Real Estate Powered By Mini-Grids in Nigeria

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Global Vision Solutions Limited (GVSL) is a startup that aims to construct large volume of quality, affordable homes that will be powered by solar energy.

Global Vision Solutions Limited (GVSL) is a startup that aims to construct large volume of quality, affordable homes - blocks of twin bedroom apartments and flats and units of 4 bedroom semi-detached duplexes - that will be powered by renewable energy source – solar. It plans build and install solar powered mini grids in all our newly built residential housing estate(s), using Roof-Top Solar Technology. It also plans to manufacture and sell a wide range of concrete precast products such as sceptic tanks, precast walls, pavers/interlocking blocks etc.

GVSL has partnered with Elematic to build the first of its kind solar powered Elematic Concrete Precast Production Plant (CPPP), which enables the construction at a much reduced cost of between 1,000 and 3,000 quality, affordable residential homes on a yearly basis. For the electricity supply, it will partner with world class renewable energy companies such as Jinko Solar, Canadian Solar Inc, Betta Batteries Europe BV, Soventix GmbH, Hareon Solar, AEG Solar Huawei Solar, Krannich Solar etc.

Tripartite Power Purchase Agreement (PPAs) will be signed between customers, GVSL and the renewable energy technical partner(s). GVSL believes the renewable energy aspect of our business could create the ideal platform to launch a fully operational renewable energy business that will engage customers across the entire country, to supply renewable energy products/services/systems and solutions such as solar powered mini grids. From this project alone, expected revenues between the second and the fourth year are expected to range between US$2,500,000 and US$4,000,000 in revenue per year. From the fifth onwards, the business will generate between US$7,000,000 and US$13,000,000 in revenue per year. The solar energy vehicle can be made a stand-alone business for the start of the project.

Total project cost to set up the CPPP business and the construction the first set of residential real estate with solar powered mini grids installed to power these housing estates is estimated at US$51,651,449.73 USD. Deloitte & Touche has offered to raise 85% of the project capital in loans of a 10 maturity. The remaining 15%, or US$7,650,000.00 USD, are to be provided by an investor who will receive 25% equity stake. The investor is also expected to have a seat on the management board.

It is also noteworthy that the project lends itself to deployment in other African countries and expansion to commercial real estate (e.g. shopping malls, office complexes, industrial parks) and invest in spin-offs (e.g. morgage business).

The Internal Rate of Return (IRR) on real estate is estimated at 29%.


Executive Summary

Financial Projects

Business Plan

Is there a bank-guarantee backing Purchase Power Agreements (PPAs)?

The Renewable Energy Investor (REI) as our technical partner will be responsible for yearly construction of solar powered mini grids to power to all our residential housing estates. We estimate these solar powered mini grids will range in size from 2MW to over 50MW depending on the size of each housing estate.

Our goal is construct between 150 to 4000 housing units per year in the first 4 years then in Year 5 with additional investment in the production plant technology our construction output will increase to between 300 to 10,000, my point is overtime we plan to build mega housing estates on a yearly basis.

The REI as our technical partner would be responsible for providing all the best fit solar solutions again PPA would be put in place on an project to project basis. Of course as a investor/shareholder in the project the REI would have a seat on the management board and would be in a good position to negotiate the PPAs as they arise.

While the proposed transaction structure foresees a holding company and 2 special purpose vehicles (SPV) - one for real estate and another for the solar energy - it is possible to make the renewable energy SPV a stand-alone business.

There are a lot of aspiring minigrid and commerical & industrial rooftop power business targeting Nigeria

I am fully aware there are aspiring minigrid and commerical & industrial rooftop power business targeting Nigeria. These businesses have been making such plans since 2000 when the Nigeria economy opened up after military rule but due to factors such as the high cost of doing business in Nigeria particularly in the renewable energy sector is putting off many of these investors/businesses. Financial institutions within Nigeria are not offering loan/financing/leasing option to purchase these solar equipments thereby reducing the uptake by local business &residential customers.

All the solar equipments are imported and these products exchange hands several times before it gets to customers therefore leading to very inflated prices, too high for many customers to afford therefore again leading to low uptake by customers. Many Chinese companies unfortunately have flooded the Nigerian market with very poor substandard solar equipments which have been purchased by Nigerians because they are cheaper. But unfortunately after awhile these equipments no longer works leaving these customers disillusioned and discouraged by the effectiveness of solar powered equipments.

Also these businesses targeting Nigeria have found, not many States economies within Nigeria can support mini-grid/rooftop technology to make the business economically viable for them to invest hence the delay. These are just a few reasons why many businesses are still in the targeting phase and have been slow to actually invest. They need to work out how best to overcome these challenges before they can take the next step.

Only those businesses that are sure they will get or have already gotten PPA/contracts from Federal and State governments are seriously investing in Nigeria in the area of renewable energy. Also some companies such as MTN which is a telecommunication company but recently diversified its business operation by offering pay-as-you-go small solar home kit to power small items (one light bulb, a fan and possible a laptop) within the homes for a few hours at night, are the ones making headway.

Like I stated above, it’s really difficult to talk about other businesses plans for Nigeria regarding solar minigrid/rooftop technology but I would like to share our plan on this matter. Due to the epileptic electricity power supply within the country it is standard practice for residential real estate developers to offer backup power supply in the form of diesel powered generators to provide e electricity. Aside from the negative environmental impact of diesel powered generators other problems includes, they are expensive to run & maintain, often lack of availability of diesel within the country, constant price hiking of diesel due to shortage etc.

Therefore it’s for these reasons we decided to power all our newly built housing estate using solar powered mini grids. Also we carried out a cost-benefit-analysis exercise on the cost of using diesel powered generators against using solar powered generators to power our first housing development project consisting of 156 housing units. We found the cost of providing diesel fuel over a 4 to 5 year period, to guaranty 10 - 16 hours of electricity per day is the equivalent cost of purchasing of a solar powered generator (cost of mini grid not included). The solar generator would be able to power the entire housing estate 24hrs. Therefore it makes economic sense to use solar generator for all our housing estate going forward. Plus currently no developer in Nigeria is offering solar powered mini grids with their housing estates therefore this would be one of the company’s Unique Selling Point (USP) that will differentiate us from our competitors and increase the demand for our residential real estate. Our goal is to address the past disappointments faced by residential consumers using solar generators to show when constructed properly with quality affordable solar products, solar generators can power homes cost effectively and can be a blessing not a curse. Therefore by building trust with consumers in relation to our brand and our range of solar products we will be able to increase the demand and uptake of our solar generator products in Nigeria. We believe our business strategy in this area could be an ideal platform for to launch and set up a renewable energy business offering a wide range of renewable energy products and services to the entire Nigerian market.

It might be best to try and get something done on a relatively small scale first, and then expand once the concept is proved

On this point I totally agree with you. As you can see from the URLs/Links above many of the developers/investors mentioned in these articles are building affordable housing in their 1000s and 10,000s even though for many of them it’s their first project in Nigeria. Although our concrete precast production plant once fully built and operational has the capacity to fabricate concrete components to build several 1000s of housing units on a yearly basis, we have chosen the safer option, like you said start small and then expand overtime. Our first project is the construction of a small residential housing estate consisting of a total of 156 housing units (120 flats & 36 duplexes please kindly refer to the GVSL Business Plan). Also to further strengthen the business’s capability to carry out our mandate going forward, we have put in place the necessary agreement(s) with Elematic our major concrete precast technology supplier. The company has agreed to have a few of their personnel stationed with our business in Nigeria, in a project management and technical consultancy role on and off for a period of at least 3 years (could be extended if needed). Their role will be to assist us in delivering our various real estate construction projects in the first 3 years after we commence operation s as well as ensuring the transfer of knowledge to all our staffs.

To give you some background info about our concrete precast technology partner, Elematic is a company with a wealth of experience in building mass housing and currently Elematic is working with a construction firm to construct of mega city - the Bismayah New City in Iraq, that when completed the new city will have homes to house 600, 000 families. This wealth of knowledge and experience will be made available by Elematic to our business to assist us in executing all our projects.

Financial return
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