Uganda is a landlocked East African country where the majority of people (94%) use firewood or charcoal for cooking. These energy sources have several disadvantages for the environment and the users: According to the National Environment Management Authority (NEMA), 2.6% of Uganda’s forests are cut down annually for firewood, charcoal, agriculture and housing. In addition, the burning of wood or charcoal produces harmful emissions and smoke, the inhalation of which causes 3.8 million premature deaths every year, according to the World Health Organization. In addition, the collection of wood is often carried out by women, which robs them of valuable time.

The transformation to modern, clean cooking solutions is therefore essential. However, there are still major hurdles to overcome, as only 42% of the population in Uganda has access to electricity. In addition, this change requires an adaptation of cooking habits, as other cooking appliances must be used. One alternative are bioethanol cooking solutions, which are marketed by AREM Clean Energy. AREM Clean Energy’s business model is called “tool and fuel”, as both cooking stoves and the associated bioethanol fuel are sold. This business model has gained visibility and investment in recent years.

Switching to bioethanol-based cooking solutions is considered the most effective measure at household level to reduce deforestation and improve health and living standards. At the same time, cost savings are achieved using energy-efficient cookstoves. Bioethanol is a by-product of sugar cane processing and is therefore a fully renewable resource in the circular economy.

AREM Clean Energy intends to use the loan to purchase 2,723 bioethanol cookstoves and 50,000 liters of bioethanol fuel. In addition, the establishment of premises and depots for storing and packaging the bioethanol fuel in branded plastic containers will be financed.

AREM Clean Energy’s business model actively contributes to 6 of the UN’s sustainable development goals (SDGs):

The energy-efficient cookstoves, which run on bioethanol fuel, reduce the consumption of fuels such as firewood and charcoal, thereby increasing energy efficiency (Goal 7.3) and cutting down fewer trees (Goal 15.2). Bio-ethanol stoves and fuel provide an affordable alternative cooking solution compared to LPG and charcoal stoves. This enables households to reduce expenditure on cooking and save 50% on fuel costs (Goal 8.4).

The use of efficient stoves also reduces health risks such as indoor air pollution, which can cause respiratory diseases. Bio-ethanol-based cooking solutions are recognized as the single most effective intervention at a household level that reduce indoor air pollution, reduce carbon emissions, improve health and living standards (Goal 3.9). In addition, fewer CO2 emissions are emitted (Goal 13), which helps to combat climate change.

Bio-ethanol stoves are very efficient and user friendly so that any gender can use the stove to cook. At the same time the bio-ethanol stoves cook faster and provide women and girls more free time to concentrate on education and work. AREM Clean Energy currently employs 21 people, of which approximately 62% are women, and supports women in taking up positions that are traditionally “only meant for men”. (Goal 5.1).

Traditionally using a charcoal stove for cooking emits 7,738 kg CO2 per year. However, by cooking with an bioethanol stove, the emissions amount to only 321.2 kg CO2 per year. Therefore, using an bioethanol stove prevents emission of an average of 7,416.8 kg CO2 emissions per year. 

Through the crowdfunding project, a total of 10,161 cookstoves will be sold, saving an average of 75,362.1 tons of CO2 over the 3 year duration of the loan. Therefore, CO2 savings per year amount to an average of 25,120.7 tons of CO2.

The investment risks associated with the subordinated loan are described in detail in the risk information. With regard to the assessment and limitation of risks for investors, the issuer draws attention to the following special features in the design of the project:

a) Use of a special purpose vehicle:

For the crowdfunding campaign on bettervest, a special purpose vehicle called BETTERVEST INVESTMENT LTD based in Kenya was established to act as the borrower in this project. It forwards the collected capital as a secured loan to the project owner in Uganda, Arem Clean Energy Solutions U Limited (AREM Clean Energy). The shareholders and managing directors of BETTERVEST INVESTMENT LTD are independent of AREM Clean Energy. In contrast to a German special purpose vehicle, the special purpose vehicle based in Kenya can act as a borrower for several projects. However, there are no changes to the contracts and the risk assessment compared to a German special purpose vehicle.

In addition, the following collateral is offered as security for the loan passed on by the special purpose vehicle to the project owner:

b) Personal guarantee of the shareholder

In the event of default, the shareholders are personally liable for the repayment of the loans.

c) Pledging of receivables and inventories

The crowdfunding loan is used for the purchase of SAFI bioethanol cookstoves and bioethanol fuels, which will be sold to AREM Clean Energy. As long as the customers have not yet fully paid for the cookstoves, these current assets are available as collateral in case the loan cannot be repaid.

Investment needs

The total cost of AREM Clean Energy’s project is € 151.818.62. This will fund 2,723 new bioethanol cookstoves, 50,000 liters of bioethanol fuel, and the establishment of premises and depots to store and package the bioethanol fuel in branded plastic containers.

EUR 100,000.00 (incl. fees) is to be collected via crowdfunding.

The term of the loan is 3 years and has an annual interest rate of 8.0% p.a. for the crowd investors. Investors who invest in the project within the first two weeks also receive an early bird bonus of 0,5% p.a. (i.e. a total of 8,5% p.a.). The funding threshold for this project is 50,000 euros. If the funding target is not reached, but at least the funding threshold is met, the project owner will still use the investor funds to purchase material and invest to a lesser extent in the above-mentioned investment objects.

Repayment

The loan will be repaid from liquid funds that AREM Clean Energy generates as income from the sale of bioethanol cooking stoves and bioethanol fuel as part of its business activities.

AREM Clean Energy sells ethanol cooking solutions consisting of bioethanol stoves and bioethanol fuel.

1. SAFI bioethanol stoves (single and double burner stoves): Model SB 102 & DB 202

SAFI brand bioethanol stoves are patented Blue Flame Stoves manufactured under license in China. The stoves are safe, clean-burning and durable bioethanol cooking stoves. The unique combustion technology produces hardly any soot and particles. The stoves have been developed to reduce deforestation and solve the problems caused by cooking with firewood and charcoal indoors – resulting in over 3.8 million deaths worldwide each year.