Investment and acquisition opportunities picking up in off-grid power services

Investment and acquisition opportunities picking up in off-grid power services

In the past several months, Lux Research has seen promising investment activity suggesting there is a shift in thinking about the profitability of off-grid power services:

Khosla Impact, Vinod Khoslas impact investing fund, has invested $1.3 million in the green power supply company BBOXX. BBOXX closed a $1.9 million round after reporting pre-Series A revenues of $3 million.

Off-Grid Electric, a mobile-payments-enabled, solar lighting service company based in Tanzania, received $7 million from Solar City, Vulcan Capital, and Omidya Network in late March.

Impact Energies was acquired by another pay-as-you-go electricity provider, Persistent Energy Partners, becoming the first successful exit of a pay-as-you-go electricity provider.

Impact Energies knowledge of local markets, ability to deliver turnkey products and its collection service model made it an ideal acquisition target for Persistent Energy Partners. The company was, at the time, one month away from closing a financing round with two Fortune 500 companies. Navigating politics and local policies is an enormous barrier to entry, but those that address on-the-ground hurdles will be able to scale their respective models to enable investment and partnership opportunities.

Similarly, Off-Grid Electrics mobile payments platform has allowed for the company to see scalable growth, and in turn attract investors like SolarCitys CEO Lyndon Rive, who is joining Off-Grid Electrics board. This board appointment and investment should provide SolarCity with a channel into Africas growing off-grid solar market, and give Off-Grid Electric operational insights that have yet to be applied to off-grid opportunities. BBOXX utilises a pay-as-you-go model to provide both power services through traditional solar installations as well as a host of products. The company has excelled in supply chain management from production in China to importing and distribution in the 14 countries it operates in.

Lux Research has covered business model innovation in lighting and power services for developing regions. Globally, 1.4 billion people lack access to electricity, and these individuals lie in hard-to-reach regions often ignored by their own nations power expansion plans. Companies providing electricity services have significantly increased the number of off-grid customers they can reach through pay-as-you-go financing opportunities.

Pay-as-you-go service providers have not seen drastic changes to their underlying business model, but it has taken some time for these companies to gain traction. The success of this model is in contrast to a direct product sales approach that others have tried with solar lanterns and related products. By providing pay-as-you-go services, off-grid providers receive recurring revenue and scaling opportunities based off of traditionally hard-to-reach customers. Cash historically has been hard to come by for power service providers in developing regions, but with scalable business models through operational execution, scalable capital is beginning to follow suit.

Taken in aggregate, these services have the ability to be a force for poverty reduction while leading to profitable growth opportunities for developers like Impact Energies, Off-grid Electric and BBOXX as well as their investors.

Source: Smart Grid News

SMART GRID Bulletin March 2018

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