Azuri pursues debt-fueled growth with potential three-year sale horizon

01 July 2019 - 03:14 pm UTC

by Patrick Harris

Azuri Technologies, an Africa-focused pay-as-you-go solar company, is targeting a sale or IPO in three to five years’ time, with its interim financing needs covered by debt capital, said Chief Executive Officer Simon Bransfield-Garth.

 

The topco equity investors will look for an exit opportunity at a certain date, and Azuri is working towards that 2022-2024 horizon to begin the next stage in corporate growth, he said.

 

The company, which is based in Cambridge, UK and was founded in 2012, is funding its customer acquisition plan and commercialisation by raising debt at SPV-level, without any further interim corporate equity funding rounds, he said. The company's recent funding round will keep the company funded for a long time, he said.

 

The company will be cash-flow generative by that point, as it is close to achieving positive EBIT today, Bransfield-Garth said.

 

Until recently, the company had raised USD 20m equity funding, with a further USD 26m additionally raised in the last few months, he said, and as per a company announcement. The raise has made Marubeni Corporation the largest, but not majority, shareholder. This strategic investment round also saw participation from existing shareholder IP Group, and will accelerate Azuri’s market growth plans in both East and West Africa and open up new opportunities for the business, according to the announcement.

 

There are many large energy companies which are becoming increasingly interested in the space, and have yet to invest, Bransfield-Garth said. Big energy companies' agendas have shifted towards distributed energy, such as Azuri develops, he added. Azuri has shipped over 150,000 systems cumulatively to date, he said, and within three years the company will have shipped well over 500k systems.

 

Debt financing for pay-as-you go roll-out

 

The company will sustain its growth over the next three years through debt raisings of tens of millions of USDs to execute asset roll out, he said. Azuri is looking to supply pay-as-you-go solar to the last billion people in the world who do not have access to electricity, he said.

 

Azuri has developed a renewables financing model, he said, for example, if Azuri installs USD 200 worth of equipment at a home, it is paid off over the course of two-to-three years by the customer.

 

However, the challenge is that as customer numbers increase, more cash is tied up in peoples’ homes, he said, which means that Azuri raises debt financing secured on the forward revenues from these customers.

 

This is continuous debt raising to cover the ongoing capital spend, so there is little need to raise further equity, he said. It is happy to hear from advisers or investors with SPV level ideas, he said.

 

The debt is raised at the country, currency and project specific SPV level, he said.

 

This usually involves a mix of investors, such as private finance initiative and energy focused funds, he said, as well as traditional project finance investors.

 

Large funds, such as private equity, are also now looking to provide debt as the pay-as-you-go solar industry has developed to the point that it is seen as mainstream, he said.

 

This is primarily Western finance, but locally based in Africa, he added.

 

For example, the company is currently seeking to supply 30k customers in Nigeria, and each customer could support between USD 100-500 of debt, he said.

 

Azuri is expecting to raise around USD 70m debt in total over the next three years, he said, and is focused on Kenya, Uganda, Tanzania, Zambia and Nigeria.

 

In Africa, it’s important to keep a risk balanced portfolio across jurisdictions so as not to be exposed to single country risk, he added.

 

Azuri could also bring equity investors into the project/SPV holding, he said, as there is very little difference between equity and debt investors at this level.

 

Azuri Technologies provides solar home systems to off-grid consumers in sub-Saharan Africa on a pay-as-you-go basis, according to its website. These systems enable households without access to the grid benefit from modern conveniences, from electric light to satellite TV and internet access via smartphones.