Show us your route
Rana Alaa: I am an electronic engineer, holder of a master’s degree in environmental engineering. I worked at Intel in the United States and for Shell, trying to save the environment, and then I realized that on the other side of the energy sector; my business partner, Yaseen Abdel-Ghaffar worked for ExxonMobil Egypt, and in 2013 we faced a lot of power cuts in Egypt when there is a lot of sun (like in the rest of Africa) .
Why didn’t we have more photovoltaics?
We started to look into it and found that people were not using solar energy because it was still too expensive.
The most expensive companies in the area are moving to off-grid systems with batteries, which increases costs. We then wondered if we should connect them without necessarily having to use a battery, so households could charge it during the day in order to be supplied with electricity at night.
We spent the first 9 months creating proposals, convincing people, and finally got our first lecture in March 2013 at the University of Cairo. We had two other projects in parallel at the time until the government began to remove substitutes for conventional energy. The alternatives became more and more expensive, which pushed the population to become more interested in solar. Another thing is that the government announced a “Feed-in-tariff” (FiT) incentive program allowing anyone to create a solar system and sell it the electricity they get.
To sell to the government? It’s interesting. So they can resell it to other people?
R.A.: Suppose I have an empty roof and want to use it: I create my own photovoltaic system that I place on the roof and the deal is done. However, you should know that the government certifies the number of companies capable of doing so (we are one of them). We have a 25-year contract with the government to sell the electricity we produce.
It’s an income stream. Suppose you have a house that you rent, it’s a kind of rent for your roof. It depends on your willingness to have a flow of income, what you are willing to pay, the difference going from one roof to another… We currently have 30 projects on the go all over Egypt, and they relate to houses, businesses, schools, universities, factories …
By “projects” do you mean customers?
Yes. As soon as we build a photovoltaic system, it becomes our project.
Once built, do you train them to become autonomous with their establishment?
Yes. We give them one year warranty. They can call us anytime, and if they need help, we can do an Operation and Maintenance contract (O&M) with them. But it’s pretty easy to manage: you have a car, you can clean it with water at sunrise and sunset, and it stops there. If they have any technical problem, they can call us but it’s very easy to use.
We have another system that we plan. We have just signed two large contracts for larger plants from 0.5 to 1 MW, sort of farms. Customers use it to sell electricity to government or to be self-sufficient. So you can either pay for this big power plant or you can pay this little rent, rent with subsidies giving small interest rates so that they can reap the benefits. What we do is not only technologically viable, but also financially viable for the customer, connecting them to the right investor and supplier.
For this system, we have introduced the concept of “free solar”. We have an agreement with the bank whereby the customer does not need to spend anything: the bank subsidizes us so that we build the equipment for him, and the system pays for itself.
What do you mean by “the system pays for itself”?
For example: Since you have a photovoltaic system, you save your electricity bill, and the amount you save is kept for your installation, and from six years, the plant is yours.
You can also use the power plant to generate income, and the money obtained can be put in the rent and after five years (because the power plant has a lifespan of twenty-five years), it belongs to you …
So there is an agreement between you, the bank …
We, the bank, and the customer.
So this is a banking breakthrough because the main obstacle for solar in this part of the world is money.
But is it really affordable for most ordinary people? Maybe the bank could ask for guarantees or …?
They ask for the person’s income. The product is therefore, at this moment more for people with average incomes. But we have plans to build systems for hospitals, for research centers, or slums, where we have to be financed by the banks.
Who are your typical customers?
Homeowners, businesses and schools. Now that people are starting to move out of town to settle in the suburbs, there is growing interest in this type of facility.
How many are you in this startup?
We are six. At the start there were only two of us with the co-founder (Yaseen). Last year we hired two juniors, and at the end of 2015 we recruited two people for management (we are mainly technical).
What is your expansion plan? Do you plan to stay in Egypt?
No. We want to expand out of Egypt, to countries like Sudan. My business partner is currently in Qatar, and I have spoken to people based in Saudi Arabia who are very interested in this technology, as well as in southern Nigeria and Kenya, in particular. We just need the right people to partner with to ensure quality is there.
We also need the investment to grow at the same speed as the market. So far we have managed to keep up.
I was about to ask you: have you raised funds?
We are working on saving this money and using it in bootstrapping. The market is booming so we have to grow at the same speed.
What are the next big steps for your projects?
The next is to have the largest power plants up and running. Ideally, we want to become energy traders.
Can you tell us what you can achieve with 1 MW?
1 MW represents ten thousand m²: a large power plant that can power a university, and costs a million dollars, so this is a big step for us. We want to be modern IPP ie Independent Power Producers but for that we have to find an investor or invest ourselves in a site and sell electricity. We therefore wish, with this system, to become energy sellers. This is something for which we need a lot of funds: we have to contact investment companies to do it,… This is where we see the future to have constant income and goods.
Is there competition in Egypt?
We didn’t have many competitors, but when the government launched subsidies, everyone was interested in it: the largest companies created a lot of spin-offs, and a hundred companies were created; but six months later most dropped out of the business, so we were left with six to ten still on the market. It’s still very recent, so there are no figures verified yet, but we estimate to have a presence of 5%. We are more present than everything else, so that’s something we’re trying to maintain.
Regarding fundraising, have you thought of crowdfunding (crowdfunding)?
Yes: yesterday I met an investor who told me about it and I said that we are in favor of it as long as we collect the required amount.
What do you need now and what could Seedstars World be useful for you?
In terms of cash flow, meeting investors is useful, meeting other startups has also been very useful to learn from their experiences, to be aware that we are not alone (many emerging markets are similar, with the same problems … ), the experience and learning given by the mentors was very practical to get an overview of the thing as well as the free evaluations.