In 2014, when Abe Cambridge began looking for angel investors, selling them a story about Bitcoin, Africa and solar power, most investors ran a mile. Except one. For California-based Boost VC, which focuses on future technology developments, Cambridge’s idea of developing the world’s first peer-to-peer solar leasing platform made complete sense.
Seven years later Cambridge’s company, Sun Exchange, has been through several rounds of venture capital funding and includes Arch Emerging Markets Partners, 49% owned by African Rainbow Capital, among its backers. Sun Exchange has completed 37 solar projects that are delivering power, has five under installation, and a number in the pipeline.
With one crowdsale completed in Zimbabwe and the second phase soon to start, the company is now pursuing opportunities in other sub-Saharan markets.
The idea is simple, says Cambridge. Southern Africa has some of the best energy-producing sunshine in the world, while electricity produced by state suppliers is expensive, unreliable and usually coal-fired, which makes it carbon-intensive. The challenge is that without the subsidies and feed-in tariffs common in the European region, organisations are unwilling and unable to invest in solar power plants.
“There is so much opportunity, but a massive funding gap,” says Cambridge.
He solved the funding problem by creating a platform that invited individuals from around the world to buy into, and own, solar energy-producing cells. Some 25 000 people from 180 countries earn a return on this investment by leasing those cells to businesses and organisations on whose roofs the panels have been installed. They become the offtakers for the power produced.
Lessees include schools like Durban-based Westville Girls High, Cape-based Brackenfell High, Wynberg Junior and High schools, Stellenbosch Waldorf and Muizenberg High; retirement homes: Pinelands Place Retirement Village and Woodside Special Care Centre; businesses: Boland Wine Cellar, Morgenster Shopping Centre, at least six Spar supermarkets; Westville Veterinary Hospital in Durban and Knysna Elephant Park.
“Our clients sign a 20-year lease agreement for the solar panels,” explains Cambridge. Sun Exchange does not do the installation or the maintenance. Instead, this is taken care of by one of Sun Exchange’s installation partners.
One of Sun Exchange’s most recent projects was the installation of a 510.30kW solar plant with 1MWh battery storage at Nhimbe Fresh, an agriculture leader in Marondera, Zimbabwe. The farm exports blueberries, raspberries, strawberries, stone fruit, snap peas and snow peas to grocery retailers across the world. Thus, maintaining power at its cold storage facility is important. A second project is under way to power the irrigation systems.
“The first phase saw us facilitate solar finance for the installation of $1.4-million worth of solar capacity, funded by 1,700 people from 150 countries. The funding was raised within two to three months,” he says.
According to the documentation, solar cell owners paid R113 per solar cell, for which they will receive $0.06 per solar cell per month, equivalent to a dollar-pegged internal rate of return (IRR) over 20 years estimated at 16.71% IRR in rands, or a 13.70% IRR in dollars.
Fundraising for the second phase, which will be bigger, is due to start soon. Given the Zimbabwe inflation rate, the lease is dollar-based, which mitigates the risk of local currency fluctuations.
On average, individuals who buy solar cells spend about $280 per project, while South Africans spend about $150 per project, says Cambridge.
The total value of the projects is calculated, roughly, by the number of solar cells sold multiplied by the price per cell. So, for instance, the Nhimbe Fresh first phase was valued at $1.4-million, Spar Lulekani, Phalaborwa: $400,000; Watergate Apartments: $140,000; Rondebosch Boys High School: $142,000.
Solar cell purchases can be made in rands or the Bitcoin equivalent, and returns are paid in rands or Bitcoin — for its ease of use, Cambridge stresses.
Given the scams and pyramid schemes one has seen using cryptocurrencies, should investors be worried that Sun Exchange, as an unregulated entity, is another scheme?
Cambridge replies that Sun Exchange is not a get-rich-quick scheme, nor is it an investment fund or trading platform.
“We are about earning with purpose. You can see who we are, and the venture companies that have invested in us. The people who buy into solar projects buy tangible assets, backed by a lease that is legally binding. For this, they receive a modest return that is predictable, trackable and transparent.”
The company, he adds, makes use of the blockchain to enable seamless payments, not to speculate on the rise in the price of cryptocurrencies. DM/BM