Help the leader of energy efficient cookstoves in Kenya expand to 7 African countries, make clean cooking accessible to millions & enable the saving of 934,400 tons of CO2 per year!
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The acquisition of this investment is associated with considerable risks and may lead to the complete loss of the invested assets.
UN Sustainable Development Goals
The investment at a glance
UKaid supported bettervest in drafting legal contracts related to this project through Energy4Impact’s Crowd Power program.
This is the second tranche of the project “Resource-efficient cookstoves for Africa – Expansion financing of BURN Manufacturing” by BURN Manufacturing. The first tranche was completed in July 2023 and EUR 707,200 of a total of EUR 2,266,300 has already been raised via the two platforms bettervest and ROCKETS (co-funding). This tranche is intended to finance the remaining amount.
A large proportion of people in sub-Saharan Africa rely on charcoal or firewood as an energy source for cooking, the combustion of which releases emissions that are harmful to health. According to the World Health Organization, smoke inhalation from cooking on open fires causes 3.8 million premature deaths each year. Due to a lack of alternatives, households spend a lot of money to purchase these harmful fuels, for which they must pay $300 to $500 per year, depending on the region, type of wood, and price volatility. Entire forests are being cut down to meet demand.
Award-winning BURN Manufacturing Company (BURN Manufacturing) is countering these problems by producing energy-efficient cookstoves. At the company’s factory, which is located in Ruiru, Kenya, BURN Manufacturing produces resource-efficient cooking appliances that use less fuel than conventional cookstoves and produce up to 80% less smoke. This significantly minimizes health risks and provides high cost savings for customers who tend to be from poorer backgrounds.
Since its inception in 2011, BURN Manufacturing has established itself as the market leader in Kenya with over 4.1 million cooking appliances sold and is now looking to bring its climate-friendly products to the African continent. As a result, BURN Manufacturing plans to enter seven additional countries by 2024: Rwanda, Ghana, Uganda, Tanzania, Democratic Republic of Congo, Nigeria and Mozambique. As part of this, BURN Manufacturing is looking to expand its production capacity in Kenya, as well as invest in further development of its energy-efficient electric cooking solutions. Currently, the company has the capacity to produce 400,000 cookstoves per month. This is expected to increase to 500,000 units per month by mid-2024. This funding will therefore finance BURN Manufacturing’s business expansion and production expansion to improve the quality of life for millions of people.
BURN Manufacturing has already successfully completed two fundings on bettervest.com: In the first campaign, €334,550 was raised, and in the second campaign, €683,000 was raised to finance raw materials for cookstoves.
BURN Manufacturing’s business model actively contributes to 6 of the UN’s sustainable development goals.
The resource-efficient cookstoves reduce fuel consumption by 39%, increasing energy efficiency (Goal 7.3) and cutting down fewer trees (Goal 15.2). Since the first so-called jikokoas (Swahili for “cook stove” and “save”) were sold in 2013, 9.6 million tons of wood have already been saved from deforestation. At the same time, customers are able to save on fuel costs (target 8.4). BURN Manufacturing customers’ cost savings have accumulated to $683 million since 2013.
The use of the efficient cookstoves also reduces health hazards such as indoor air pollution that can cause respiratory illnesses (Goal 3.9). Reduced fossil fuel use also results in lower CO2 emissions (Goal 13), helping to combat climate change. BURN Manufacturing has been able to avoid 17 million tons of CO2 emissions to date through its energy-efficient cookstoves.
BURN Manufacturing currently employs more than 2,500 people, approximately 50% of whom are women, and supports women in taking positions that are traditionally “for men only” (Goal 5.1).
The use of the efficient cookstoves saves fuel, which at the same time creates a large potential for CO2 savings. On average, a BURN cookstove saves 3.2 tons of CO2 and 2.3 tons of wood per year. Thus, indoor air pollution is reduced by 60% when using a cookstove. The expansion is expected to sell 20 million more cookstoves by 2027, saving an average of 12.8 million tons of CO2 per year. The crowdfunding campaign finances 7.3% of this. Accordingly, crowdfunding can save an average of 934,400 tons of CO2 and 671,600 tons of wood per year.
The investment risks associated with the subordinated loan are described in detail in the VIB under item 5 and in the risk notes. With a view to assessing and limiting the risks for investors, the issuer draws attention to the following special features in the design of the project:
a) External default guarantee
This project is the first to receive an external default guarantee from a guarantee fund. The guarantee exists in favor of the issuing special purpose entity Burn Cook Stove Emissions UG (haftungsbeschränkt), which is independent of the Project Owner, and relates to the loan that the special purpose entity on-lends to the Project Owner (on-lending loan).
The guarantee comes into effect if the Project Owner defaults on repayment of the loan after the lender (SPV/bettervest) has initiated all reasonable recovery measures. Payments under the guarantee are subject to the terms and conditions of the applicable guarantee agreement. The guarantee covers a portion of the outstanding loan amount. The guarantee is not a first loss guarantee and is granted exclusively on the basis of true risk sharing by the lender (SPV/bettervest). Political risks are not covered by the guarantee. The costs and fees associated with the guarantee in favor of the guarantor are borne by bettervest.
You can find our blog post on the general topic of “default guarantees” here.
b) Use of a special purpose vehicle:
For the crowdfunding campaign on bettervest, a special purpose entity called Burn Cook Stove Emissions UG (haftungsbeschränkt) was established. Burn Cook Stove Emissions UG (haftungsbeschränkt) acts as the borrower and is based in Germany. It forwards the collected capital as a secured loan to the company in Kenya, BURN Manufacturing USA LLC Kenya Branch (BMUKB) and does not engage in any other business activities during the entire term of the loan. The shareholders and directors of Burn Cook Stove Emissions UG (haftungsbeschränkt) are independent of BMUKB. In addition, Burn Cook Stove Emissions UG (haftungsbeschränkt) has a liquidity buffer of 25,000 euros of the money raised in the crowdfunding. The liquidity buffer serves as a financial cushion for any necessary measures in the event that BMUKB does not meet its payment obligations.
c) Collateralization of the on-lending loan:
The on-lending loan from Burn Cook Stove Emissions UG (haftungsbeschränkt) to BMUKB is secured by the following assets:
(i) Inventory of Finished Goods: Pledge of goods worth 40% of the outstanding loan amount. These are higher value electric powered cook stoves which are spun off into a trust company based in Mauritius for the purpose of pledging.
(ii) CO2 allowances (VERs): In addition, the U.S. parent company, BURN Manufacturing Company, Vashon, Washington State, pledges CO2 allowances, known as Voluntary Emission Reductions (VERs), credited to the U.S. parent company in the course of BMUKB’s manufacturing and marketing of cookstoves in Africa. This collateral relates to 100% of the outstanding loan amount.
In total, the book value of the collateral amounts to 140% of the outstanding loan amount.
The equity of the Project Owner BMUKB amounted to 51% of total assets as of December 31, 2021.
BURN’s parent company in the U.S. received fresh equity of $2.2 million during the year, as well as $1 million through the conversion of an existing bond. For the current year, BURN expects to raise approximately USD 9 million in additional equity through the retention of earnings. In addition, the group is negotiating options with external investors that will allow it to increase equity via a capital increase in late 2022 and Q1 2023, if required. A large part of the funds will be invested in BMUKB. Thus, they strengthen the financial power of the borrower vis-à-vis the issuer of the crowdfunded loan.
f) Subordinated loan:
To supplement equity, BURN received a total of $5.6 million in funding in the form of equity-like loans from Spark+ Africa Fund, Clean Cooking Alliance, and Energy Access Relief Fund in late May and June 2022. Payment of an additional USD 2.0 million is still outstanding this year.
g) Special Credit Agreement Subsidiary Agreements (“Financial Covenants”):
The following ancillary loan agreements between the lender Burn Cook Stove Emissions UG (haftungsbeschränkt) and debtor BMUKB were included in the on-lending loan:
From the 13th month to the end of the term, the leverage ratio, shall not exceed 2.0:1. The debt-equity ratio is defined in the contract as follows: (non-subordinated debt) / (equity + subordinated loan).
BMUKB’s debt service coverage ratio may not fall below a factor of 1.2 during the entire term of the loan. That is, in the 4 quarters prior to the maturity of each annuity payment, the cash flow available for servicing the company’s debt must be at least 20% higher than the debt service BMUKB is required to pay on its total debt in those 4 quarters.
In addition, the disbursement of the loan is contractually conditioned on MBUKB’s equity being at least 35% of its total assets. This corresponds to a maximum debt-equity ratio of 1.86.
In order to realize the expansion as well as the development of the production and the product range, BURN Manufacturing needs 7.6 million euros. On the one hand, this will finance the market expansion into seven African countries and the associated measures such as sales, marketing, logistics and administration. On the other hand, BURN Manufacturing will use the money to invest in the development and design of (new) products as well as in the expansion of production capacities.
Via crowdfunding, 2,266,300.00 euros (incl. fees) are to be collected, the remaining requirements will be covered by equity, grants and debt capital. The term of the loan is 5 years and has an annual interest rate of 6% p.a. for the crowd-investors. Investors who invest in the project within the first four weeks also receive an early bird bonus of 1% p.a. (i.e. a total of 7% p.a.).
The project is co-financed by the crowdfunding platforms bettervest and ROCKETS. This means that the project will be offered for funding on two platforms in parallel.
The funding threshold in this project is 50,000 euros. If only this amount is reached, the Project Owner will fund the rest from other sources and carry out the project.
The loan will be repaid from cash generated by BURN Manufacturing through the sale of the cookstoves and CO2 certificates (Voluntary Emission Reductions (VERs)).
Want to try the BURN cookstove for yourself? BURN Manufacturing has made 5 of their energy-efficient cookstoves available for a raffle among bettervest investors. The cookstoves will be raffled among the supporters with the highest investment amount and will be shipped to the winners if they are interested.
1. What is a default guarantee?
We have created a detailed blog post on the topic of default guarantees, which you can access here.
2. Do I as an investor have additional costs due to the guarantee?
No. The cost of the guarantee is paid entirely by the SPV, which in turn charges it to the Project Owner.
The BURN business model: clean cooking stoves and green CO2 certificates
A) Production and sale of resource-efficient cook stoves
Strategy and rationale:
The classic version will be discontinued and replaced by the improved mass market version in Q4 2022.
Classic: retail price $37
Mass market version: retail price: $10-27 (prices subsidized by CO2 allowances).
Jikokoa Xtra – The largest, longest lasting and most efficient residential biomass stove in Africa.
Jikokoa Pro – The most efficient charcoal cookstove for commercial customers in Africa.
Strategy and rationale:
Xtra enables BURN Manufacturing to capture the premium consumer market at a higher price point and profit margin.
Pro is designed for restaurants and institutions. Studies have shown that these institutions are responsible for ~50% of charcoal consumption in Kenya.
Xtra: retail price: $47
Pro: Retail Price: $80
Ecoa Wood – The world’s most economical stove for domestic use.
Uses 71% less wood than a 3-stone fire.
43% thermal efficiency (51% with pot skirt)
ISO/IWA level 3
Lifetime: 5 years+
CO2 reduction: 2.3 – 3 tons per stove per year.
130,000 units sold in 2021
Currently negotiating supply contracts for over 1 million units in Africa for 2022
Strategy and rationale:
More than 600 million rural residents in SSA rely on wood because they cannot afford LPG or electricity.
Wholesale price: $23
EPC – The safest, most affordable and modern cooking solution that can prepare any meal.
Designed for the East African market with one-touch cooking for traditional East African cooking.
Induction Cooker – The induction stove heats an induction cooking pot through electric induction, ensuring minimal energy loss.
The induction stove is aimed at African households.
Switching to the induction stove is 3-8 times cheaper than other fuels, with customers able to reduce their average weekly fuel expenditure by 65% from $8.40 to $2.70 – an average saving of $5.70 per week. This benefit is becoming increasingly apparent as the cost of ethanol, LPG and biomass for cooking continues to rise.
Customers using our electric induction stove reduce their charcoal consumption by 85% and their LPG consumption by 59%.
A 10-person research and development team developed a grid-connected platform with pilot projects currently underway in Kenya, Tanzania and Ghana. Approved $1.5 million in grants/ received $358,000 to date.
Strategy and rationale:
Target households that have access to electricity, with a focus on those that rely on charcoal, wood, and kerosene. Electrification on the continent is progressing rapidly; for example, 56% of all Kenyan households are now connected to the grid.
Retail Price: $60-110
ecoa LPG (Liquified Petroleum Gas) – locally manufactured cookstove that offers better quality at a lower price than comparable imported cookstoves.
Value and Premium models retail for ~20% less than imported units
Modular design to accommodate PAYG and OEM customer specifications.
VAT exemption for raw materials
Duty-free shipping to EAC (East African Community).
Strategy and rationale:
LPG consumption in SSA will double in the next 10 years.
Direct sales to retail, OEM (for LPG companies like ProGas) and wholesale to PAYG LPG companies.
Retail price: $21 – $37
All cookstoves have been tested by several independent bodies including the Kenya Industrial Research and Development Institute (KIRDI) and the University of Washington. Fuel efficiency, durability and reduced emissions have been confirmed. UC Berkley and the University of Chicago also authored an independent study on customer efficiency and cost savings. The study can be found here.
Generally, the cookstoves can be registered by customers using a serial number, which gives them access to customer service, which assists them in maintaining the cookstoves and provides spare parts. For this purpose, they have access to over 50 service points in Kenya and East Africa.
The modern production hall is located in Ruiru and is powered by solar electricity, which covers two-thirds of the production’s energy needs. BURN Manufacturing sources a large part of the raw material, such as Galvalume sheets or stainless steel sheets, from Kenya. Other materials such as stainless steel tubes or wires are imported from China. In the press, the material is cut, pressed and formed into various parts, with each machine producing about 4,000 – 7,000 parts per day. The individual parts are powder coated in an oven at 1,000 degrees, giving them a glossy finish and making them durable and odorless. The individual parts are then assembled into various sub-assemblies, which are ultimately joined together to form the finished product. This is done by welding or with riveted joints. Quality control is carried out directly on the assembly lines. Within one month, 200,000 climate-friendly cook stoves can thus be produced.
The cookstoves are sold and marketed worldwide through many channels. These include retailers, financial institutions that allow installment payments, cooperatives, and through an online store.
BURN Manufacturing already sells its products in Kenya, Somalia and Somaliland, and sporadically in other parts of East Africa and the world. Plans are now underway to expand to other African countries.
With regard to the packaging of the cookstoves, BURN Manufacturing operates a zero-plastic policy. This includes packaging the cookstoves with sustainable materials that do not cause environmental pollution.
B) Trading of CO2 certificates (Voluntary Emission Reductions (VERs))
The second source of revenue for BURN Manufacturing is the trading of CO2 certificates. Since 2016, BURN has generated tradable CO2 certificates, so-called Voluntary Emission Reductions (VERs), through the sale of cookstoves and the associated CO2 savings. One VER represents one metric ton of CO2 equivalent from a verified project that is audited by an independent third party and certified to Gold Standard. The Gold Standard sets requirements for designing projects for maximum positive impact on climate and development and certifies CO2-saving projects such as BURN.
VERs are sold to companies and brokers. Sales are often made through Emission Reduction Payment Agreements (ERPAs). ERPAs are a commitment to buy/sell carbon credits at predetermined prices over a period of time. BURN has already signed EPRAs worth approximately EUR 30 million with various buyers. The end of the contract period is between 2021 and 2028 and the average price per VER is 5.21 euros (6.21 USD).
In the last three years, BURN has also already been able to sell over 1 million VERs at a price between $1 and $6 per certificate, with the expectation that this value will continue to rise.
The decline in global inventories has driven up VER prices, and carbon credit prices are estimated to continue to increase tenfold to ~$50/tCO2e by 2030. BURN credits have followed market trends, rising from ~$3-4/VER in 2020 to $7-8/VER in 2021. The increasing net zero obligations of many companies and countries have led to an explosion in demand for carbon credits, with prices expected to continue to rise.
For more in-depth information on carbon credits, read our blog post on the topic.
We are excited to partner with Bettervest as we embark the most ambitious growth plans in our company history: expanding to new markets across Africa, increasing our production capacity and launching new product lines.
This year alone BURN will manufacture and sell over 2,1 million stoves, employ over 1000 team members, and deliver life-changing impact to over 9 million customers. These all more than we have delivered in all previous years combined and just the beginning of our major scale-up across the African continent.
Through our partnership with Bettervest and their unique crowd funding platform, we are grateful for the opportunity to utilize a key, timely source of capital for funding of our aggressive growth and to share our journey with an investor base committed to delivering environmental & life changing solutions like BURN.
The Borrower and Country Profile
Burn Cook Stove Emissions UG (haftungsbeschränkt)
BURN Manufacturing USA LLC,
New Horizons Industrial Park
Burn Cook Stove Emissions UG (limited liability): Issuer and borrower
The special purpose entity Burn Cook Stove Emissions UG (haftungsbeschränkt) is based in Germany and acts as borrower in this project. The task of this special purpose company is to forward the collected money of the crowdinvestors as a project loan to the project owner on site, BURN Manufacturing USA LLC Kenya Branch (BMUKB). Burn Cook Stove Emissions UG (haftungsbeschränkt) will not engage in any other business activities during the entire term of the loan. Shareholder* and Managing Director* of Burn Cook Stove Emissions UG (haftungsbeschränkt) are independent from the project owner BMUKB.
BURN Manufacturing Company (BURN Manufacturing): Parent company
BURN Manufacturing Company was founded in 2011 by Peter Scott in the United States. The company includes several local companies through which BURN Manufacturing operates in various African countries. In Kenya, BURN Manufacturing operates BURN Manufacturing USA LLC Kenya Branch (BMUKB), a wholly owned subsidiary that has been active since 2013.
Since 2016, BURN Manufacturing has been operating in Somalia and Somaliland in addition to Kenya, where it has seen steadily growing sales. As part of its expansion plans, BURN Manufacturing aims to offer its cookstoves in additional African countries by 2024, including Tanzania, Ethiopia, Ghana, Democratic Republic of Congo, Rwanda, Mozambique and in Nigeria. As part of this, BURN Manufacturing plans to restructure and expand its product line.
The company employs more than 2,500 people* worldwide and has sold more than 4.1 million energy-efficient cookstoves. Since selling its first cookstove in 2014, BURN Manufacturing has generated a total of €62.6 million ($68.9 million) in revenue, of which €25.3 million ($27.9 million) was generated in 2022 alone. In addition, since 2018, BURN Manufacturing’s net income and shareholders’ equity have been positive. By 2027, BURN aims to increase net profit from €5 million ($5.4 million) in 2022 to €99.96 million ($100 million).
BURN Manufacturing has already received several awards for its business model. Among them, the company received the 2018 Bloomberg New Energy Pioneers Award for global leadership in developing clean energy solutions, the 2018 Swiss Energy and Climate Summit Award for a pitch on the impact of clean ovens, and the 2015 Ashden Green Energy International Award – the Oscars of energy awards – for empowering women through new economic opportunities. In 2020, BURN Manufacturing received the LEAP Award for Affordability for its electric pressure cooker (model BURN MY-8001) for providing the best overall value to the end user based on unit price, estimated cost of ownership, overall performance and cooking capacity.
BURN Manufacturing USA LLC Kenya Branch (BMUKB): Project Owner
BURN Manufacturing USA LLC Kenya Branch (BMUKB) is a wholly owned subsidiary of BURN Manufacturing Company (based in the USA) and has been operating in Kenya since 2013. Located in the town of Ruiru, Kenya, BMUKB designs, manufactures and distributes Africa’s best-selling, longest-lasting and most economical cookstoves and has established itself as the market leader in Kenya since commencing production operations in 2013. The company focuses on innovative research and design, efficient production and excellent customer service.
When making investment decisions, it is advisable to find out in advance about the project location, in particular the country in which the project will be implemented. To get an overview, the following indicators are a helpful starting point for independent research. The information was retrieved from the relevant data sources in August 2023 and is published without guarantee.
|Euler Hermes Ranking||Euler Hermes has rated the risk of non-payment by Kenyan companies as “sensitive risk” and rated it C3 on a scale from AA to D (Source: Euler Hermes Country Risk Map)|
|OECD Classification||The OECD classifies Kenya’s overall country risk on a scale of 0 (low risk) to 7 (high risk) as 7 (Sources: OECD Country Risk Classification and OECD Ranking 2022).|
|Corruption Index (Transparency International)||The corruption index, published by Transparency International and measured on a basis of 0 (high level of corruption) – 100 (no perceived corruption), in Kenya is 32 (Source: Transparency International 2022).|
|Commercial Bank Prime Lending Rate||Die Commercial Bank Prime Lending Rate zeigt auf, welchen Durchschnitt an annualisierten Zinsraten lokale Geschäftsbanken ihren kreditwürdigsten Kunden für neue Kredite in der Landeswährung berechnen. Bei Kenia lag die Commercial Bank Prime Lending Rate im Oktober 2022 bei 13,31% (Source: Trading Economics 2023).|
|Creditworthiness (Moody’s)||Moody’s has rated the creditworthiness of Kenyan government bonds at B3 on a scale of AAA to D, classifying them as speculative (Source: Trading Economics 2023)|
|Foreign Exchange Market (Bundesbank)||In the last five years, the foreign exchange price for the euro in Kenya has increased, five years ago the price was 117.48 Kenya shillings, one year ago the price was 120.67 and today the price is 156.61 Kenya shillings (Source: Bundesbank 2023).|
|Isuuer||Burn Cook Stove Emissions UG (haftungsbeschränkt)|
|Type of investment||Subordinated loan|
|Loan Amount||EUR 1,559,100.00|
|Interest||6.0 % p.a. (7.0% p.a. for investments within the first 4 weeks)|
|Repayment of loan and interest/td>||annuity|