What is the KOSAP SSP RBF Facility?
The KOSAP Solar Service Providers Results-Based Financing (SSP RBF Facility) will award a total of US $12 million (in Kenya Shillings) in financing to compensate solar home systems service providers (SSPs) for initial, ongoing incremental, and opportunity costs associated with an expansion of operations in the KOSAP Service Territories (KSTs).
The aim will be to encourage the growth of emerging solar companies where possible and to set a foundation for established solar operators, to access debt investments to further scale operations in these counties.
In the KOSAP Service Territories, grid penetration remains limited, poverty is widespread, and social exclusion is prevalent. Due to the remoteness and sometimes dispersed nature of the target populations and considering the socioeconomic profile and lifestyles of those residing in these counties, there is a high cost of provision of infrastructure services, low affordability of the potential users, and sustainability of service provision is challenging.
The objective of the SSP RBF Facility is to establish sustainable supply chains for marketing and sales of multi-light Lighting Global approved solar-PV systems in the KOSAP Service Territories (KSTs) of Kenya using a private sector-led market-based approach.
The target number of households provided with new electricity connections by stand-alone systems is 250,000, for the SSP RBF and SSP Debt Facilities combined.
The 14 KSTs are grouped into six lots:
Lot 1: Turkana, West Pokot
Lot 2: Isiolo, Marsabit, Samburu
Lot 3: Mandera, Wajir
Lot 4: Lamu, Garissa, Tana River
Lot 5: Kilifi, Kwale
Lot 6: Narok, Taita-Taveta
Lighting Global approved multi-light solar PV systems. For testing results of solar products, we refer to the Standardized Specifications Sheets (SSS) on the Lighting Global website (www.lightingglobal.org).
Both individual companies (for example, pay-as-you-go (PAYG) businesses, over-the-counter businesses, wholesale distributors) and partnerships that consist of a combination of these companies are eligible to apply to the SSP RBF facility. The applicant must be a Kenyan business or a Kenyan subsidiary of an international business that can credibly demonstrate a capacity to perform the following activities:
- Sell or provide services with Lighting Global-approved multi-light Tier 1 and Tier 2 solar home systems to households in the KSTs. Solar lanterns are excluded.
- Commit to a sustainable KST market presence and honour warranties for KST end-consumers
- Demonstrate how awarded funds have translated to KST sales by tracking and sharing basic customer data through adequate Customer Relationship Management (CRM) systems
- Provide evidence of a sustainable business model and business plan.
- Have the capacity to deliver on the plan: track record, financial position, and operational capacity.
There will be several rounds of proposals for the SSP RBF Facility and in each round, Solar Service Providers can choose to bid for one or several Lots.
SSPs will submit a Technical Proposal and a Financial Proposal, outlining the supply chain, business model, usage of RBF, amount of RBF needed, number of solar sales in the period and how warranty and after sales are offered.
The RBF amount per system will depend on the output of the solar system and the specific lot in which the system was sold.
The payment is split up into three components:
- Market entry component (ex-ante): upon funding award and completion of due diligence
- Results-based component (ex-post): based on reaching progressive pre-agreed sales milestones
- Sustainability component: disbursed upon verification of ongoing functioning of systems and honouring of warranty no less than one year after deployment
Verification will be done by an Independent Verification Agent (IVA) contracted by the Ministry of Energy. The objectives of the IVA are to verify the claim reports of the Recipients of KOSAP funds through desk, telephone and field surveys. The data will be analysed and put together in an IVA report that advises KOSAP on the numbers of (un)verified sales and the amount of incentive to be paid.