India: Off-Grid Prepaid Solar Leasing Project

Nonsovereign Project | 49238-001

A debt facility of up to $6 million using third-party donor capital from the ADB-administered Clean Technology Fund (CTF) to Simpa Energy India Private Limited to allow the company to expand its deployment of pre-paid off-grid solar home systems in the state of Uttar Pradesh (UP), India. Simpa is an early-stage energy-access company providing solar-based energy solutions to rural customers who either lack access to electricity or receive only a few hours of electricity from their grid connection each day. The company has received early stage funding from venture capital investors and is showing year-over-year revenue growth. In 2013, ADB made a $2 million investment in Simpa for a stake in the company.

Project Details

Project Name Off-Grid Prepaid Solar Leasing Project
Project Number 49238-001
Borrower/Company Simpa Energy India Private Limited
Country India
Location Uttar Pradesh
Type or Modality of Assistance
Loan Clean Technology Fund USD 6.00 million Approved
8298 Loan Clean Technology Fund USD 6.00 million Committed
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Private sector development
Sector / Subsector

Energy / Renewable energy generation - solar

Gender Equity and Mainstreaming Some gender elements
Responsible ADB Department Private Sector Operations Department
Responsible ADB Division Portfolio Management Division, PSOD
Responsible ADB Officer Patil, Avesh
Project Sponsor(s)
Description

A debt facility of up to $6 million using third-party donor capital from the ADB-administered Clean Technology Fund (CTF) to Simpa Energy India Private Limited to allow the company to expand its deployment of pre-paid off-grid solar home systems in the state of Uttar Pradesh (UP), India. Simpa is an early-stage energy-access company providing solar-based energy solutions to rural customers who either lack access to electricity or receive only a few hours of electricity from their grid connection each day. The company has received early stage funding from venture capital investors and is showing year-over-year revenue growth. In 2013, ADB made a $2 million investment in Simpa for a stake in the company.

Simpa''s customers make a small down payment for a solar photovoltaic (PV) home system and subsequently pre-pay for daily energy service, topping up their systems in small user-defined increments via SMS. Each payment also amortizes the final cost of the system. Once fully paid (typically 2-3 years after initial purchase, depending on the payment plan) the system unlocks permanently and continues to produce electricity for the customer without any further payments (essentially a lease model). This transforms recurrent energy expenditures (that would otherwise be spent on kerosene or candles) into an asset purchase. Simpa has reached over 13,800 customers by end of July 2015 through a distribution network of 9 branches.

Objectives and Scope The project will (i) improve access to electricity in rural India, the availability of which can yield a myriad of benefits such as improved education outcomes as children can study after sunset, improved hygiene etc.; (ii) reduce greenhouse gas emissions by substituting kerosene with solar energy thereby also improving air quality and benefiting the respiratory health of household members; and (iii) have gender benefits due to female beneficiaries. Successful implementation of this off grid energy solution across India could also have a demonstration effect in neighboring Bangladesh, Nepal and Pakistan, which have chronic power shortages and a high percentage of un-electrified rural households. Further capital infusion will also give credence to the case for increasing financing for innovative off-grid renewable energy solutions in South Asia.
Status of Development Objectives

Within the private sector development results framework, the transaction had the most direct relationship to the promotion of innovation, i.e., new or improved infrastructure design or technology, demonstration effects of successfully scaling up an off-grid solar energy solution, reduced emissions with replacement of kerosene by solar energy, and impact on inclusion with better access to electricity for rural and underserved areas.

The company's achievement of the outputs and outcomes has been substantially lower than the targets because of underperformance on the business plan. Consequently, other targets flowing from off-grid solar capacity addition, such as reduced emissions, local procurement, and employment, have also been underachieved. Overall there have been substantial shortcomings in meeting the stated outputs and outcomes, although the investment is likely to have resulted in intangible social and economic benefits via solar off-grid energy access, which cannot be quantified. The outcome of a financially viable energy services company could not be achieved.

Status of Operation/Construction

Out of the USD 6 mln facility, ADB had disbursed USD 1.5 mln. The remaining facility remains undisbursed as loan availability period has ended.

In August 2018, ADB approved a proposal to restructure the Loan as part of the proposal for change in ownership of Simpa. Engie Global Developments NV, (Engie India) was going to become the new sponsor/owner of Simpa with a commitment to invest $6 million. The ADB restructuring proposal provided for deferral, with the principal repayments commencing from June 2025. " In November 2018, Engie India acquired a 90% stake in Simpa for $1. Prior to this acquisition, Simpa had 21 branches and remained unprofitable as it had not yet generated sufficient unit sales and branch profitability to cover head office and branch expansion costs.

In May 2019, Engie India acquired the remaining 10% stake for $1. However, Simpa has not been able to meet the operational targets in the last two years as anticipated at the time of restructuring and continues to make losses.

Linkage to Country/Regional Strategy The proposed financing is consistent with ADB's Midterm Review of Strategy 2020 as it relates to two of the five core focus areas of infrastructure and environment. Under Strategy 2020, ADB is committed to expanding the supply of energy in an environmentally sustainable way. The investment is also aligned with the India Country Partnership Strategy (CPS) 2013-2017 which highlights access to energy as one of key areas of ADB's engagement.
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The activities of the proposed project have minimal or no adverse environmental, health and safety impacts and categorized as C on environment. The installation of solar home system (SHS) reduces greenhouse gas emissions from replacement of burning fuel for cooking and lighting of individual households.
Involuntary Resettlement The activities of the project have no adverse involuntary resettlement impact. The project activities did not require purchase or lease of for putting up its facilities because the PV home system were installed on customer's roof.
Indigenous Peoples The activities of the project have no adverse impacts on Indigenous Peoples.
Stakeholder Communication, Participation, and Consultation
Timetable for assistance design, processing and implementation
Concept Clearance 23 Jun 2015
Credit Committee Meeting 14 Sep 2015
Approval 01 Dec 2015
Last PDS Update 04 Aug 2021

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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