Sustainable economic growth is one of the most important factors in improving the quality of life on the African continent. In this regard, Kenya is one of the fastest developing countries and trading hub in East Africa. In 2021 Kenya’s economy grew by 6.7% after a 0.3% contraction in 2020. Small and medium enterprises are at the heart of Kenya’s economy and growth in this regard. According to a 2019 report by the International Trade Center, they account for about 98% of all businesses in Kenya and create 80% of new jobs annually.

However, excessively high electricity costs, as well as poor reliability in power supply leading to lost production, pose major problems for businesses, forcing them to look for alternatives to the national power utility. Numerous companies are thus opting for a clean and reliable power supply from renewable energy sources and against the use of diesel generators.

It is these issues that the Ariya Group of Companies has addressed by designing, financing and implementing customized green energy systems in Kenya. These include solar photovoltaic (PV) systems, smart integrated batteries, and power stabilization technologies. The Ariya Group focuses on established commercial and industrial (C&I) customers operating in diverse industries in Kenya.

Through this crowdfunding, Ariya Finergy Limited aims to finance 4MW of solar PV systems and battery systems for established companies in East Africa, the average size of systems being installed is expected to be 300 kWp thus approximately 13 systems will be installed across various companies so that they can benefit from clean solar power as well as cost savings. In addition, Ariya intends to use the loan to finance its business activities and growth in East Africa.

With its business model, Ariya actively contributes to four of the UN’s sustainable development goals (“SDGs“):

By installing solar panels, Ariya’s customers receive clean, renewable electricity, which is a cost-effective alternative compared to the Kenyan electricity grid or diesel generators (Goal 7.2).

Many of Ariya’s customers are involved in agriculture (~ 57 % of Kenya’s workforce), more specifically in tea, horticulture and floriculture (~ 33 % of Kenya’s exports). Furthermore, a single tea factory employs on average 3000 people, each of whom generates the income for a family of four. Expensive electricity, frequent power outages and poor power quality are recurring problems. An intelligently designed solar system can thus have an indirect impact on economic sustainable growth (Goal 8.1).

Ariya’s holistic approach combines various innovative technologies such as solar thermal collectors and cost-effective battery energy storage systems to help its customers meet the energy needs of their industrial processes. The intelligently designed systems also address the shortcomings of the electricity infrastructure, which mainly lead to expensive electricity, frequent power outages and poor power quality (Goal 9.4). By providing financing to its customers, Ariya also contributes to Goal 9.3.

Ariya’s business model addresses climate change (Goal 13), as its solar panels and other energy efficiency solutions replace diesel generators and grid electricity (80% of which is generated by thermal power plants) and significantly reduce CO2. Similarly, Ariya also contributes directly to this goal by replacing unsustainable firewood-fuelled heating with solar thermal.

By switching to solar power, the companies can increase their environmental sustainability by reducing their CO₂ emissions. A total of 4MW of solar are expected to be installed with this funding, these systems are projected to generate 5,900 MWh of solar power annually, resulting in 2,944 tons of CO₂ savings per year. The average CO₂ emissions per kWh of electricity generated from the general energy supply mix of Kenya Power and Lighting Company, the public grid operator in Kenya, was used as the basis for the calculation. Using the rate of 499 g/kWh, this project will save 2,944 metric tons of CO₂ annually. Over the lifetime of the project, this results in a CO₂ saving of 14,720 tons, and over the lifetime of a solar system of approximately 25 years, 73,600 tons of CO2 can be avoided.

The investment risks associated with the subordinated loan are described in detail in the VIB under item 5 and in the risk notes. The measures taken to reduce risk are explained in this section: 

a) Dual company structure: two so-called “special purpose vehicles” (SPVs) are used for the crowdfunding campaign:

1. The first one called Ariya Emissions 2 UG (haftungsbeschränkt) acts as the borrower/issuer and is based in Germany. It forwards the collected capital as a secured project loan to the local asset company Ariya Finergy Limited (AFL). In return collateral is pledged to it (see later in this text section). Furthermore, Ariya Emissions 2 UG does not engage in any other business activities during the entire term of the loan in order not to mix the risk with other projects. Shareholders and managing directors of Ariya Emissions 2 UG (haftungsbeschränkt) are independent from the Ariya Group. In addition, a liquidity buffer of 25,000 euros of the collected money in the crowd financing remains at the disposal of Ariya Emissions 2 UG (haftungsbeschränkt). The liquidity buffer serves as a financial cushion for any necessary measures by the issuer if the project owner fails to meet its payment obligations.
2. The second SPV, the Kenyan Ariya Finergy Limited (AFL), is the local asset company, which was established by Ariya specifically for the purpose of financing as a pure asset company. It acts as borrower vis-à-vis Ariya Emissions 2 UG (haftungsbeschränkt) and remains the owner of the project assets that are financed and generated with the project loan, these assets are pledged to the German UG, during the entire term of the loan. AFL may not make any other loans during the term of this loan without the consent of Ariya Emissions 2 UG. AFL may not engage in any business activities other than in the field in which it is already engaged during the term of the loan.

b) Project assets: The assets being financed under this campaign by the Kenyan project company AFL are available to the German issuer Ariya Emissions 2 UG (haftungsbeschränkt) as collateral for the on-lending loan. The assets include, in particular, the solar plants financed with the crowdfunding and leased to customers or the customer receivables due to AFL from power purchase agreements (PPAs) with the customers. The projects planned under this funding will create customer receivables of EURO 4,214,000 over the entire term.

c) Payments in USD or EURO: All but a few contracts require customers to make payments in USD or Euro. Since a predominant part of Ariya’s customers conduct international business and have revenues in hard currency, currency risks associated with the local currency KES are thus decisively reduced.

d) Equity financing: AFL had a gearing ratio of 2.62 at the end of 2021, which corresponds to an equity ratio of 28%. The disbursement of the crowd loan is linked to the condition that AFL demonstrates an equity ratio of at least 25%. The same threshold applies for the entire term of the loan. With the consent of the issuer, AFL may fall below this value for a limited time and up to a lower limit of 20%. From the perspective of the issuer Ariya Emissions UG 2 (haftungsbeschränkt) in Germany, these funds provide a buffer against losses, for example from currency risks between customer payments in USD and payment obligations from the project loan to the issuer in EUR.

This financing plan contains the total projected cash flows for Ariya Finergy Limited covering the receipt, initial utilization and repayment of the loans.

Investment needs

A total of 4.2 million euros is required for the overall project, which will be used to finance solar PV systems and battery systems for Ariya’s customers in East Africa. It will also be used to finance the company’s business activities and growth. The loan will cover the costs of personnel, sales and management support functions as well as the acquisition and operation of the solar PV and battery systems and related services. This is the fourth and final tranche of Ariya’s “Green Solar and Battery Systems for Businesses in East Africa” project at bettervest. The first and second tranches were completed in April and October 2023. The third tranche in February 2024. Out of the maximum funding amount approved by the regulator (1,999,500 EUR), a total of 1,309,150 EUR has already been raised via the bettervest crowd and its co-funders´crowd. The remaining available funding sum of EUR 690,350 is to be financed with this final tranche. The project will not be extended after the end of this tranche.

The term of the loan is 3 years and has an annual interest rate of 6% p.a. for the crowd investors. Investors who invest in the project up to and including 17.05.2024 will also receive an early bird bonus of 1% (i.e. a total of 7% p.a.).
As this is the final tranche, the project owner Ariya is offering an investment voucher that corresponds to an additional interest of up to 1.5% on the investment. Investors who redeem the voucher with the code ARIYA2024 during the early bird period will receive a perceived interest rate of 8.5% and investors who redeem the voucher after the end of the early bird period will receive a perceived interest rate of 7.5% p.a.. Repayment is made once a year and includes amortisation and interest (annuity repayment). The funding threshold for this project is €50,000; if only this amount is reached, the Project Owner will still use the investor funds to finance his business activities and invest to a lesser extent in the above-mentioned projects.

Repayment

The liquid funds for the repayments to the investors are made up of the proceeds from the sale of the solar installations and the sale of the clean solar power, which is governed by a power purchase agreement (PPA).

The third webinar on the Ariya project took place on 26.05.2023 at 6 pm. Jenny Fletcher and Troy Barrie reported on the progress of the project and answered questions from participants. You can watch the recording here.

The second webinar on the Ariya Finergy project took place on 21.02.2023 at 6 pm via Zoom. Jenny Fletcher (CEO) and Troy Barrie (CTO) presented the current status of the project and answered questions from the audience. You can watch the recording here.

The Ariya Finergy Limited webinar took place on 15.11.2022 at 6 pm. The two founders Jenny Fletcher (CEO) and Troy Barrie (CTO) presented the project and their company and answered questions from the audience. You can watch the recording of the webinar here.