Renewables Emerging Markets LLC Promissory Note
We know it can seem a little confusing. Here is an explanation of our structure.
renewables.org (part of Renewables Public Benefit Corporation) as a website is raising funds for Renewables Emerging Markets (REM) LLC. REM LLC is an entity formed to raise debt from investors in the US and to finance renewable energy projects in emerging markets. REM LLC has filed with the SEC for Regulation D exemption. This means REM LLC can solicit investors and raise funds from accredited investors in the US. REM LLC can also raise from non US persons under the Regulation S exemption. You can review the filing here and the prospectus by emailing us at info(at)renewables.org.
In emerging markets, the upfront cost of a solar plant is anywhere between $500 – $800 per kilowatt of panels installed. This includes the cost of skilled labor and equipment such as solar panels, inverters, cables, installation frames, etc.
Many organizations would need to take out a loan to afford such a high upfront cost. We remove the barriers of financing and project management and offer customers a hassle-free turnkey solution that spreads the cost of their solar plant over 5 to 20 years. So instead of paying for the solar plant upfront, they pay a per kWHr (unit of electricity) rate over time.
We model the cost of maintenance and the interest rate in this repayment plan to make it attractive for investors. Our partners collect this money from the organization and pay us. This is how we generate a 6% return from these plants.
The current offering of the loan/promissory note has a maturity of 10 years.
Solar as an asset class has a break-even time of 5 to 9 years. The exact timeframe is determined by the upfront cost of solar plant, which includes the cost of equipment (panels, inverters), cost of installation (labor), and shipping. Project costs vary country by country, ranging from $500/kW to $800/kW installed. By structuring your loan over 10 years, we can more flexibly deploy your money across projects, countries while accounting for break-even time as well as time to generate a return for our investors. We normally lend the money out onward to projects at 7.5% to 9% to cover our costs. We also try and plan for currency risk with onward lending, where possible.
When you lend money on renewables.org, REM LLC is issuing a promissory note. A promissory note is a loan/debt agreement with the terms of repayment outlined. If you transfer money on the website or offline, you will be asked to sign a promissory note for the amount. The default terms are 6% for 10 years. You will receive monthly repayments calculated using the PMT function in your renewables.org dashboard. For investors who invest larger amounts, we may also create a side letter with different terms. You can withdraw or reinvest your repayments from the renewables.org dashboard.
This structure spreads your money and the risk of default across all the projects and special purpose vehicles (SPVs) REM LLC invests in. These projects can be viewed in our Portfolio section on the Invest page.
We are backed by a community of individual and institutional philanthropists who seek to catalyze renewable energy deployment in emerging markets. To incentivize and de-risk initial investments, they have agreed to guarantee repayment of the first $100 invested by the first 1,000 lenders.
A Power Purchase Agreement (PPA) is a contract between two parties: the Power Producer and the Energy Customer. The Power Producer generates electricity and the Energy Customer purchases electricity. PPAs are long-term electricity supply agreements that define conditions such as amount of electricity to be supplied, electricity price per kWHr (unit of electricity) and terms under which an agreement may be terminated. This is a widely accepted mechanism for selling power around the world.
Most of our funding arrangements are backed by PPAs and asset-backed by the installed solar panels and equipment.
The path to net-zero emissions involves access to clean energy for everyone. There are hundreds of thousands of organizations in Asia and Africa. These companies can do good for the environment and save money at the same time. Unfortunately, access to capital in emerging markets is not equal. And the cost of capital can be out of reach for these organizations.
renewables.org solves these problems by curating partners in Asia and Africa. Our partners sign Power Purchase Agreements (PPAs) with organizations that need clean energy. Then, renewables.org connects these partners with your funding.
Our goal is to make renewable energy access a reality for everyone, independent of where they are.
While it's rare for private investors to publicly disclose data on investment performance, secondary sources suggest that the Internal Rate of Return (IRR) on renewable energy projects is about 8-9%, with an initial dividend yield of about 6% and positive real dividend growth.
Returns depend on many factors, such as:
1) how the investment is made (via equity, debt, direct project investment, fund investments, etc.);
2) risks linked to the location and size of the project (political, economic, currency, regulatory);
3) the cost of capital;
4) the quality of legal documentation; and
5) the credibility of the buyer and project size.
Projects in emerging markets usually bring higher returns than projects in developed markets owing to their higher risks and reduced competition.
Based on data from the Mercatus’ platform of more than 80 GW of renewable energy projects, the average return (expressed as unleveraged IRR) on solar projects is 10.4% in the Middle East, 10.3% in Africa and 8.4% in Asia.
Separately, Moody’s 2021 and 2018 reports state that the project finance bank loans identifies ten-year cumulative default rates as the lowest for green use-of-proceeds projects in the power industry sector (5.7%). Non-OECD non-high income countries (our target market) have a default rate of 5-7% on average in these sectors.
 Data from International Renewable Agency Report 2020 here
We manage risks the following ways:
1. We work with trusted partners local to our focus markets, who bring a strong track record of installing and managing solar plants;
2. We carry out extensive due diligence on the opportunities that our partners bring. We evaluate the viability of the agreements as well as the customer;
3. We oversee the project execution to ensure high quality design and material sourcing; and
4. We require our partners to insure all the assets against calamities, theft, fire, etc. This is in addition to pre-existing warranties on solar panels and inverters.
At this stage, there is a minimum of $100 to invest and no minimum to withdraw. You can withdraw or redeploy your returns anytime.
As a business, solar power is a tried and tested source of electricity that has seen tremendous growth over the last decade, not only from a technological innovation standpoint, but also from an investment standpoint. With solar panel prices at an all-time low, the cost of solar energy spread over time (also known as the levelized cost of energy) is now lower than grid tariffs (the cost of electricity from utilities) in most markets.
Compared to other sources of renewable energy, solar deployment is cheaper, faster, more flexible and can be deployed in smaller sizes. These factors allow us to generate renewable energy on faster timeline, at a lower cost to customers, and with a lower risk profile for investors.
We currently focus on projects ranging from 100 kW to 20 MW for organizations in emerging markets.
All of our partners and their end customers undergo detailed due diligence. We carefully evaluate all technical and financial considerations. Each customer must provide a guarantee or a cash deposit equal to 3 or more months of their solar electricity bill. In addition, the Power Purchase Agreement with the end customer has suitable clauses aimed at mitigating defaults.
If, despite all these measures, the customer defaults or becomes insolvent, our partner can move the solar plant to a new customer at a cost of 10-15% of the project's value.
We also aggregate our projects at a partner level to spread the risk of default across multiple projects. While we aim to return your money even after a default, your loan amount cannot be guaranteed in the event of a customer or a partner defaulting.
Our $100 guarantee for the first 1,000 investors is independent of these defaults. This promotion will guarantee your money, regardless of customer or partner defaults.
Our primary mandate is to deploy capital in emerging markets, such as Africa and Asia. Each region has its unique set of challenges and opportunities. These regions have ambitious renewable energy targets and policies aimed at fast-tracking the deployment of solar power. We have a range of mechanisms backed by a financial team with decades of experience working across emerging markets. Furthermore, we partner with local vendors (that meet our pre-qualification criteria) that have a detailed understanding of the on-the-ground reality.
We take a number of steps to mitigate as many risks as possible to protect your loan amount.
All transactions carry a currency risk. We offer lower loan interest rates to partners to enable them to undertake the currency risk involved in signing agreements/working with us. When we offer a loan to a partner, we do so in USD and expect loan repayments in USD. Where possible, we also guide them in hedging the currency risk through banks.
We began this business in September 2019. Our first solar plant was commissioned (as a proof of concept before the business began) in early 2019. All the plants we have invested in continue to supply clean power to our customers and generate returns for our investors.
Our leadership team has collectively 75+ years of experience running businesses in emerging markets, across energy, microfinance, marketing and technology.
In the past, solar vendors and investors have reached out to organizations listed on our site. To avoid this unsolicited contact and protect the privacy of our customers, we no longer publicize this information.
Rest assured, we are in direct contact with these organizations and carry out a thorough technical and financial evaluation before listing their project. If you would like more information on any of our projects, you can email us using the contact form.
At the moment, we can only accept investments from US investors if they are accredited. There are various criteria for accredited investors. We use a third-party service provider: Parallel Markets. They review your documents and confirm with us that you are accredited. If you prefer, you may also directly provide us with an accreditation letter (Sample 1, Sample 2) signed in the last 3 months by a licensed attorney, certified public accountant, investment advisor, or registered broker-dealer.
In general, there is a de minimis threshold of $10 per tax year. In other words, we have to complete/submit a form 1099-INT for/to each investor who lends to us and to whom we pay $10 or more in interest per tax year.