00: Yes, absolutely.
• 33:09
  SPEAKER_00: But let's talk about the action.
• 33:11
  SPEAKER_05: How do you kind of manage that?
• 33:12
  SPEAKER_00: Okay, so let's assume it differently, of course.
• 33:14
  SPEAKER_00: You have money, yeah, right?
• 33:16
  SPEAKER_00: So you pay for your phone in cash.
• 33:18
  SPEAKER_00: Then you then you can buy your solar product and pay it off with your MPESA, right?
• 33:22
  SPEAKER_00: But it means that if someone is un underbanked, that product is not arriving to that person, right?
• 33:28
  SPEAKER_00: Yeah.
• 33:28
  SPEAKER_00: So then then the question remains first thing people need is access to credit or financing or some some way of a payment system to be able to buy that off-grid solar product, right?
• 33:42
  SPEAKER_00: Because I wouldn't assume that a battery pack can be quite expensive with solar things on it.
• 33:48
  SPEAKER_00: Or yeah, how cheap does that go?
• 33:52
  SPEAKER_00: So can I buy a first my first solar battery with 10 shillings and use that?
• 33:59
  SPEAKER_00: Or do I need a payment system immediately?
• 34:02
  SPEAKER_05: So uh I'll put it in a different way.
• 34:05
  SPEAKER_05: So your first analogy was actually very right.
• 34:09
  SPEAKER_05: So you don't have access to cash, you don't have a form, um, you don't have that light in.
• 34:17
  SPEAKER_05: Um, but we want you to be uh part of the population that's included in the energy inclusive issue.
• 34:24
  SPEAKER_03: Yeah.
• 34:25
  SPEAKER_03: So how do we get you there?
• 34:28
  SPEAKER_05: Yeah, how has this problem been addressed before?
• 34:31
  SPEAKER_03: Yeah.
• 34:31
  SPEAKER_05: Um how is it still being addressed and how is it supposed to be addressed?
• 34:36
  SPEAKER_03: Yeah.
• 34:37
  SPEAKER_05: So uh I'll use the example of a refugee camp.
• 34:40
  SPEAKER_05: We've had refugee camps in northern Kenya for quite some time now.
• 34:45
  SPEAKER_05: And these are people who come in uh escaping war from whatever regions they come from.
• 34:51
  SPEAKER_05: And by the time they get there, they literally have only themselves and whatever they all into their hands.
• 34:57
  SPEAKER_05: So for us to kind of power these communities, uh, there's been a lot of concessional funding and government kind of uh interventions.
• 35:05
  SPEAKER_05: Interventions uh put in place to ensure that these people kind of uh still have energy access.
• 35:12
  SPEAKER_05: And it's this uh first uh layer of contact when they get that energy access that's going to then trigger the second level.
• 35:21
  SPEAKER_05: And the second level is that uh they have lighting, they're able to uh do a few economic activities.
• 35:27
  SPEAKER_05: So for instance, somebody who has some power uh in a refugee camp could easily uh take a small loan from somebody within the camp, start their barbershop, yeah, then over time they're able to generate some cash.
• 35:43
  SPEAKER_05: Then with that cash, they're able to then pay a deposit uh for a solar refrigerator, uh solar refrigerator.
• 35:51
  SPEAKER_00: You kind of upgrade your products.
• 35:52
  SPEAKER_05: They upgrade their products over time.
• 35:55
  SPEAKER_05: But the key word here is that there has to be concessional funding for these projects to actually uh be successful.
• 36:01
  SPEAKER_05: And still using the same example of a refugee camp, yeah, this is an off-grid area.
• 36:07
  SPEAKER_05: So the typical kind of uh power uh power companies that would operate in such an area mini-grid companies.
• 36:16
  SPEAKER_03: Yeah.
• 36:16
  SPEAKER_05: So just imagine a mini-grid company even producing 500 gawatts, which is a lot.
• 36:24
  SPEAKER_05: You probably need like 500 kilowatts to serve a small refugee company.
• 36:28
  SPEAKER_04: Okay.
• 36:29
  SPEAKER_05: So there was a huge capex outlay.
• 36:33
  SPEAKER_03: Yeah.
• 36:34
  SPEAKER_05: So if the capex outlay was huge, then um it's supposed to kind of serve specific uh demand, yeah, or uh hypothetical demand that is equivalent to the power output, or slightly less than the power output.
• 36:51
  SPEAKER_05: Yeah, but in a refugee camp, what is the power demand?
• 36:55
  SPEAKER_05: It's only a bulb.
• 36:57
  SPEAKER_05: Yeah, it's only a few phone charges.
• 36:59
  SPEAKER_00: Yeah, it's it's low.
• 37:00
  SPEAKER_05: Yeah, so the demand is low.
• 37:02
  SPEAKER_00: So then off-grid.
• 37:03
  SPEAKER_05: Yeah, so it's off-grid.
• 37:05
  SPEAKER_05: Yeah, yeah, so off-ridge.
• 37:06
  SPEAKER_05: Like go go do in some off-grid kind of uh uh products, but you still want to probably grow a community, grow a town in that area.
• 37:14
  SPEAKER_00: So uh you want to provide it with more than it might yeah.
• 37:18
  SPEAKER_05: So for this uh investor who did the mini-grid project uh to kind of recoup their investment within a reasonable uh time frame, then this is where you have concessional funding coming in.
• 37:32
  SPEAKER_05: And uh we'll you'll find a grant provider say that for every um connection that you make, yeah, uh we are going to uh reimburse you with four dollars.
• 37:47
  SPEAKER_05: So four dollars per maybe kilowatt hour or maybe three dollars per kilowatt hour.
• 37:55
  SPEAKER_05: The numbers could sound outrageous, but the concept is simply that you get some concessional funding to help you recoup your investment.
• 38:02
  SPEAKER_05: Yeah at a time.
• 38:03
  SPEAKER_00: But you know it will come back, that right, because once people also get access to energy, the demand for it increases.
• 38:09
  SPEAKER_05: The demand will start increasing.
• 38:10
  SPEAKER_05: Yeah.
• 38:11
  SPEAKER_00: Then I don't not want a phone anymore, right?
• 38:14
  SPEAKER_05: So the so as you continue uh growing the demand, yeah, then the the projects then kind of tend to uh break even and repay themselves.
• 38:24
  SPEAKER_05: But just as first start, you need to as a fast touch, then you need that concession of funding.
• 38:29
  SPEAKER_05: Even for those uh um distributed renewable energy kind of uh products, you still need the concessional funding because I as you rightly pointed out, this these people don't have any cash flow within their hands.
• 38:44
  SPEAKER_05: Yeah.
• 38:45
  SPEAKER_05: So as a as a kicker, then you need to provide the concessional funding for them to first get this product, then over time be able to uh generate the ability to pay for the products, additional products.
• 38:56
  SPEAKER_00: Yeah, it's interesting because I don't think we think about it enough that energy, access to energy is one of the core levers that you need to be able to engage in any type of economic activity at some point.
• 39:07
  SPEAKER_05: I mean, uh without energy, um, it's kind of like food, water, sleep, energy.
• 39:14
  SPEAKER_00: Yeah, that's I think that's new the new Maslow's pyramid that we should assume.
• 39:17
  SPEAKER_00: Yeah.
• 39:18
  SPEAKER_00: But do um so you you guys uh you raise, so NITIO raises funds from foreign investors.
• 39:24
  SPEAKER_02: Yes.
• 39:25
  SPEAKER_00: Um is there something that they consistently also get wrong about deploying renewable energy projects in uh in say Kenya or or Africa as opposed to what they're doing uh overseas?
• 39:38
  SPEAKER_05: So uh you have to look at it this way.
• 39:40
  SPEAKER_05: Um most of our investors uh come from Europe.
• 39:43
  SPEAKER_03: Yeah.
• 39:44
  SPEAKER_05: Um Europe is way advanced in terms of energy infrastructure.
• 39:48
  SPEAKER_05: So don't worry, our grids are locked.
• 39:51
  SPEAKER_00: We have a problem.
• 39:53
  SPEAKER_05: Yeah, but uh if you look at it, uh Europe is probably decades ahead of us, right?
• 40:00
  SPEAKER_05: An investor coming from Europe uh into Africa has a very simple playbook.
• 40:06
  SPEAKER_05: And the playbook is uh there's a policy in place, this has been done in Europe.
• 40:12
  SPEAKER_05: So why can't it work?
• 40:13
  SPEAKER_04: Why not here?
• 40:14
  SPEAKER_05: Why can't it work in Africa?
• 40:16
  SPEAKER_05: But we need to appreciate that um there are other kinds of uh factors that will either slow down the ability to implement a project.
• 40:27
  SPEAKER_05: And a good example is um let's say you go into a country that um has a severe kind of um debt distress, or maybe um they're struggling to raise their revenues.
• 40:44
  SPEAKER_05: Yeah, so even the guys who are supposed to be working in government, you only have a handful of guys.
• 40:51
  SPEAKER_03: Yeah.
• 40:52
  SPEAKER_05: So guys are stretch out things.
• 40:54
  SPEAKER_05: So guys who are supposed to kind of guide this regulatory trifecta you were talking about?
• 40:58
  SPEAKER_00: Yeah.
• 40:58
  SPEAKER_00: Like this part that people need to figure out first.
• 41:00
  SPEAKER_05: Yes, yeah.
• 41:01
  SPEAKER_05: The you don't have as many guys to help kind of uh fast track um an energy infrastructure project, an energy infrastructure project.
• 41:10
  SPEAKER_00: Yeah.
• 41:11
  SPEAKER_05: So something that initially looked like it was a two years maximum uh kind of deployment uh timeline for European investor stretches out to a seven, ten year kind of kind of uh.
• 41:25
  SPEAKER_00: So you need to take that into account when you're so you need to take that into account.
• 41:28
  SPEAKER_05: Yeah.
• 41:28
  SPEAKER_05: So how does this affect your uh return horizon?
• 41:32
  SPEAKER_05: So if your return horizon was five years, this has been pushed out to 15 or 20 years.
• 41:37
  SPEAKER_01: Yeah.
• 41:37
  SPEAKER_05: So by the time you uh come to this specific market, you need to be alive to the realities of the uh different implications and factors you find on the ground.
• 41:49
  SPEAKER_05: You need to be patient.
• 41:50
  SPEAKER_05: Yeah, you have to be patient.
• 41:52
  SPEAKER_05: Yeah, that's going to that's what's going to ultimately uh drive the return that uh you probably uh will be seeking uh when it comes to uh the risk kind of uh analysis.
• 42:05
  SPEAKER_05: Um any financial analyst will tell you that as you um go into a market, the first kind of layer that you use to analyze the credit risk of any company in that market is the sovereign credit risk.
• 42:18
  SPEAKER_05: So a European investor will come into the market.
• 42:21
  SPEAKER_05: Uh the sovereign credit risk for Kenya is uh X.
• 42:25
  SPEAKER_05: Uh, I want to invest in a CNI project.
• 42:28
  SPEAKER_05: So the CNI project would be X plus a premium because of course Africa risk?
• 42:33
  SPEAKER_05: Yeah, this company is uh is riskier than its government.
• 42:37
  SPEAKER_00: Than what we think it should be, yeah.
• 42:38
  SPEAKER_05: Yeah, so yeah, all those are nuances.
• 42:41
  SPEAKER_05: Probably when a company is she should have a better credit rating than the government than the government, but um it's these different kinds of permutations that uh investors have stuck within their minds that they need to kind of break away from, yeah, understand the realities and ramifications within the specific market and sector context.
• 43:07
  SPEAKER_05: And once they have a good understanding of that, then you'll be able to um kind of deploy your capital to uh the risk that fits your uh mandate.
• 43:17
  SPEAKER_00: So it doesn't fit traditional VC models.
• 43:19
  SPEAKER_05: No, no, no.
• 43:21
  SPEAKER_05: It's very kind of dynamic.
• 43:23
  SPEAKER_00: Yeah.
• 43:23
  SPEAKER_00: So I think that is that that's good that you guys have a climate investment fund that knows that you have to focus for 10, 15, perhaps 20 years.
• 43:32
  SPEAKER_00: Yeah.
• 43:32
  SPEAKER_00: So them, yeah, there needs to be a certain degree of patience, a willingness to deploy.
• 43:38
  SPEAKER_00: I think also follow-on capital is probably a big thing for.
• 43:40
  SPEAKER_05: Follow-on capital is one of the key things that has helped companies within this space kind of uh survive to get to that level that they'll actually uh break even and come survive in the long run.
• 43:52
  SPEAKER_01: Yeah.
• 43:53
  SPEAKER_05: So that is the capital that is probably required beyond the initial initial investment.
• 43:58
  SPEAKER_00: You can't expect to just do it with your first ticket.
• 44:00
  SPEAKER_00: You need a yeah.
• 44:01
  SPEAKER_00: And so if we look um if we look 10 to 15 years ahead, what what do you think uh what do you think really needs to happen to get these final 20 percent of Kenyans?
• 44:13
  SPEAKER_00: Wait, maybe let's make it bigger before we go small into Kenya again.
• 44:16
  SPEAKER_00: We're talking about how many millions of people in Africa?
• 44:21
  SPEAKER_00: Because Kenya is uh 80%, is it's a high number in a sense, to some other countries on the continent.
• 44:28
  SPEAKER_00: So what does the continent need to do?
• 44:30
  SPEAKER_00: And also what do what do Kenyans need to do to ensure that everyone is gonna get this access?
• 44:35
  SPEAKER_05: I mean, um back to my trifecta example.
• 44:39
  SPEAKER_05: I mean I mean, uh in any market that has its own independent government of the day, policy needs to be energy energy.
• 44:48
  SPEAKER_05: And that's difficult in some of the yeah.
• 44:50
  SPEAKER_05: Yeah, so energy, energy-friendly policies, yeah, uh that's the first kind of uh level of intervention that needs to happen.
• 44:59
  SPEAKER_05: With the right kind of energy-friendly policies, this is going to attract capital inflow.
• 45:04
  SPEAKER_03: Yeah.
• 45:05
  SPEAKER_05: And the capital is there.
• 45:07
  SPEAKER_05: The capital is there.
• 45:08
  SPEAKER_05: So be it in Europe, be it in Asia, be it in the Americas, the capital is available.
• 45:13
  SPEAKER_05: And capital will actually flow to the right kind of risk that it's desired for.
• 45:18
  SPEAKER_05: Yeah.
• 45:18
  SPEAKER_05: So there's capital that's gonna flow to CNI, there's capital that's gonna flow to upgrade because Is there enough domestic capital available?
• 45:25
  SPEAKER_05: Uh there's also uh equally some good pockets of uh capital in the local market, and this is through the pension funds.
• 45:33
  SPEAKER_04: Okay.
• 45:33
  SPEAKER_05: Uh so the kind of right risk pricing is what uh dictates how these funds flow.
• 45:41
  SPEAKER_05: So uh whereas local pension funds have not predominantly invested in the climate sector, yeah, then there's been a recent kind of uh warming up to uh kind of investing in such kind of projects.
• 45:54
  SPEAKER_05: So with the right kind of risk pricing, uh we'll see funds flow to that sector, yeah, as long as uh then the precursor, which is the policies, have set friendly policies.
• 46:05
  SPEAKER_05: And then I mean, with capital flowing to where the risk is best suitable, then it's just a matter of uh renewable energy companies uh executing.
• 46:15
  SPEAKER_03: Yeah.
• 46:15
  SPEAKER_05: And execution is not hard because an only say any renewable energy company is kind of composed of experts.
• 46:24
  SPEAKER_05: It's experts who do what they know best.
• 46:27
  SPEAKER_05: So as long as everything else has been done correctly, execution for them is never uh an issue.
• 46:35
  SPEAKER_05: Yeah.
• 46:35
  SPEAKER_00: Okay, so it is this idea of we're following an example from uh the West that we've done there and deploying it there, but with minor adaptations.
• 46:44
  SPEAKER_00: So wind, for example, yeah, how to build a wind park, what to do it, take that.
• 46:49
  SPEAKER_00: But for example, off-grid solar is not something that's used in Europe as much unless we go camping.
• 46:55
  SPEAKER_02: Yeah.
• 46:56
  SPEAKER_00: So it's a very specific uh a specific thing.
• 46:59
  SPEAKER_00: Okay.
• 46:59
  SPEAKER_00: And what would you what would you recommend to a founder?
• 47:02
  SPEAKER_00: Say if you uh say I'm a European or a Kenyan and I just came out of uni and I want to start my business and I want to start a startup and I want to go into renewable energy.
• 47:12
  SPEAKER_00: What would be your advice?
• 47:14
  SPEAKER_05: My advice would be um, especially if you're coming to Kenya, the market is ripe, the market is right for uh investments.
• 47:22
  SPEAKER_05: Uh you just need to uh get your hands, I would say, dirty.
• 47:28
  SPEAKER_00: You have to get your hands in the clay?
• 47:29
  SPEAKER_05: Yeah, get your hands in the clay.
• 47:31
  SPEAKER_05: Uh, understand what the customers need, not what they want.
• 47:36
  SPEAKER_05: Yeah.
• 47:37
  SPEAKER_05: Understand what they need, structure your product to actually fit their needs uh as opposed to structuring a product that's based on a hypothesis.
• 47:46
  SPEAKER_05: Yeah.
• 47:47
  SPEAKER_05: And when it gets to the customers, then it breaks.
• 47:49
  SPEAKER_05: But it's because you build a hypothetical product that never really served what the customers needed.
• 47:56
  SPEAKER_00: Yeah.
• 47:57
  SPEAKER_00: But do you think all of those products have been developed by now in a sense?
• 48:00
  SPEAKER_00: That because Kenya still has to reach these final 20% of people.
• 48:05
  SPEAKER_00: Um, and of course needs to completely go over on renewable, which would be a dream for everyone, which we should also do in Europe.
• 48:12
  SPEAKER_00: But there's other African countries that have a lower percentage, right?
• 48:16
  SPEAKER_00: So is there maybe also an argument to be made to say that, you know, if the expats came into Kenya and started renewable energy products, Kenyans should go into other African countries and start those renewable energy projects?
• 48:29
  SPEAKER_00: Because I think it's is this the place where the best practices are now held when it comes to the opportunity for renewable energy on the continent?
• 48:36
  SPEAKER_05: Yeah.
• 48:37
  SPEAKER_05: So uh to your question, yeah, you don't necessarily need to reinvent new products.
• 48:43
  SPEAKER_00: Exactly.
• 48:43
  SPEAKER_00: You don't have to reinvent the the wheel.
• 48:45
  SPEAKER_00: You need to provide access and find the customers as well.
• 48:48
  SPEAKER_05: Yeah, if uh Pego kits have worked very well, for instance, in uh the Kenyan remote areas.
• 48:54
  SPEAKER_00: What is that?
• 48:55
  SPEAKER_00: So the the solar kits, yeah.
• 48:57
  SPEAKER_05: The solar kits that you pay uh pay on a daily basis.
• 49:00
  SPEAKER_05: Yeah.
• 49:01
  SPEAKER_05: So pay as you go as you use the product.
• 49:03
  SPEAKER_05: So if those have worked very well in remote uh Kenyan areas, yeah, um it would definitely uh kind of almost translate that they'll be successful in a place like Zambia, for instance, where uh people live in remote areas in the mountains.
• 49:19
  SPEAKER_03: Yeah.
• 49:20
  SPEAKER_05: Uh to probably work very well in an area like southern Sudan where people live in remote areas.
• 49:26
  SPEAKER_05: So not necessarily really inventing the products, but uh rolling out the products where people have not had access to such kind of products.
• 49:34
  SPEAKER_01: Yeah.
• 49:35
  SPEAKER_05: And uh for very specific uh use cases, that's where you'd need to get a product that then suits those people's needs.
• 49:43
  SPEAKER_00: Yeah, specifically.
• 49:44
  SPEAKER_05: And energy goes beyond lighting, it goes beyond uh charging, goes even to the economic activities.
• 49:53
  SPEAKER_03: Yeah.
• 49:54
  SPEAKER_05: So and you might have heard of a concept called the productive use of renewable energy.
• 50:01
  SPEAKER_05: Explain us.
• 50:02
  SPEAKER_05: So productive use of renewable energy refers to uh using renewable energy to power uh assets that generate economic value to the owners.
• 50:15
  SPEAKER_04: Okay, so give me an example.
• 50:16
  SPEAKER_05: An example is uh an irrigation pump.
• 50:19
  SPEAKER_04: Okay.
• 50:20
  SPEAKER_05: So an irrigation pump is used to irrigate a farm, the farmer sells the produce and they get uh the income.
• 50:26
  SPEAKER_05: Yeah so you'll find that some irrigation pumps are powered using gas, others are powered using petrol.
• 50:35
  SPEAKER_05: Yeah, but you still have renewable uh solar powered irrigation pumps.
• 50:40
  SPEAKER_05: Okay.
• 50:40
  SPEAKER_05: So a solar-powered irrigation pump would fall under the bucket of uh productivity use.
• 50:47
  SPEAKER_03: Yeah.
• 50:48
  SPEAKER_05: So it's such specific use cases uh that you also need to kind of uh invent.
• 50:54
  SPEAKER_00: Yeah, the return is higher than just the return on investment on that product.
• 50:59
  SPEAKER_00: Yeah, it's the activity that comes out of being able to use it.
• 51:02
  SPEAKER_00: Exactly.
• 51:02
  SPEAKER_00: That's the yeah.
• 51:04
  SPEAKER_00: So that's something the investor, of course, then doesn't have access to unless you maybe invest in a farm.
• 51:11
  SPEAKER_05: You'll have to you can also invest in a in an uh intermediary.
• 51:14
  SPEAKER_05: So there's a company that specializes in uh doing such kind of assets.
• 51:20
  SPEAKER_05: Yeah.
• 51:20
  SPEAKER_05: So if you want to focus on uh maybe productive use of renewable energy assets as you call them, then you have to understand all these companies, what are they doing?
• 51:33
  SPEAKER_05: Uh what makes the best case for this specific market.
• 51:37
  SPEAKER_03: Yeah.
• 51:38
  SPEAKER_05: Kenyan or Africa is an agricultural zone.
• 51:41
  SPEAKER_05: So if it's yeah, if it's uh anything, any equipment to do with farming, it's most likely going to get some kind of uh uptake.
• 51:52
  SPEAKER_05: Yeah, because people, the the people who are benefiting from those assets uh have a direct motivation to own the asset because of the income generating activity.
• 52:02
  SPEAKER_05: After it.
• 52:02
  SPEAKER_05: If it's an uh e-bike uh e-mobility, um, I'll be motivated to pay for uh my electric motorbike because that is what puts food on my table.
• 52:15
  SPEAKER_03: Yeah.
• 52:15
  SPEAKER_05: So when I go to that swap station that is power, uh solar powered to charge the batteries, as I pay for that battery, you know.
• 52:24
  SPEAKER_05: I'm paying for this battery, I'm going to make 10 trips.
• 52:27
  SPEAKER_05: Out of the 10 trips, I'm going to make$10.
• 52:30
  SPEAKER_05: That that$10,$5 goes towards uh food, uh electricity, and water for my family.
• 52:38
  SPEAKER_05: $2 will go towards uh making my daily payment to finance the bike,$1 will go towards uh uh my swapping, uh the number of swaps I'll do in a day, then the extra two dollars will go towards my savings.
• 52:52
  SPEAKER_05: So that's pure motivation for me to actually continue uh financing that asset.
• 52:58
  SPEAKER_00: Yeah.
• 52:59
  SPEAKER_00: Nice.
• 52:59
  SPEAKER_05: Yeah.
• 53:00
  SPEAKER_00: So um I think one of the things that we're uh so in this podcast, of course, we talk about narrative, and we're gonna we're gonna wrap up.
• 53:07
  SPEAKER_00: And I'd love to ask you to maybe describe Kenya in two words.
• 53:12
  SPEAKER_00: So one word for what it absolutely isn't, and one word for what it is.
• 53:22
  SPEAKER_05: Um Kenya is a very lively country.
• 53:31
  SPEAKER_05: I would say so the people are very warm.
• 53:34
  SPEAKER_05: Uh, there's a lot that you can do in Kenya.
• 53:36
  SPEAKER_05: You can do um adventure, you can do uh what do you call it?
• 53:43
  SPEAKER_05: You have some of the best athletes in the world.
• 53:45
  SPEAKER_05: Yeah, so you can do your sporting activities.
• 53:49
  SPEAKER_00: Kenya sounds fun.
• 53:50
  SPEAKER_05: It has it has fantastic food, yeah.
• 53:53
  SPEAKER_05: So what Kenya isn't uh so we are not racists.
• 53:59
  SPEAKER_00: Okay, so um I that's a that's a good that's a very strong, I haven't heard that before.
• 54:05
  SPEAKER_00: It's a strong, yeah, good statement.
• 54:07
  SPEAKER_05: So it goes to affirm the first statement that I gave you, yeah, that Kenyans are very warm people.
• 54:14
  SPEAKER_05: Yeah, so hardly will you ever uh encounter uh any racial or whatever form of discrimination as a non-Kenyan uh on Kenyan ground.
• 54:27
  SPEAKER_05: So it's beautiful.
• 54:29
  SPEAKER_00: It's good, it's welcoming.
• 54:30
  SPEAKER_00: Yeah so everyone can come to Kenya.
• 54:33
  SPEAKER_00: We can all work from Kenya.
• 54:35
  SPEAKER_00: Okay.
• 54:35
  SPEAKER_00: Well, thank you very much for coming and for uh helping me understand the sector I don't underst I didn't understand before our talk.
• 54:43
  SPEAKER_00: Thank you.
• 54:43
  SPEAKER_05: Thank you for seeing me, Bana.
• 54:45
  SPEAKER_00: Cheers.