1 May 2017

Africa: Off-Grid Solar Start-Up Bboxx Scales Up in Africa By Cracking Credit and Distribution With Us$40 Million Capital Raised So Far

There are a lot of off-grid solar start-ups whose sales are in the low thousands. But the market appears to be scaling up as the more ambitious start-ups began to tackle both distribution and credit payment. Russell Southwood spoke to Christopher Baker-Brian, CTO of BBOXX about how it has achieved scale and its future plans.

The three co-founders of BBOXX - Christopher Baker-Brian, Mansoor Hamayun and Laurent Van Houcke - met at Imperial College London while studying Electrical and Electronics Engineering. All three saw the challenge of the lack of electricity in the developing world and wanted to do something about it.

"There were few solutions for rural electrification and we started a charity to solve this challenge." He laughs at their youthful ignorance of the sheer scale of the challenge they had taken on. The charity ran from 2008-2010: "We got some funding from the Rwanda Ministry of Energy and a Belgian company to do two villages".

From this experience, they realized that people were willing to pay for solar power:"We realized a better solution was to flip it as people were willing to pay and we turned into a business in March 2010. We wanted to try and replicate what we did in Rwanda in other villages and contexts".

The initial focus was to try and supply solar equipment to those who wanted to electrify through a franchisee but then came the second light-bulb moment:"The initial sales were great but there was an affordability challenge. People were spending around US$10 per month on candles and kerosene and we needed to match this with our energy offer. We wanted to be able to give them credit to buy our consumer product".

It decided to buy out its Kenyan franchisee and open retail stores in the West of Kenya and in Rwanda and in 2013 it raised a round of VC funding to invest in its solar technology and its retail network. With this backing, it began to sell products on a payment plan and provide long-term service and support.

"We knew they already knew about solar and were already spending US$7-9 a month on candles and kerosene. We said we can give you something at a similar price and provide long-term support and if it doesn't work replace it instantly".

The solar kit the rural consumer gets is a BBox battery and control system with solar panels that comes in different versions:"On payment plan, we have just short of 50,000 units. We hope to go over it this month. In other ways, there are 120,000 units, of which 80,000 are the 50W home solar system which will power 6 lights, a TV and a radio. It can also provide home charging for the off grid rural household".

It is now on its fourth version of the technology and the latest version has a network connection that can run over a low data connection on a mobile network. This enables them to do two key things. Firstly, they can cut customers off if they haven't made their monthly payment. Secondly, they can monitor battery performance and tell a customer to go in two weeks before to replace the unit before the battery finishes its life cycle. Typically a battery will last 4-5 years. There are 70,000 units currently being monitored and that will hit 100,000 by the end of next year.

The total installation price for the basic unit is US$100 and the customer pays US$6 per month over three years. The battery comes with the monitoring communications in it and the company absorbs the relatively low cost of monitoring. The product comes with a one-year warranty which is extendible for an additional fee to anything between 3-10 years:"These are there to build consumer confidence."

In 2014 it opened its first store and it now has 44 across the continent, going from 15 employees in 2013 to 450 today. It now has distribution partners in Nigeria, Cameroon, Pakistan and South Africa. The partners provide the capital for the equipment and each has 500-1,000 clients:"The main limiting factor is capital."

In terms of consumer credit, it works with local banks in local currency. It raised a US$2 million loan over 3 years from Atlas Mara in Rwanda and it has done a seecuritisation sale. This means it groups up a pool of customers into an Special Purpose Vehicle (SPV) and it is sold to someone who buys future receivables. It did this in Kenya for US$0.5 million for 3,000 customers.

It plans to expand in Rwanda from 26 to 40 shops to give it national coverage and to expand the number of distribution outlets in Western Kenya:"In the next three years we want to open shops in the most populated off-grid areas. Outside of Kenya and Rwanda, we're working with partners to expand in other countries". It's also looking to sell customers TVs to connect to their BBox battery unit.

So who are its main competitors? Berlin-based Mobisol which is estimated to have sold 70-80,000 units; San Francisco and Tanzania-based Off-Grid with an estimated 80,000 units sold; and M-Kopa with 0.5 million customers predominantly in Kenya, Uganda and Tanzania:"They all provide smaller power products than we do." Interestingly all have raised very similar amounts of capital, in BBox's case US$40 million, including from French energy giant Engie.

"We also provide lamps and TVs. Our real role is providing a real solar experience. We lead on the size of solar panel. We're installing capacity for the future. It allows customers to upgrade the things they choose to plug in".

Although some companies in the market are clearly beginning to scale up significantly, the scale of new potential customers remains huge. BBox wants to sell to 50% of the 850,000 off-grid household in Rwanda. There are an estimated 3.5-4 million off-grid households in Kenya. Overall in Africa there are estimated to be 100 million off-grid households and 620 million people without electricity.

And how will future tech developments change the product?:"The customer will be able to upgrade without having to change the equipment. It can be done using the data connection. Eventually we want them all to have the 6 light package (the top-end package). We want them to be able to power other things like charging multiple phones for people in household".


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