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French utility Engie announced on 3 September that it had acquired troubled off-grid pioneer Mobisol, which entered self-administered insolvency proceedings in April. The acquisition will come as a relief to the industry, showing the continued confidence of major institutional investors, writes Dan Marks

French energy giant Engie claims to have become the market leader in off-grid solar in Africa following the acquisition of Germany’s Mobisol. When the transaction closes, which is expected in October, Mobisol will join solar home system company Fenix International and mini-grid developer PowerCorner under the umbrella of Engie’s distributed power business. The company has been aggressively targeting the market with the intention of being able to provide the full range of electrification options to emerging countries.

Through Fenix, Engie already provides energy and financial services to more than 500,000 customers in Benin, Côte d’Ivoire, Mozambique, Nigeria, Uganda and Zambia. PowerCorner operates some 12 mini-grids in Tanzania, and inaugurated its first one in Zambia in April (AE 390/12). Engie intends to develop 2,000 mini-grids on the continent by 2025.

“Engie is convinced that universal access to quality affordable electricity is possible in the medium term,” Engie Africa chief innovation and new business officer Raphael Tilot told African Energy. “We think that this can be achieved by a combination of off-grid solutions: small size such as solar home systems, medium size such as mini-grids, and then centralised generation systems. We believe that the Sustainable Development Goal number seven set by the United Nations, which aims for full electrification by 2030, is possible.”

Mobisol fits neatly into this vision. As well as adding operations in countries where Fenix is not currently active – Mobisol operates in Kenya, Rwanda and Tanzania – the company’s products complement the systems produced by Fenix. Mobisol’s systems range in size from 80W to 200W, whereas Fenix’s products are between 10W and 50W. This means Mobisol can help plug the gap between community centres best served by mini-grids and rural areas where Fenix’s smaller systems are well suited.

“I believe we are the only player able to offer the full range of solutions: solar home systems, mini-grids, centralised systems,” Tilot said. “Mobisol is key for us, it is going to help us accelerate even more. What Mobisol brings is presence in three countries where we are not yet present. Beyond that their range of solar home systems is larger in size and therefore complementary to Fenix’s range. With Mobisol, we are able to provide a solution to clients in and around the cities as well as productive uses.”

Productive use of standalone systems and the prospect of selling more and bigger appliances are a central element of Mobisol’s appeal, although their systems’ larger size may also have contributed to the company’s difficulties. Tilot cites a recent example from Tanzania, where an entrepreneur started a hairdressing business after assessing the monthly cost of a Mobisol solar system able to power hairdressing equipment, phone charging, lights, sound system and television alongside the salary of a hairdresser.

Growing role of appliances

Appliances account for an increasing amount of revenue for off-grid solar companies. Solar lighting and home systems association Gogla reported in May that its members had sold nearly 156,000 appliances in H2 2018, predominantly televisions but also growing numbers of fridges, water pumps and fans. Mobisol’s systems facilitate the use of more energy-intensive appliances, complementing work already done with Fenix to create scalable systems. “We are launching a new generation of products with Fenix which have even more flexibility, where you can add storage and PV generation capacity to facilitate climbing the energy ladder,” Tilot said.

The exact drivers of Mobisol’s insolvency are not well known as the company’s accounts are not public. The Financial Times reported in May that Mobisol appeared to have raised $80m-$90m since it began operating in 2011, with about two thirds coming from equity and one third from debt. The company’s list of investors was impressive, including Germany’s KfW and Deutsche Asset Management, Investec, Dutch development bank FMO, the World Bank Group’s International Finance Corporation, Finnfund, the Energy and Environment Partnership, the United States Agency for International Development, and the Africa Enterprise Challenge Fund.

The size of the systems may have been partly to blame for the insolvency. Larger systems represent a bigger cost for very poor customers, which some have speculated may have increased the impact of bad weather in East Africa last year on the company’s revenues and sales. Bad weather means lower earnings in rural areas, and when earnings are squeezed, a bigger cost is more likely to be defaulted than a smaller one, meaning Mobisol’s larger systems might be more vulnerable than a smaller system that pays for itself by replacing kerosene.

In an interview with the Financial Times in May, Mobisol managing director Andrew Goodwin said that affordability was an issue. “You are sending a first world technology into the third world. Farmers are earning €1-€1.50/d. That is very different to a Californian company putting a solar panel on a roof.” The company also faces competition from cheap low-quality imports and new entrants into the market.

Another issue facing the company was a strategy based on aggressive expansion. The off-grid market is capital intensive, with sales drives requiring new staff, shops, logistics and equipment manufacturing. In Mobisol’s case, a rapid expansion appears not to have achieved the necessary increase in sales, not helped by the impact of bad weather on customer budgets.

“I would say that Mobisol has been a pioneer in this industry. They have been very, very successful,” Tilot said. “It is quite typical for start-ups to go through phases. What Engie wants to do now is to take Mobisol to the next phase, which is probably less like a start-up in terms of overall focus on innovation and entrepreneurship, and more a phase of structuring the business for steady, healthy growth internationally. Engie is coming in as a long-term investor which aims to make the business profitable as soon as possible. It has to be profitable otherwise it will not be sustainable and we won’t have significant social impact.

“The team at Mobisol is very good, the products are well designed, so thanks to scale and the way Engie runs its businesses we believe that this will become a successful business very soon.”

 

Off-grid Investment Exchange

Engie is sponsoring our sixth annual AIX: Power & Renewables meeting in London on 13-14 November.

Engie Africa, CEO, Yoven Moorooven, will be joined by co-sponsors Winch Energy and 17 other panellists for the fourth annual Off-grid Investment Exchange, which takes place on the afternoon of the second day.

Find out more