How to Collaborate
The B-REED program will seek to engage a gamut of stakeholders from both the private and public sectors in order to maximize its impact and create a dynamic investment community revolving around the use of sustainable energy. Given the range of technologies, the differing stages of development of potential entrepreneurs / existing companies seeking capital (affecting risk and projected returns for investors), and the importance of interlocutors (ie. government agencies, NGOs, consultants, etc.) in helping implement the use of sustainable energy, there will be opportunities for all of these parties not only to contribute to, but also to benefit from the B-REED initiative.
I. Entrepreneurs, Existing companies, and Cooperatives
B-REED welcomes project / enterprise ideas (even at the concept phase) from entrepreneurs, existing companies interested in entering or expanding their sustainable energy business, and cooperatives considering the use of sustainable energy technologies in their communities. B-REED’s entrepreneur toolkit, entrepreneur workshops, and enterprise development services (“EDS”) offer interested parties the opportunity to acquire business skills required to start a sustainable energy business or project, regardless of their existing level of entrepreneurial experience. Attractive business plans, developed with assistance from B-REED, will be considered for seed capital investments. B-REED continues to provide technical, business and financial advisory support to its portfolio companies.
II. Strategic players
Manufacturers (or suppliers) of sustainable energy producing equipment or productive use tools – B-REED has flexibility to work actively with technology suppliers, both local and international, in various capacities. Technology suppliers include two categories: 1) those involved in the manufacture or assembly of equipment used to generate sustainable energy and 2) those producing equipment (ie. light bulbs, solar pumps, etc.) that can run on sustainable energy electricity and help end-users generate income (productive uses).
B-REED would consider collaborating with these players in several manners such as: 1) facilitating linkages with distribution companies, 2) investing directly in local manufacturers to expand / develop product lines, 3) identifying co-investment opportunities in existing distribution companies or to create new distribution enterprises (ie. via a JV), 4) sharing of information regarding the demand for new products and improvements to existing products, gathered from B-REED supported companies through their interactions with end users.
Equipment distributors – Recognizing the importance of equipment distribution networks, especially in rural areas, B-REED would consider working with distributors by: 1) linking them with equipment manufacturers to create, expand or improve sustainable energy product lines, 2) providing financing to enter or expand their sustainable energy business, 3) identifying co-investment or commerical agreement opportunities with rural distributors (or those in other regions) to expand reach, 4) facilitating their development of appropriate supply models, including through partnerships with microfinance institutions to provide credit to end users in order to increase potential market penetration.
III. Financial institutions
B-REED provides workshops and informational materials specifically designed to enhance financial institutions’ familiarity with the opportunities and risks of sustainable energy sector financing.
Lenders – B-REED will engage lenders regarding co-financing in its investments and for second stage financing of its portfolio companies. The program will also provide workshops and training specifically tailored to financial institutions, in order to develop their credit risk management capacity in the sustainable energy sector.
Microfinance providers – B-REED will actively seek partnerships with microfinance institutions interested in providing financing of sustainable energy equipment for end-users, as long as viable income generation activities can be identified (via productive uses of this sustainable energy). Microfinance can be provided through 1) OSCIPS (Civil Society Organizations for the Public Interest) 2) micro-enterprise credit societies (SCMs, a fairly new kind of financial institution), 3) developmental banks, or 4) rural credit cooperatives.
Development banks – Development banks, at the national, regional or state levels, could collaborate through their established programs by: 1) identifying entrepreneurs, NGOs, target communities or applications of sustainable energy, 2) providing attractive financing for sustainable energy enterprises, 3) providing microfinance for end-users through productive use lines of credit.
Rural Credit Cooperatives – Rural credit cooperatives, as they provide the financial infrastructure to support agricultural production in the interior regions (as well as offer important financial products such as savings accounts) could work with farmers and cooperatives to identify and promote productive uses of sustainable energy and provide financing for such equipment.
Private equity investors – As B-REED makes its initial investments and begins to develop a robust pipeline of investment opportunities, it will engage private equity investors regarding: 1) potential co-financing and second stage investment opportunities in individual projects and roll-up opportunities, 2) participation in a new sustainable energy facility / fund (ie. as a limited partner or co-manager), 3) investments in sustainable energy technologies, as B-REED can offer a distribution platform for products developed by their portfolio companies.
NGOs – B-REED and its portfolio companies can work with NGOs to: 1) enhance their understanding and implementation of sustainable energy technologies in local communities, 2) encourage the incorporation of the enterprise-centered approach within traditional development activities, 3) assist them in promoting sustainable income-generating applications of the sustainable energy and 4) introduce clean energy services as a means to solve both energy access and environmental issues (biodiversity, deforestation, etc).
Government – Local or National Government can stimulate investment in the sustainable energy sector by providing a supportive legal and regulatory framework along with fiscal incentives. The creation of OSCIPs (Civil Society Organizations for the Public Interest), for example, facilitates the ability of these specially qualified NGOs to efficiently implement projects that are in the benefit of the public. Governments can also explore various forms of public-private partnerships that use the private sector to deliver what has traditionally been public sector services. The end result of the introduction of new energy sources will help stimulate local economic growth in rural areas.
IV. Universities / Research institutions
These organizations could contribute through their ability to provide training at any level – business, technical, etc. – and by offering manpower for undertaking these tasks. They can also help document successful uses and challenges of implementing sustainable energy.
V. Investors interested in allocating some money towards social returns
Given the spectrum of funding needs in the sustainable energy sector, debt and equity capital – ranging from softer (subsidized) capital to market-return capital – are sought by B-REED. Unlike in traditional venture capital, the initial seed capital investor may not seek the highest returns, in order to encourage the start-up / viability of the business. Moreover, once these businesses are ready for second stage capital, the returns are typically higher, approaching the range of commercial investment, while the risks are lower. Although this would suggest that securing seed capital funds will continue to be a challenge and a potential barrier to the development of sustainable energy businesses, there are at least three factors that suggest that seed capital funding will remain available. First, these seed capital investments are relatively small (ie. up to $250,000, typically disbursed in various tranches), so investors willing to allocate even a small amount of capital help catalyze the sustainable energy industry. Second, participating in these initial investments gives investors a preferential opportunity to participate in the larger, higher return / lower risk second and later stage investments, allowing them to elevate their total returns. Third, by channeling this money through a facility / fund, investors will be able to achieve a high level of portfolio diversification and hence limit the individual project start-up risk.
VI. Corporations seeking to implement RE / EE
Companies can incorporate sustainable energy into their operations as a way to enhance their corporate social responsibility and increase profitability. B-REED could provide: 1) contacts to sustainable energy entrepreneurs (ESCOs, technology providers, etc.) and, as appropriate, technical support and 2) assistance in accessing co-financing, including evaluating the potential of packaging carbon credits. Energy efficiency and cogeneration projects may have returns greater than a company’s cost of capital (and perhaps even further above the cost of capital provided by B-REED), in addition to substantial environmental benefits. Moreover, carbon credits may be able to further boost returns.