The Asian Development Bank (ADB) has revealed details of its US$2 million equity investment in Indian pay-as-you-go solar company Simpa Networks.
The ADB announced the deal in January and says the move is its first venture into small scale equity investment but may reap bigger dividends than its larger deals if the arrangement encourages private equity groups to follow suit.
A report on the project, released by the ADB, says Simpa will also benefit from the renewable energy expertise which the bank’s representative will bring to Simpa’s board.
Bangalore-based Simpa has already successfully piloted its mobile phone pay-as-you-go scheme in its home state of Karnataka and has started a roll out in Uttar Pradesh, which has around 19.4 million households without mains electricity.
The business model sees rural households pay an initial 10%-30% down payment on a solar system. With a module, battery, charge regulator and LED lamp system, plus a metering device, costing from $200-$400, the typical downpayment will range from $20-$120.
Top-up payments for less than a dollar
After the downpayment secures the installation of the household system, users then top up the amount of energy they buy as required, with payments as low as INR50 (US$0.79) possible.
The top-up payments made via a mobile phone SMS service are split between paying down the remaining cost of the solar system and going to Simpa as profit.
The larger the top-up payment, the higher the percentage that goes towards paying down the system and Simpa says it typically takes between two and three years to pay for the system after which the user owns the panel, which should have a ten-year lifespan.
With Simpa eyeing the 3.4 million households without electricity in Maharashtra, the company plans to expand the service into Andhra Pradesh, Kerala, Gujarat, Madhya Pradesh and West Bengal by December 2014 and to serve 63,000 households by 2015.
The company also offers its technology on a micro-grid basis for community solar networks.