SunFunder. Driving a global energy transformation ANNUAL REVIEW 2016

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1 SunFunder Driving a global energy transformation ANNUAL REVIEW 2016

2 A LETTER FROM OUR CEO 2016 was a breakthrough year for SunFunder. Just before the end of the year, we completed our ninety-first debt financing for the solar companies delivering energy access around the world. This meant 2.7 million people will have been directly impacted by our loans, and 222,000 tons of CO2e emissions mitigated annually the equivalent of taking 50,000 cars off US roads each year. We grew our business three-fold, both in terms of the financing we have provided to customers and the debt funds we have raised to do so. We also grew to 22 people and now have in place the backbone of our team to scale our business many times over was also a year of firsts. We closed our first structured receivables finance and commercial-scale solar transactions, as well as our first major loans in West Africa and India all areas of huge potential. We also completed the first close of our $50 million Beyond The Grid Fund, anchored by OPIC, the US s development finance institution. This shows us a pathway for our next stages of scale. In 2016, we said a final goodbye to our crowdfunding operations, which got us started five years ago. In 2017, we will launch new lending products and debt funds to keep pace with demand. The emerging market solar sector has never been more dynamic. Over 2 billion people still live without access to reliable energy, while the economics of solar continue to improve. The lack of available debt finance remains a key bottleneck, and the need for financial intermediaries has never been more important. SunFunder is uniquely positioned to thrive in this role. To all our customers, investors and friends, we would like to say thank you and here s to continuing to build the beyond the grid solar sector together in Ryan Levinson, CEO

3 2016 A BREAKTHROUGH YEAR We look back at some of the key events in a breakthrough year for SunFunder. $50M BEYOND THE GRID SOLAR FUND We reached the first close of our new $50 million fund in October. It changes our capabilities and sets a path for future debt funds. See the next pages. BUSINESS GROWTH We are proud of the strong and steady growth in our core business and impact since See more about our portfolio in the next pages. $39 million capital unlocked $20 million solar loans completed 2.7 million people impacted SunFunder s Lais Lona accepts the Ashden International Gold Award in June 2016, both a recognition of SunFunder and the need for long-term, sustainable financing solutions for scaling energy access STRUCTURED FINANCE In March, we launched our first structured asset finance instrument (SAFI) transaction with Ugandan residential solar company SolarNow. This market-leading receivables financing product is helping our industry scale. See the case study in the following pages. COMMERCIAL SOLAR We also completed our first commercial-scale solar transactions, which enable businesses to switch to solar. There is high potential for these projects, especially in markets where diesel is used for back-up power. See the case study below.

4 SOLAR LENDING IMPACT SunFunder loans go directly to financing the companies and projects delivering solar to people living beyond the grid. There are 1.2 billion people with no access to electricity, and another 1 billion people with only unreliable access, primarily in Sub-Saharan Africa and India. Solar power now offers an economic solution, which a range of entrepreneurs are proving can be delivered commercially, through highly scalable business models. They need finance to grow. 2.7 million people impacted with improved energy access as a direct result of SunFunder loans 222,000 tons CO2e greenhouse gas emissions mitigated annually as a direct result of SunFunder loans This is an opportunity for countries in Africa to leapfrog over dirty energy and immediately go to clean energy President Barack Obama The result is children having light to do their homework by. Households no longer reliant on toxic and dangerous kerosene and saving money in the process. Rural businesses that can stay open after nightfall. New jobs in fast growing solar companies. In short, an entirely new energy economy and a clean development pathway for a large part of the world s population. A trader in Uttar Pradesh, India illuminated by microgrid solar

5 DEBT INVESTORS SunFunder unlocks capital for solar beyond the grid. We offer investors diversified, high impact, fixedincome debt products, comprising vetted portfolios of emerging market solar investments. We started 2016 with $15 million of debt funds, and ended it having having raised that to $39 million through our new Beyond The Grid Solar Fund. The sector needs an entire ecosystem of investors to fulfil its potential from well-targeted concessional finance to commercially-oriented capital from impact and institutional investors. We pioneered the role of financier as aggregator and intermediary for our sector to bring this ecosystem together. The opportunities we offer investors are proving its long-term viability. OPIC is proud to partner with SunFunder in delivering innovative financing solutions for off-grid and grid-deficit solar energy Elizabeth Littlefield, OPIC former President and CEO $39 million total capital unlocked 56 accredited investors $50M BEYOND THE GRID SOLAR FUND We closed $24 million of the Beyond The Grid Solar Fund in The first close, in October, was anchored by OPIC, The Rockefeller Foundation and MCE Social Capital. They were followed by Baldwin Brothers and the Sant Foundation. Solar installation in Masai Mara, Kenya We are thrilled to have them as partners and are actively engaging with investors to complete the $50 million fund and unlock further capital in 2017.

6 Solar roadshow in Rwanda SOLAR LOAN PORTFOLIO SunFunder has financed more companies in the off-grid and grid deficit solar sectors than any other investor. Our portfolio of solar loans nearly tripled in This matches the growth of the sector as a whole with businesses rising to meet the scale of the challenge. The most active market remains East Africa, but we have also completed loans in West and Southern Africa, as well as India and other countries. $7 million loans completed We work with the leading businesses in beyond the grid solar while also providing finance to early stage companies that will become the next generation of leaders. Our loans range from inventory finance and working capital to structured receivables financing and larger commercial projects. In the following pages we present case studies of some of our 2016 transactions. SunFunder is the most innovative lender in the sector. They set the benchmark, others are following. 91 loans in Willem Nolens, SolarNow CEO <1% loan default rate $20 million loans completed December 2016 January 2016

7 STRUCTURED FINANCE FOR SOLAR LEASING SolarNow, Uganda SunFunder innovates new loan products to help beyond the grid solar grow. Leasing models are one of the ways that innovative solar companies have made offgrid residential solar affordable. But while their customers pay only a few dollars a week for new solar systems, often through their mobile phones, the company needs upfront financing as it recoups the system cost only months or years later. SunFunder designed a product to help. The structured asset finance instrument (or SAFI, which also means clean in Swahili) provides this receivables financing off balance sheet. This improves the company s cash flow and capital structure, and opens up new investment possibilities. $2 million first SAFI with SolarNow 5,098 systems deployed by SolarNow through SAFI in 2016 Find out more about SAFI in the white paper we wrote with Bloomberg New Energy Finance We launched the first SAFI in 2016 with industry leader SolarNow in Uganda. More SAFIs are in the works which offer syndication opportunities for new investors. Solar roadshow in Rwanda July SolarNow technicians install a solar home system

8 Tailors working by the light of a Greenlight Planet Sun King lantern in India LONG-TERM RELATIONSHIPS WITH INDUSTRY LEADERS Greenlight Planet, multinational SunFunder works with the leading international solar companies to build a long-term financing ecosystem at the heart of beyond the grid solar. More than 18 million people worldwide use Greenlight Planet s solar lanterns and home systems, particularly in India and East Africa. We completed our third loan to Greenlight Planet at the end of As our customers grow, so do their financing needs. The new $1 million working capital facility will allow the company to expand sales of Sun King EasyBuy products, the new payas-you-go offering of its flagship Sun King line. Long-term partnerships are key for the growth of our sector. By working closely with Greenlight Planet and other industry leaders, we develop our own financing options and grow together. We are proud to fuel the businesses that are driving solar energy access. $1million new loan facility, our third with Greenlight Planet 70,000 number of solar products the new loan will finance 220,000 number of people expected to be directly impacted by the new loan December

9 HELPING LOCAL BUSINESSES GROW Ensol, Tanzania We work with local companies as well as international businesses. Local players often have a strong economic impact but the fewest financing options. Tanzanian solar business Ensol has been active since Despite its track record, it remains difficult for small local companies among others to access local bank financing. This is where SunFunder steps in. We completed our third loan to Ensol in 2016, for a 48kW solar project that will provide uninterrupted power for two server rooms and six computer labs at Sokoine University of Agriculture. The university s project is sponsored by USAID, but Ensol needed inventory finance in order to fulfil its contract. This built on our first loan to Ensol in 2014, which was for residential solar equipment. 48kW commercial-scale solar project 20,000 estimated number of students impacted Apart from finance itself, SunFunder supports smaller local companies in other ways too. $155k new loan amount, our third with Ensol Our loans are often the first external finance they have received, and our rigorous diligence process can ready them for long-term growth. Ensol ground-mount project in Tanzania May

10 NEW PROJECTS, NEW MARKETS Orb Energy, India SunFunder is flexible and fast-moving when it comes to identifying and executing on new solar opportunities around the world. Our loan to Orb Energy in 2016 marked a first step into commercial-scale projects in India. While large-scale solar in India has been booming, the commercial segment has had less attention. The loan is a creative facility that allows Orb to offer extended payment terms for commercial customers. Founded in 2007, the company has 75 branches across four Indian states and has developed a niche in solar projects for small and medium sized businesses and other institutions. Commercial solar can increase reliability and cut costs for businesses, as well as cut emissions from India s coal-based grid electricity and diesel backup generators. $1.5 million SunFunder loan kW size of Orb s fastest growing project segment, which the facility will finance New markets bring new challenges. We continue to develop our operations in India and other new markets, as well as the commercial solar segment. May 20kW Orb Energy installation on the rooftop of an educational institution in Karnataka, India

11 EXPERTISE IN AN EVOLVING MARKET Sunergise s Iririki project in Vanuatu, financed by SunFunder Collectively, SunFunder s team has decades of experience in a young and vibrant market. We think the following trends will shape it in the coming years: 1. Market opportunities The fundamentals of emerging market solar will keep improving: global energy access remains inadequate, fossil fuel dependency is expensive and solar keeps getting cheaper. New applications in new and existing markets will continue to present opportunities. 2. New players We expect competition to increase in the sector as a whole, as new players enter and incumbents seek new markets. This also applies to the financing landscape, as more investors are drawn to a growing market. 3. Back to business realities The beyond the grid solar sector had an unusual start in attracting both significant equity investor interest and concessional capital from development institutions. Increased competition will drive efficiency and new business realities. 4. Funding opportunities These all mean that demand for growth capital will increase. Climate funds and other development finance will mobilize at scale, leveraging in increasing amounts of commercial capital as transaction sizes and the industry s track record grow. Financial intermediaries like SunFunder will play a prominent role in matching supply to demand. 5. Political and macroeconomic risks Operating in emerging markets carry specific risks. The industry is highly exposed to local currency fluctuations, but the majority of its growth has been in comparatively stable economies in East Africa. We are likely to see wider macroeconomic and other political risks emerge as solar reaches new markets. Keep up with the latest news and insights on our blog at

12 LOOKING AHEAD TO 2017 If 2016 was a breakthrough year for SunFunder, the year ahead is already shaping up to be bigger and busier than ever. Over the next three years we want to finance over $250 million of beyond the grid solar projects, and improve energy access for more than 30 million people. In 2017, this includes more structured finance transactions for pay-as-you-go and other solar receivables, more commercialscale projects, and expansion into new markets. As the needs of the sector evolve, so do the partnerships we need to help it grow. We recognize the demand for local currency financing options, and will be launching the capability to offer this to our customers. SunFunder will also partner with other debt finance providers on syndicated transactions. We are looking ahead to our next series of debt funds too. By the end of the year we aim to have unlocked $50 million of new capital. SunFunder is also building new partnerships to unlock new kinds of institutional capital for beyond the grid solar. We look forward to working with our partners old and new to drive a global energy transformation