Interview with Patrick Kimathi, CEO of Skynotch Energy Africa Limited, conducted by Sohaib Elbebny in August of 2020.
Skynotch Energy Africa Ltd. has developed its business around the community-developer model of business. It works with communities around the energy resource to develop and commercialize renewable energy projects either for grid or off-grid connection.
Skynotch will create and enhance sustainable energy enterprises with the communities as stakeholders.
This idea helped them raise low-cost financing during the development phase, reduce the investment cost, and increase investment return. The organization can get new revenue streams and income that enables them to invest corporately or individually.
- The Community Developer model gives the opportunity to spread benefits and increase its development.
- Challenges with community developer model
- Educating the community about the projects
- The corruption challenges for startups in developing countries and how to avoid it.
How much money have you raised for your company since you worked with Mentor Capital Network (MCN)?
$1.2 million. This was from the Sustainable Energy Fund for Africa and the Africa Climate Technology Network as a project preparation grant to enable us to develop a 7.8 Megawatts Project.
Why wasn’t it on the news?
I’ve avoided the news. The reason being that I wanted to have something concrete. One of the things that happens is it attracts both good and bad attention and dealing with the community. It can lead to the incitement of the communities, which becomes a risk that was not anticipated. I’ll give you a scenario immediately when I get into a discussion of raising funds, some people will not care about why the funds were raised, but they will talk of the raised money. So there are people whose attention is out to get a share of the capital. Others who start monitoring determine whether the money trickles down to the people without understanding what it is. So it becomes a bit tricky for our project. The other thing is, and it is highly politicized internally because people think there’s a lot of money in it. So every time you do that, politicians want to get a share of it.
The good thing is the funds that we got; it’s not money that sat into our account. It was, I’d say a third party financing. That we did the procurement, and EFDB paid the service providers. So it did not hit our balance sheet. Even if anyone came to me looking for money, they would be shocked that I don’t have money. And that’s one reason why I avoided the media because people have come to look for money, and since we didn’t get the actual cash, then there’ll be politics of we diverted the money. We’ll be dealing with unnecessary noise.
What is your business model?
Our business model is what we call a community developer model. And this model, what we’ve done is we took 1,200 households, structured them into a community-owned organization, where each household nominated one member, they’d sat down at their level, agreed that they are the one representing us in that front. And then we created what we call a public company limited by shares. And each of the community, each of the households got a certain amount of shares. Which means now they are part of the project. We made them see that this is their project.
So anything that is politically instigated, politicians like numbers and numbers of people who have limited or no information. Every time they come to the community with some wrong information, the community would give them the correct information.
For instance, someone would come and say that he is raising money using your name, and they are not giving you money. And the community says we know and we understand that we need this amount of money to pay professionals and do technical studies.
How did you educate the community about the project?
We did what we call community forums, where we educated the community about developing the project, what it takes, and how long it will take. What we usually do is the consultants have to go down to the community. We always have a preparation meeting between the consultant and the community, where we explain who the consultant is and what the consultant is supposed to do and what they will expect. Another thing we’ve done is that part of the consultant’s fee goes into hiring the local people to support the consultant when they are on the ground.
If someone were to undertake a feasibility study, they would have people who will help them map the transect. If they are doing geological research, they need to dig around whatever they need that doesn’t require high education; then they get the locals.
So in the process, we built a good rapport with the community. And the fact that once the report is concluded, then we go and send it to the community with a consultant before we get to go to look for the next step.
Why do you use social equity?
As part of the community to benefit the community, a capitalist would look at it like it’s dollar for dollar. But here I am as a person who did not have deep pockets with a lot of money to do technical studies. I had to raise funds. So one of the advantages that I had was, as someone asked me when we were discussing the funding from the African Development Bank. What’s the difference between your hydropower and the hydropower in DRC Congo? And the only thing that happened is they realized that we are the only project with community ownership. So we took the community goodwill, transformed it into low-cost funding. And it would have been very unfair for us to have a project with raised funds, low-cost funds using the community, and don’t benefit the community. So for us, that’s how we have been explaining our social equity model. And that has enabled us to raise adequate resources. I’d say that we’ve raised about $2 million other than the significant monies.
We called it social equity because it was their goodwill that we harnessed to raise development funds.
Why did you choose this model for your business?
Kenya had one agency that was generating, distributing and regulating the power sector.
So it had become such a big monopoly that the government decided to break it into four agencies. So we have an energy-generating component, we have energy distributing, we have the regulator, and now we have a transmission agency. So I think the latest that has been handed this little electrification authority. then I realized that most local people would have to get into the energy sector to raise development financing. However, having engaged the various development agencies during that period, the challenge was how to develop an inclusive model, where communities who are the owners of the energy resource are not going to be alienated. That’s how I thought of this model.
How was your experience with the MCN different from other incubator programs you have participated in?
The Unreasonable Institute made made it easier for me now to perfect my business plan. However, as it advanced, then I realized I needed sector-specific mentors.
The MCN helped me realize something else that I never thought of when going into this. I can rely on an expert elsewhere who is willing to spare their time and walk with me without necessarily going into a workshop or a public forum. I initially thought the only way I could get expert knowledge is to attend a workshop or go for training, but when I got into the MCN, I realized it opened my thinking to mentorship. The idea of feedback. The idea of feedback from the mentors gives to you.