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Abstract
Wesaf Energy is planning a sugarcane ethanol and electricity production facility in Cameroon. In order to convince potential investors of the fundability of the project, we were challenged to show the profitability of the project in a clear and structured manner. Realising we had limited experience of financial metrics within the project team, we sought advice from our industry network to help gather the data to build an accurate and complete financial model, that demonstrates the true potential of investment into the IEPA project.
The Project
The IEPA (Inokun Ethanol Power & Agriculture) project is located in Cameroon. It is planned to consist of a sugarcane Ethanol production facility as well as electricity generation capacities on a 322 hectare landsite wholly owned by the company. The electricity production will have an installed capacity of 18 MW from three different renewable sources. The power mix will consist of 10 MW photovoltaics, 5 MW hydro and a 3 MW cogeneration plant fuelled by cane bagasse.
The unique factor of the project is its combination of existing technologies and innovations of these technologies to ensure a sustainable and profitable rural project. By intentionally generating electricity in an area currently outside of the grid,the power supply of the region becomes secure enhancing the regions profile for further investment and development.
Implementing innovative technologies and delivery systems such as metering and mobile-pay solutions will enhance delivery of the power throughout the wider project area, and showcase the benefits these solutions can have on rural host communities. By demonstrating the efficiency of the systems in place we further prove the overall concept of the business model.
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The Challenge
The main factors in any successful project development are identifying infrastructure, utilities, resources and man-power. As we began identifying all these metrics we quickly realised the clear relation between these physical metrics and the impact they could potentially have on the project investment and return. This relationship must be clearly present within the financial planning for the project so that the investment encapsulates all facets of development from construction to commissioning and the operating of the plant for the initial operating period.
Cameroon upheld its B/B credit rating from Standard & Poor’s in 2016 and we see this as an encouraging factor as we seek funding for our project. This rating indicates relative stability and some expected growth in the country making it an ideal time for us to source finances for the project. In order to take advantage of this rating we needed to build a strong financial model. One which clearly demonstrates the financial viability of establishing a renewable energy plant in Cameroon right now.
Once we had devised the business model and obtained the technical profiles for our ethanol production plant and installed generation systems we were ready to develop a concise financial model for the project. We obtained costings and pricing from various study visits to Cameroon. We held meetings with existing partners in the fields of Energy, agriculture and construction, to obtain the most accurate cost analysis associated with similar projects of scale. We consulted various professionals to aid in the construction of the model prior to seeking a digital platform.
The advice received from these sources pointed out that whilst there is a generic format to obtain the IRR and NPV of the project, the ideal situation would be to construct the model with existing renewable energy finance professionals within an environment dedicated to projects of this nature.
Taking this on board we now broadened our search and came across various platforms and methods by which we could prepare a full financial model for the project. As the process began we quickly noticed that most platforms could not adequately accommodate the entire scope of our project which often left us with incomplete models.
The Solution / Implementation of greenmatch
Upon further research we came across the greenmatch platform which not only allowed users to construct financial models but had a marketplace feature which allows potential investors to instantly peruse the financial models of projects. We were impressed with the greenmatch platform but in the initial stage were not too confident that we would be able to produce a complete model for the IEPA project. After 2 induction conferences with a greenmatch operative we began to see the framework of a clear legible financial model for the project. One that demonstrates the full financial potential of an investment in the IEPA project. The entire process took us around 3-4 weeks to design a model that not only evidenced the huge financial potential of the project but also the effectiveness of the greenmatch platform. That said the platform allows for continuous tweaking of models and modifications and has sharing features which allowed us to build the model and consult expert advice throughout. The platform itself once understood is very practical, well presented and innovative, allowing users with limited understanding of financial metrics the chance to produce accurate financial models for renewable projects. The “Fimo Checks” indicator is another feature which we found key, as it prompted us to areas where the algorithm may have picked up discrepancies in the model allowing us to reassess the data entered.“Greenmatch allows users with limited understanding of financial metrics to produce accurate financial models for renewable energy projects. » – Marvin Tabi
The creation of this particular model will prove the crux of our business and shall create the legacy of our company. By proving the financial case for a rural industrial project of this nature we believe we can provide a disruptive project model to change the face of the energy sector in Cameroon and sub-Saharan Africa. We believe in the economic potential of rural African villages and by producing a thorough financial model that works and is a viable investment more and more micro industrial projects will begin to emerge in rural communities.
Being the 1st industrial scale biofuels plant in Cameroon means we shall be somewhat paving the way for our wider vision to establish micro industries across rural African villages. Rural project locations keep capex and opex low, due to the low cost of materials and man-power. This is not to say that the human capital will be exploited but rather the opposite as we will be creating more opportunity to earn through employment and cooperative entry into the market. The development of infrastructure and electrification will further enhance the potential of the indigenes and provide greater incentive for them to ensure the success of the project.
Author
Marvin Tabi, CEO WESAF ENERGY SOLUTIONS LTD.
Marvin Tabi is the CEO of the WESAF group which he founded in 2015. At 31 he is legally trained in English law and obtained Oil and Gas law honours from the Robert Gordon University, Aberdeen. His professional experience includes working in various legal fields and then in the oil and gas industry predominantly in contract engineering and negotiations. Marvin has always had a passion for renewable energy and his dissertation was in fact on the establishing of a renewable energy sector with a developing economy, taking in consideration all policy economic and social aspects of such a development. This in turn has lead to him actualising this very subject through WESAF Energy Solutions Ltd. and the IEPA project in Cameroon.
