- March 15, 2021
- Posted by: Olusegun Odunaiya
- Category: Blog
For a sector with some of the most hardworking founders and teams, there have been very little stories about what everyone is building even for key milestones. We believe in executing ruthlessly, silently, but this little milestone might be a good time to pause a bit and write a short chronicle about it. Ours is a story of grit, relentless efforts and commitment in one of the most difficult sectors to build anything.
Building an energy access company is not easy. Scratch that. Building an energy access company in a country like Nigeria is even harder – ask the founders/teams. The challenges in energy access globally are similar, but building in Nigeria comes with additional hurdles to cross despite the massive opportunities. With a potential for over 10,000 mini-grids, Nigeria boasts of one of the largest opportunity in energy access globally. Havenhill has faced its own challenges in this regard but we stay building.
In 2018, we studied over 50 companies in the renewable energy space globally (private, public, even the defunct ones) and did a deep dive into the entire value chain of the industry. With this, we decided where we wanted to play and the kind of company we wanted to build. We imagined a new future for the company, and repositioned the core of our operations to match this. Everything changed, from the way we select sites to our choice of new hires. This understanding is critical in a sector with a lot of distracting opportunities. Knowing the kind of company we were building made us either walk away from certain opportunities especially when we faced resistance from the brokers of the opportunities or try to find a win-win if possible. Quite a lot of painful experiences of walking out of the room with money on the table, potential partnerships etc. The pain pales in comparison with some of the small traction we have made since then.
Between 2017 and 2019, we engaged several advisors and partners to support our fundraising efforts. While everyone tried their best, no investor was willing enough to write cheques. It’s either the investors were not interested in Nigeria, or one story or the other. We also noticed that the investors either didn’t understand the sector/country or were just not interested for other reasons. So, in August 2019, we decided to jump into the ocean ourselves and engaged investors directly. To be honest, we didn’t expect to close any deal within a few weeks. The intention was to be able to engage directly with funders, educate them properly (from a developer’s view) about the space and ultimately to show them what we are building. Our thesis was that no one else (advisor etc.) can accurately tell the stories and vision of a team better than the builders themselves. We had done it one way, so we wanted to try a different approach. At best, we’ll end up with a deal, worst case, no deal.
So, we developed a new plan, funding/legal structure, wrote new sets of documents loaded in a data room and began direct outreaches to funders. We started reaching out to investors who were not already looking at this sector/Nigeria. Every week, we would set up calls to discuss. These were not regular pitch sessions. Some of them looked like tutorial classes explaining the differences between mini-grids and solar home systems. Sometimes, you have to explain how it is that a large population in Nigeria still have no grid connection. It was unbelievable to some funders. There are additional transactions we hope to close pretty soon that we have now spent over a year on, working almost every week with the funder’s team to understand how it works and what our plans are. Sometimes, we would spend weeks explaining our preferred structure to funders hoping they accept it. The process did pay off. Within a few weeks, we got several offers from some investors. Each one had its own merit and disadvantage, but we were happy that the new approach worked. Of course, Covid dealt a blow to that plan. Nigeria Electrification Project’s change in plan at the middle of our engagements with investors set us back by at least 3 months. We had to replan from scratch. However, the end they say, justifies the means.
Last week’s announcement is an important milestone for us and the sector. For the sector because it marked increased capital deployment into the off-grid energy space in Nigeria by a private funder (into an indigenous company). It represents a good example of how private capital can leverage public funding for impact. While the viability gaps are well understood, private funders must continue to innovate structures that can work for the sector. Our engagements with Nigeria Infrastructure Debt Fund was pretty straightforward fueled by a funder’s will to understand and support a budding sector. This is evident in the overall structure of the deal. The team worked with us so hard from week to week trying to structure something that works for all parties. Hopefully, this will now be replicated by other funders in the space or by NIDF to the other companies in the space. We are rooting hard for this to happen quickly – in 2021. Our conviction is that energy access needs so much capital to move the needle. Else, we can forget about the SDG7. We need more investors that are willing to write mid to large ticket cheques for the companies in the space to make meaningful returns (impact and dollars).
While it is an important milestone, we do not consider it as a success. It has always been clear to us that “success” will always be measured by two main factors – impact delivered per dollar, and growth in shareholder value. Until both happens at a huge scale, we’re just still grinding.
It’s building time for us as it has always been. This milestone is a win for the communities who will soon start enjoying electricity access than some urban cities. More importantly, we now have an opportunity to make more impact. With a deep sense of humility, this is just the beginning. Those we have had an opportunity to share a part of what we are building with will share our optimism.
Deep gratitude to everyone who has supported us on this journey. You owe us nothing, but you did it anyway. Shoutout to all the industry enablers who are doing all the hard work to make the sector easier for us all to operate in.
Back to building.