Portfolio

Off-Grid Solutions

INVESTMENT SUMMARY

Nearly two billion people worldwide are living without electricity. A similar number rely on animal dung, crop residue, and wood to cook their daily meals. Beyond the health implications of incinerating biomass indoors to cook and provide basic light, the cost of these pre-industrial technologies is considerable — low-income households around the world spend roughly $38 billion a year on kerosene alone.

Off-Grid Solutions (OGS) offers a sustainable, cost-effective alternative to traditional indoor lighting technologies in developing markets. At a fraction of the cost of kerosene, and with none of the adverse health effects, OGS provides a low-cost solution to rural electrification using durable solar-powered white LED (WLED) lighting distributed through established microfinance networks.

Working with WLED has considerable advantages, including nearly 100,000 hours of service life (or roughly 30 to 40 years under typical usage), lower power consumption than traditional incandescent or fluorescent technology, and unlike first-generation LED, newer “white” LED technology emits at all visible wavelengths, producing considerably more light per unit of power.

Now widely available at low-cost for western consumption, the limiting adoption factor in the development context has been the prohibitively expensive up-front cost. However, in utilizing pre-existing supply-channels and micro-financial incentives, OGS offers a novel mechanism for aligning the profitability of micro-lending and the affordable electrification of off-grid villages.

By providing the technology (solar-LED units) and the financing needed to purchase them, OGS adds value for three key constituencies. Villagers benefit from improved indoor air quality, hours of daily productivity, and opportunities for extended educational development. Microfinance partners benefit from increased demand for low-risk micro-investment opportunities among current and future customers. Finally, investors benefit from the opportunity to earn socially responsible profits of nearly 20% per annum.

To kick-start the process, OGS and its financial partners will incentivize early adoption through lottery-based giveaways to pre-existing MFI clients and other viral base of the pyramid marketing mechanisms. Later in the business cycle, when widespread grid-based rural electrification does emerge, OGS’s micro-solar solutions will still serve a pivotal role in village life – given their inherent point-of-use reliability and India’s track-record of unpredictable power supply.

MARKET ANALYSIS

The World Bank has estimated that half of Indian villages lack access to electricity, limiting their productivity and quality of life. According to these calculations, market share could exceed 600 million individuals in India alone and nearly 2 billion worldwide. Market selected for initial roll-out is Andhra Pradesh (rural population: 50 million, rural electrification: 35% of households) and Sri Lanka (population: 20 million, rural electrification: 50%) broadly representative of trends within the greater region. With considerable existing ties to government, business leaders and microfinance institutions within the province, OGS is well-positioned to penetrate the market with little direct competition.

MARKETING/DELIVERY SYSTEM

Marketing will be conducted through established microfinance networks in targeted states throughout India and Sri Lanka. The product will be advertised and distributed through village-level branches as pre-qualified microfinance investments. By combining existing microfinance distribution networks with medium-term financing packages and a clear value proposition (based on kerosene savings, health benefits, and extended working/schooling hours), wide-spread adoption is anticipated beyond initial project trials.

VALUE PROPOSITION

Scalable, predictable-margin business providing attractive returns for four key constituencies:

Villagers
* Less expensive lighting solution
* Better health conditions
* Life continues after dark
* Educational opportunities/Literacy
* Safety/Security
* Amortized over 50,000 hours, WLED saves over $1230 vs. kerosene
* Environmental savings (reduced demand for kerosene/firewood)
* Installation and maintenance employment

Local Economies
* Productivity increases
* Public electrification projects
* Enhanced security
* Additional employment opportunities (for project affiliates/contractors)

MFI Affiliates
 * New demand for MFI loans
* Congruent with existing core values
* Offers borrowers a turnkey solution to reducing home energy costs
* Provides superior productivity for home entrepreneurs

Investors
 * Scalability
* Competitive margins
* Cash flow positive from inception
* Return on philanthropic capital (a.k.a. social dividends)
* Enhanced cash flow potential from future village-level micro-solar solutions (solar street lamps, lit common areas, etc.)

For more information, send an email to [ogs @ freedom24.org]