Energy Solutions Company Business Plan
BUSINESS PLAN ABAKA ENERGY SOLUTIONS
1200 Manistee Way
Portland, Oregon 97209
Abaka Energy Solutions will empower the world's underdeveloped communities through the application of solar and wind energy technologies. The company will become the world's leading provider of renewable energy (RE) products and services, with projects potentially spanning all seven continents by 2014. This business plan was provided by Jason P. Spellberg and Gaspar V. Makale, and was compiled in conjunction with the business plan preparation courses at the University of Colorado.
- EXECUTIVE SUMMARY
- COMPANY OVERVIEW
- PRODUCTS & SERVICES
- INDUSTRY & MARKETPLACE ANALYSIS
- MARKETING STRATEGY
- OPERATIONS STRATEGY
- DEVELOPMENT STRATEGY
- MANAGEMENT TEAM
- FINANCIAL SUMMARY
- OFFERING
- APPENDICES & FINANCIAL STATEMENTS
EXECUTIVE SUMMARY
Company Overview
Abaka Energy Solutions will empower the world's underdeveloped communities through the application of solar and wind energy technologies. The company will become the world's leading provider of renewable energy (RE) products and services, with projects potentially spanning all seven continents by 2014.
Industry & Marketplace Analysis
One third of the world's population has no electricity. The majority of these people live in rural, remote areas of the world's poorest nations. Global development is a multi-billion dollar industry, with the World Bank providing huge sums of money to fund large-scale projects. In the past ten years, global electricity demand has grown by 40 percent. During this time, the use of RE has expanded at ten times the rate of fossil fuels. Experts predict that the world's electricity demand could triple by 2020, a colossal increase that will be fuelled by the industrialization of developing countries. As a specialty provider and integrator of RE systems designed for developing communities, Abaka will position itself to capitalize on this explosive trend. Abaka will establish its first project in Karagwe, Tanzania, which lies near the western shore of Lake Victoria, deep in sub-Saharan Africa.
Products & Services
Abaka will introduce affordable electricity to Karagwe by offering attractive financing options for solar electric systems. This will enable families to make purchases in small monthly installments, in the same way that a consumer would buy an automobile in the United States. In addition, Abaka will construct a 15,000-watt solar/ wind power station and community center, where services such as electric coffee processing, water pumping, refrigeration, computing, telecommunications access, and Internet browsing will be sold. This community center will also serve as a nucleus of education, where Karagwe residents will be exposed to a contagious spirit of entrepreneurship. The services provided here will enable, motivate, and educate people to start new businesses. In this way, Abaka's presence in Karagwe will substantially boost the region's economic prosperity.
Marketing Strategy
Karagwe is a dispersed farming community of 350,000 people. The area is so remote that power lines may never be extended there, and only 2 percent of the population has electricity. Abaka's target customer is a Karagwe family that earns about $700 per year. A basic solar electric system will be priced at $288, or $24 per month. Market research conducted in Karagwe strongly suggests that this price is feasible, despite the fact that it represents 45 percent of a typical family's annual income. Currently, Karagwe families use crude and dangerous kerosene lamps to light their homes, and expensive dry-cell batteries to power their radios. A solar electric system is safer, more reliable, provides better lighting, and promises better value than the alternatives mentioned above. Construction of the power station and community center will advertise Abaka's dedication to a sustainable, long-term presence within the community. Abaka has partnered with a local company called the Seattle Solar Electronics Workshop (SSEW). Working with SSEW, Abaka will sponsor informational forums to educate customers about the economic benefits of financing, the technology behind solar electricity, and the use of electricity in cultivating a prosperous economy.
Operations and Development
In October 2000, Abaka will begin building the power station and community center.
An expert in the RE field has been recruited to design this station, and to oversee its construction. SSEW will run all operations of the business in Karagwe, including inventory handling, payment collection, product distribution, and maintenance repair. All power systems will be sold to customers as pre-packaged kits, assembled by SSEW employees.
Management Team
Liam Stiller, Abaka's founder, is completing his M.B.A. in Entrepreneurship at the University of Oregon. He has traveled extensively in East Africa, and has forged a business partnership with Ghin Patel, owner of SSEW. As permanent employees, the founders will seek, identify, and finance lucrative new project opportunities all over the world. Mr. Patel will also oversee Abaka's operations in Karagwe.
Summary of Financials and Offering to Investors
In Karagwe, solar kit financing will generate almost $800,000 of net income, and $2.7 million in accumulated cash, by 2006. Abaka will seek $1 million in a single round of seed financing to fund the construction of the power station and community center. Abaka will seek this capital from private accredited investors, nonprofit relief agencies, or possibly as a partnership with a global technology company interested in penetrating emerging markets. Abaka's presence in Karagwe will drastically improve the community's prosperity, thereby building real demand for electronics and telecommunications products and services. In exchange for capital and strategic support, Abaka will offer an investor equity, and will additionally offer a partner company direct, unlimited access to these markets at the grass-roots level. Abaka is dedicated to improving the lives of the world's underprivileged people by promoting the use of clean renewable energy. Therefore, Abaka also offers investors association with this noble initiative.
COMPANY OVERVIEW
The commitment of Abaka Energy Solutions will be to spread technologies for harnessing renewable energy (RE). The term "renewable" refers to sources of energy that can never be diminished or exhausted, such as wind and sun. The most common commercial RE technologies are photovoltaic (PV) modules, wind turbines, and, increasingly, fuel cells, which produce electricity from solar radiation, wind, and hydrogen, respectively.
Vision Statement
To become the world leader in the creation, development, and deployment of technologies that converge the advancement of human civilization with that of the environmental condition.
Three-Year Mission Statement
To profitably and sustainably introduce renewable energy into the world's underdeveloped communities.
Current Status
Abaka Energy Solutions will be organized as a Delaware C-corporation, with an executive office in Portland, Oregon, USA, during the first quarter of 2000. The company will serve as a for-profit holding, investing, and consulting agency, and will work in partnership with developing communities to establish sustainable RE projects all over the world.
Market & Services
Abaka will immediately specialize in providing electricity and electric services for rural communities, and will utilize two different business strategies to distribute power. First, Abaka will sell solar electric systems for home and commercial applications by allowing customers to finance the cost of these systems over time. Second, the company will offer end-user services direct to customers by establishing electrified community centers in the heart of their villages. At these centers, people will be able to purchase services ranging from crop processing to refrigeration to telecommunications access to internet browsing.
Objectives
Abaka's first RE project will be in Karagwe, Tanzania, a remote agricultural community in East Africa. The company will aggressively expand into a global provider of RE products and services by seeking new opportunities in other parts of Africa, as well as in Asia and Latin America. By 2014, Abaka will be the world's undisputed leading provider of RE products and services, and will operate Research & Development divisions for creating innovative novel technologies that address the environmental crises of the twenty-first century. This business plan will present Abaka's strategy for getting started, by establishing a profitable and sustainable RE business in Karagwe, Tanzania.
PRODUCTS & SERVICES
Description of Services
Abaka will offer financing packages for home and commercial-scale solar electric systems. The retail price of a small solar electric system in rural Africa is around $800. Abaka will enable Karagwe customers to purchase systems in affordable monthly installments, similar to the way most people in the United States purchase automobiles. These financing options will be especially popular in poor communities such as Karagwe, where affordability drives a preventative wedge in a customer's ability to buy. This business plan will mainly describe the financing aspect of Abaka's operation in Karagwe.
To solidify people's confidence in these financing options, and to demonstrate the company's dedication to the community, a 15,000-watt solar/ wind power station and community center will be constructed in Karagwe. A number of end-user services will eventually be provided at this community center, such as coffee bean processing, food storage and refrigeration, battery charging, water distilling, computing, telecommunications access, and Internet browsing. In addition, an educational center will be instituted, where customers will learn how to use electricity and technology to start new businesses, or to expand existing ones. Most of these services will be provided within a year after Abaka's initial establishment in Karagwe, but eventually they will generate as much as 75 percent of the company's revenue. All of these services will be designed to help Karagwe residents augment their incomes. In this way, Abaka hopes to foster economic activity, and thus prosperity, within the community. This business plan will not describe the community center aspect of Abaka's operation in detail, but the offering of these services is part of the company's long-range plan for development in Karagwe.
Proprietary Rights
In Karagwe, and in all other project sites, Abaka will seek partnership with a local organization to help with operations, marketing, legal negotiations, and other important aspects of conducting business. Abaka's partner in Karagwe is a natively owned company called the Seattle Solar Electronics Workshop (SSEW). SSEW was founded in April 1999 by Mr. Ghin Patel, a Tanzanian electrical engineer and entrepreneur. Mr. Patel and Mr. Stiller, Abaka's founder, are close friends, and have been in business together for close to two years. It is virtually impossible for any foreign company to conduct effective or sustainable business in a poor, developing community without trustworthy local contacts. Besides SSEW, there is no company in Karagwe that has the technical capability, or the entrepreneurial innovation, to establish a joint venture of this kind. As such, Abaka is confident that no other foreign company will be able to enter this market.
Stage of Development
Although fifty years of market exposure have proven RE technologies to be unequivocally reliable and durable, the commercial RE industry is still in its infancy, and the electricity markets in developing parts of the world remain almost completely untapped. A business solution is needed to meet the challenge of profitably selling this expensive, high technology equipment to people with meager incomes. In the past five years, a number of strategies have been implemented in rural, developing markets with astounding success. Almost all of these models have extended a micro-credit or financing option to their customers. These successful companies, which will be further discussed in the Industry Analysis section, have proven the efficacy of the business model that Abaka will apply in Karagwe.
INDUSTRY & MARKETPLACE ANALYSIS
Industry Analysis
As an RE service provider targeting emerging markets, Abaka will compete in the industry known as Renewables for Sustainable Village Power (RSVP). RSVP is a small, but fast-growing subset of the gigantic global energy industry, which is currently experiencing an economic revolution. One significant characteristic of this revolution has been astonishing growth. Over the past ten years, for instance, the world's demand for electricity has increased by 40 percent. Experts predict that, as industrialization sweeps developing countries, current demand could triple by 2020. Because so many new electricity users live in remote areas, most of this increased demand has been, and will continue to be, serviced by RE. As a result, renewables are by far the fastest growing segment of world energy use.
The second trend of importance is privatization and deregulation. Over the past five years, this has been a global contagion, especially in developing countries, where governments continue to implement aggressive policies designed to attract foreign investment. Tanzania, for instance, adopted the National Investment Promotion and Protection Act in 1990, which guaranteed the privatization of several key industries, including energy. The opening of these economies has sparked the proliferation of scores of small, entrepreneurial energy companies striving to profitably satisfy the need for rural energy development. Some, such as the Grameen Bank of Bangladesh, the Solar Electric Light Fund of Thailand, and Soluz of the Dominican Republic, have developed profitable business models based on selling solar electric systems through micro-credit arrangements. Meanwhile, large companies such as Enron, Shell Oil, and British Petroleum/ Amoco have established dedicated RE divisions, and are aggressively executing multi-million-dollar RE projects in places such as Indonesia and South Africa.
But despite this recent surge of activity, the RSVP industry still faces some imposing challenges. For example, the vast majority of people who most need RE technologies still cannot afford them. Substantial increases in end-user purchasing power have remained elusive, and, as a result, sales are not close to what they could be. Consequently, RE manufacturers have been unable to drive economies of scale enough to cost-compete with fossil fuels. Another problem is the lack of skilled RE technicians in developing countries. There are only a handful of training centers in the world teaching RE system installation. Finally, international turmoil remains an imposing obstacle. In many countries, political and economic instability has prevented the long-term investment and presence needed to sustain RE projects.
These challenges are typical of any global industry that is only just beginning to mature, and real progress is being made to address them. Over the past decade, for instance, PV production costs have been reduced by 80 percent (an additional 50 to 75 percent is required to cost-compete with coal-fired electricity). Furthermore, experts predict that economic and industrial development in emerging countries will lead to a 100 percent increase in world income by2020. As prosperity builds demand for electricity, RE training centers are being established in the developing world, such as the highly respected Institute for Solar Training in Karagwe. Furthermore, despite civil wars and social unrest, there are scores of developing countries, like Tanzania, where political stability harbors fantastic economic opportunity. Many experts predict that this global "Energy Revolution" contains the seed that will become the world's premier growth industry of the twenty-first century.
Marketplace Analysis
Tanzania. Tanzania is the largest and most peaceful nation in East Africa. The country has demonstrated over 38 years of political stability, and is governed by a multiparty democracy based on English common law. Tanzania has posted an average annual economic growth rate of 3.5 percent over the past ten years, however inflation currently lingers at 13 percent. Tanzania's GDP is expected to grow at 5 percent annually through 2002. Agriculture is the nation's primary industry, accounting for 56 percent of its GDP, and employing over 90 percent of its workforce. Only 24 percent of Tanzania's population live in urban areas, meaning that the country's 32 million people are widely dispersed over an area more than twice the size of California. Between 1986 and 1991, demand for electricity in Tanzania grew at an average annual rate of 10.2 percent, a trend that is expected to continue. Over 75 percent of Tanzania's electricity consumers are served by hydroelectric power, and the country experiences generation shortfalls during drought conditions. Almost all of Tanzania's electricity usage is confined to its urban areas.
Karagwe. Karagwe is a remote farming community in the northwestern corner of Tanzania, about 100 kilometers from the western shore of Lake Victoria, at a geographic position of two degrees south latitude. The region experiences two dependable rainy seasons per year, and receives an annual average of about five peak sun hours per day, roughly 10 percent more than Denver, Colorado. About 350,000 people, or 60,000 households, live in this region, which is situated on a wide, sloping ridge at an elevation of 1,650 meters (5,400 feet) above sea level. The prominence of this ridge above the surrounding plain leaves it exposed to the tropical trade winds, which consistently blow from the west. There are few regions in the world that boast such abundant RE natural resources. Almost every household in Karagwe is surrounded by a plantation of several hectares, and coffee is the community's chief cash crop. The average yearly income is about $700 per family, and, though this is strikingly poor by Western standards, Karagwe is one of Tanzania's most prosperous rural communities.
Customer Analysis
Karagwe is an extremely dispersed village, with 350,000 people living in an area of 3,200 square kilometers. As a result, only 1.4 percent of Karagwe's most centralized homes and businesses are electrified by the regional utility grid, while 0.6 percent are electrified with solar power. The remaining 98 percent have no hope of seeing the grid extended to their homes during the next ten years. Residents of Karagwe realize that modernization cannot take place without electricity, and that access to electricity will significantly enhance their economic prosperity and quality of life. As a result, it is no surprise that 100 percent of the fifty or so Karagwe residents surveyed during the summer of 1999 indicated a strong desire to participate in a financing program that would allow them to afford a solar electric system.
Karagwe families live in large houses, typically constructed of brick and concrete. Each house has three to five bedrooms, a kitchen, a living room, a washroom, and an animal pen. Families submit no property taxes or mortgage payments. Furthermore, because Karagwe is a farming community, residents spend very little on food, except for the few items, such as rice and fish that must be imported from surrounding districts. Very few people in this village possess an automobile, and those who do earn three to ten times more than the average yearly income. Aside from a handful of bars, restaurants, grocery stores, and weekly farmers' markets, Karagwe offers very little for the consumer. Because there is not much in this community to spend money on, Karagwe families tend to retain a purchasing power that is greater than half of their annual income. Nevertheless, due in large part to the inflationary pressures and banking crises that have plagued Tanzania ever since the 1960s, people are generally unfamiliar with the concept of saving money. Only in the past few years have stabilized banks begun to earn the trust of Tanzanian consumers, and in the rural parts of the country, this trend is proceeding quite slowly.
Despite these simplistic financial tendencies, the typical Karagwe resident is quite sophisticated, and understands the benefits of solar electricity. Karagwe is home to Africa's most distinguished solar training facility, where Abaka's Africa Operations Officer, Mr. Ghin Patel, is chief of faculty. Because of the international recognition of this school, Karagwe residents know that solar electricity represents a clean, safe, and reliable way to power their homes. Unfortunately, however, even a small solar electric system costs about $800 retail in Africa, and only the richest families can afford this price. As a result, most families continue to light their homes with crude kerosene lamps, and to power their radios with inefficient dry cell batteries. Nevertheless, the demand for solar electric systems latently exists in Karagwe, and it is up to Abaka to tap this market potential by making these systems affordable for the average Karagwe family.
Competitor Analysis
Competing Technologies. Because solar electric systems are so expensive in Karagwe, they are viewed as luxury items. Almost every family would love to have one, but affordability is a preventative issue. As such, people must use more conventional methods of lighting their homes. Kerosene and dry cell batteries are readily available in Karagwe, but neither item is particularly cheap. Kerosene sells for about fifty cents per liter, and a typical family uses four to six liters per month; many organizations, such as schools and health clinics, use twenty to fifty liters per month. Dry cell batteries retail for about $3.00, and may last two or three weeks at the rate most families use their radios. Some families also own gasoline gensets, while still others own automobile batteries, which they charge with gensets, or at a grid station in the central part of the village. Abaka's chief competition in Karagwe is certainly kerosene and disposable batteries, and solar has several advantages over them. First, kerosene lamps are crude and dangerous; it is easy to find an adult in Karagwe who has been burned, at some point in his or her life, by a kerosene lamp leaking, spilling, or completely exploding. Furthermore, kerosene lamps provide lighting that is only somewhat better than a large candle, and they tend to be noisy and smelly during operation. Dry cell batteries are expensive because they must be replaced so frequently, and their disposal poses a serious environmental threat. Also, many appliances cannot be powered with batteries. A solar electric system, on the other hand, is clean and safe, and provides the familiar fluorescent, white light that can illuminate an entire room. Furthermore, a solar electric system can be used to power any electric appliance. It offers modularity, flexibility, and expandability, so that one single power source can be used for the house's every electrical need. Additionally, these systems are extremely reliable, and require only minimal maintenance on, and periodic replacement of, the battery. If well maintained, a solar electric system will last for thirty years. Solar electric systems are more expensive than conventional alternatives in the short-term, but in the long run provide a far superior value for the money.
Competing Service Providers
Aside from Abaka's partner, SSEW, there are no businesses or organizations providing solar electricity in Karagwe. Furthermore, there is not a single organization in all of northwestern Tanzania that offers financing for solar electric systems. The national utility, the Tanzania Electric Supply Company (TANESCO), has no intention of expanding the utility grid into the periphery of Karagwe for at least ten years. Furthermore, this company has no understanding of solar electricity, and maintains only a minimal presence in Karagwe. TANESCO is not equipped to effectively compete in this marketplace.
MARKETING STRATEGY
Target Market Strategy
In order to make solar electricity affordable, Abaka will offer families and businesses the option of paying for their system in twelve monthly installments. The smallest kit offered will be priced at $24.00 per month. This translates into a year-end price of $288, which is a tremendous saving over retail. Because people in this region maintain a purchasing power equivalent to about 50 percent of their annual income, Abaka's principal target market is families that earn at least $600 per year. It is estimated that roughly one-third of Karagwe's households earn this amount or more, meaning that Abaka's primary target market in Karagwe consists of about 19,000 families.
Service Strategy
Financing Terms. Many micro-credit programs have failed in developing communities because customers have been allowed to default on their loans. It can be extremely difficult both logistically and financially to repossess equipment in remote villages of foreign countries. To circumvent this problem, Abaka will offer "pre-financing" plans to its customers. Under the terms of these pre-financing options, customers will have to pay their entire balance before Abaka will give them a system. There are two reasons why this is necessary in Karagwe. First, people in developing countries often do not understand the concept of credit, and, especially when an American company is the lender, regularly assume that "credit" means "free." Second, industrialized nations have repeatedly allowed governments and businesses in the developing world to default on their debt. People in these communities, Karagwe included, are accustomed to receiving free handouts from the World Bank and industrialized governments. It is unlikely that Abaka can establish a high-growth, sustainable business in Karagwe if expensive electrical systems are provided, but money is not collected. As such, customers will pay for their systems first, in entirety, before they receive them; no exceptions will be allowed.
Because the financing plans will have one-year terms, Abaka must offer customers something while they pay for their electric systems. This is where the community center will be useful. During the terms of their financing contracts, Abaka's customers will be allowed to utilize all services at this community center free of charge. These privileges will end upon fulfillment of the financing agreement, or if a customer defaults on several payments. This strategy will allow Abaka to collect money before distributing systems, and will encourage customers to fulfill their financing agreements. Abaka will gladly accept down payments for customers desiring shorter financing terms.
Solar Electric Kits. Abaka's solar electric systems will be sized to meet the needs of a typical Karagwe household.
Very few Karagwe homes have the need to power anything more extravagant than a few fluorescent lights and a radio, and therefore these systems will be small by Western standards. Each system will come with a solar panel, a deep-cycle battery, a charge controller, lights, a radio, wiring, connectors, and mounting materials. In order to serve the expected high demand for affordable solar electric systems in Karagwe, all systems will be sold as pre-assembled kits. These kits will be designed to be so simple that end-users will be able to perform the installations themselves. In this way, Abaka will minimize the size of its technical staff. Initially, there will be three kit sizes offered. The following table presents a spec and price comparison of Abaka's introductory product line. For homes or businesses requiring more power, customized systems will also be available. Furthermore, as the community becomes more prosperous, people will develop more extravagant tastes for electric appliances and equipment, such as television sets, satellite dish receivers, refrigerators, and computers. Abaka will continuously readjust this product line according to customers' power needs. In addition, attractive trade-in and scale-up plans will be offered to customers in subsequent years, so that smaller systems can be traded in and upgraded to larger ones.
Abaka's Initial Product Line
| Kit | Size | Components | Price/Month | Price/Year | Gross Margin |
| 1 | 13 watts | 1 light, 1 radio | $24.00 | $288.00 | 72.46% |
| 2 | 30 watts | 2 lights, 1 radio | $48.00 | $576.00 | 80.00% |
| 3 | 48 watts | 3 lights, 1 radio | $72.00 | $864.00 | 94.59% |
Pricing Strategy
Abaka will price these kits as low as possible while still yielding an attractive profit. Based on Prouffer's experience in Indonesia between 1994 and 1998, it is expected that a family living in an impoverished, rural agricultural community will surrender about half of its yearly income for a necessary item such as reliable electricity. With the pricing strategy that Abaka has adopted, Karagwe consumers will pay less than half of what a comparable solar electric system would cost from a typical African retailer.
Distribution Strategy
The community center will be used as Abaka's administrative office and distribution hub. Most of the components of the solar electric kits will be shipped by sea from suppliers in the U.S. or Europe to the Indian Ocean port of Dar es Salaam, then trucked overland to Karagwe. Abaka will also attempt to identify reliable suppliers in South Africa to reduce its dependence on overseas shipping. Upon arrival in Karagwe, SSEW will be responsible for assembling all components into complete solar electric kits, ready for installation. When customers have satisfied their payment schedules, they will be cordially thanked for their business, and invited to pick up their kits from the community center. At this time, customers will be given written instructions on how to install and maintain their new systems. During their payment period, and throughout their duration of ownership, all Abaka customers will be invited to attend free educational workshops on using, maintaining, optimizing, and expanding their solar electric systems.
Advertising & Promotion Strategy
Abaka will rely greatly on publicity and word-of-mouth advertising to promote these financing plans. The construction of a 15,000-watt solar/wind power station and community center will be tremendous news in Karagwe, and will therefore serve as a very useful promotional tool. Residents will be unable to avoid noticing the sheer scale of this project. Over 100 people will be employed in this undertaking, and every newspaper and radio station in the region will publicly monitor its progress. Like many rural agricultural villages, Karagwe is a tight-knit community, and people tend to be extremely social. Abaka will have to do little to instigate excitement and conversation about this project. Once built, the generating facility, featuring a 10,000-watt wind turbine perched on an eighty-foot tower, and a 5,000-watt array of sleek solar panels mounted on a 10,000-square-foot scaffold, will serve as a constant advertisement of the electricity that Abaka offers.
Due to the visibility of this project, Abaka will ensure that high standards of professionalism are maintained at all times. Embroidered uniforms will be distributed to the SSEW technicians that maintain and operate the community center. New, high-quality equipment will be purchased, and the community center itself will have a clean, modern design. Service will be prompt and courteous, and technicians will be well trained and well paid. To complement the publicity aspect, Abaka will also post billboards in the heavily trafficked "downtown" area of the Karagwe district. The main purpose of these billboard advertisements will be to inform and remind customers of scheduled educational training sessions and technical demonstrations being held at the community center. In addition, posters will be used to announce new service offerings or price adjustments, as needed. Finally, professionally printed brochures, featuring concise descriptions of the financing plans offered, as well as general information about solar energy, will be widely distributed.
Sales Strategy
Ghin Patel, the founder and executive officer of SSEW, is a native of Karagwe, and has been installing solar energy systems there for eight years. Mr. Patel's expert reputation is common knowledge in the community. All sales and operational responsibilities will be contracted to SSEW, taking advantage of Mr. Patel's contacts and stature in Karagwe as a solar energy professional. Because SSEW's name is already well known to the community, customers will be dealing directly with a local company that they trust. A customer service office and reception desk will be established at the community center, and SSEW will collect payments at this location. In exchange for these services, and for using the SSEW name to generate trust and loyalty, Abaka will pay SSEW a contracting fee based on sales volume. Therefore, SSEW will have an incentive to aggressively generate sales by subscribing new customers, in whatever fashion they deem appropriate or effective.
Marketing & Sales Forecasts
Abaka's projected target market in Karagwe is about 19,000 families. There are 58,000 families in the region without electricity. However, these pre-financing plans will be expensive. Furthermore, customers will have to pay all of their monthly installments before receiving any equipment. Abaka recognizes that this will initially dissuade many potential customers. However, the construction of the power station and community center, as well as the partnership with SSEW, will help to reinforce Abaka's trustworthiness, and should neutralize some of these concerns. In addition, Abaka will allow subscribed customers to use the community center for free during their contract term. This means that customers will be able to enjoy free access to computers, refrigeration, water distilling, coffee bean processing, telecommunications access, and other services, for up to a year. Abaka anticipates subscribing about 250 families in 2001, the first year of operation. After one year, Karagwe residents will witness the delivery of solar electric systems purchased the previous year by their friends, neighbors, and relatives. The demand for these financing contracts will therefore increase exquisitely over the next five years, as Abaka's trustworthiness becomes confirmed, and its presence accepted, by the community. Furthermore, similar projects in other parts of the world have demonstrated that the availability of energy systems motivates people to increase their income by working harder, and then to save more of that income, in anticipation of having something valuable to buy. As a result, more Karagwe families will be able and willing to afford Abaka's financing plans over time, and the growth rates built into Abaka's revenue forecasts reflect this expectation. The following table shows sales and revenue forecasts for the years 2001-2006.
| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
| Units Sold | 250 | 750 | 1,875 | 3,750 | 5,625 | 8,438 |
| Revenues | $84,240 | $252,720 | $631,800 | $1,263,600 | $1,895,400 | $2,843,100 |
OPERATIONS STRATEGY
Bim Stiletto, a primary schoolteacher in Karagwe, arrives home after a long day of work. It is nighttime in Africa, and pitch black envelops the quiet community. There are no street lights, no glows in the neighbors' windows; only the brilliant stars of the Southern Cross provide illumination. But on this night, Mr. Stiletto arrives to find his house teeming with activity. The solar electric system he spent a year buying has finally arrived, and his family is already putting it to good use. His wife is busily cooking in the kitchen, his eldest son studiously doing homework, and his two youngest children playing Monopoly, all possible due to the streaming radiance provided by the fluorescent lamp in the living room. Had this been a typical night in a typical Karagwe house, Mr. Stiletto would have to wait his turn to use one of the household's two kerosene lamps, for he has about thirty exams to grade. In other words, he would be up late, long after his family had retired for the night. But as he greets his family working and playing under this new artificial sun, Mr. Stiletto realizes that the "typical" Karagwe evening has now changed forever.
Customers will start their lifetime relationship with Abaka upon receipt of their first solar electric kit. In time, they will learn to effectively apply the full potential of solar energy, and they will completely replace archaic kerosene lamps and dry cell batteries with the solar electricity that will become the routine hallmark of the future for communities like Karagwe.
All of Abaka's operations in Karagwe will be contracted out to SSEW. Mr. Ghin Patel, founder and CEO of SSEW, will serve as Abaka's Chief Operating Officer for this project. Mr. Patel will facilitate dealings with the Tanzanian government, as well as with Karadea, an influential UN-funded nongovernment organization that will be heavily utilized, both in the construction of the power station and in ongoing operations.
Scope of Operations
SSEW will be responsible for conducting the following activities in Karagwe:
- Operating and maintaining the power station and community center
- Placing supply orders and maintaining inventory
- Overseeing and orchestrating solar kit assembly and distribution
- Collecting customer payments
- Servicing customer repair calls and manufacturer's warranties
- Printing and distributing advertisements, such as billboards, posterboards, and brochures
- Subscribing new customers and up-grading current and past customers
- Organizing informational forums and instructional demonstrations
Abaka will negotiate the most attractive supply agreements possible, and all purchases will be made directly from manufacturers at wholesale prices. Additionally, all shipping will occur via ocean, to the Tanzanian port of Dar es Salaam. Supplies will be trucked overland to Karagwe from the Indian Ocean coast. To avoid import duties, all batteries will be purchased in bulk directly from the Acme Exide Company, a Tanzania manufacturer. Lights, charge controllers, wiring, connectors, and radios will be purchased in bulk from wholesale suppliers in the United States, Europe, or South Africa. Solar modules will be purchased directly from WorldSolar, Inc, a Eugene, Oregon-based company with production facilities in India. Wind turbines and towers will be purchased from and installed by Rossimond Light & Power, of Forrestville, Wisconsin. Building and security materials will be purchased in the United States, South Africa, or Kenya. Abaka will be able to legally avoid all import duties through Mr. Patel's association with Karadea, which enjoys complete exemption from most Tanzanian tariff laws. A temporary workforce of about 100 will be hired in Karagwe to build the power station and community center. Rossimond Light & Power will design, oversee, and orchestrate the construction project, with all Abaka officers present to oversee progress and to direct funding.
Ongoing Operations
After the power station and community center are completed, a full-time workforce of three to five maintenance technicians and two to four security agents will be hired and paid directly by SSEW for salaries in excess of $1,000 per year. Rossimond Light & Power will thoroughly train SSEW technicians on proper maintenance and operation of the power station. Insurance on hard assets will be purchased from a trustworthy agency in Tanzania.
SSEW will be charged with the responsibility of maintaining customer relations and satisfaction. This will include subscribing new customers and taking care of existing ones. SSEW will provide free maintenance or repair visits to customers' homes for one year after the equipment's initial installation. Additionally, SSEW will help and encourage customers to upgrade to larger power systems. Used components in good working condition will be accepted as trade-in for credit on a larger system. Furthermore, customers will be encouraged to return their used batteries to SSEW, which will send them out for proper recycling. Price credits towards the purchase of new batteries will be given to all customers who dispose of their old batteries in this manner.
SSEW will be in charge of hiring and maintaining a trained local workforce. Because Mr. Patel has taught at the Institute for Solar Training for six years, he knows who the most competent technicians are, and how to find them in East Africa. Abaka will provide the financial resources to help Mr. Patel attract these technicians to Karagwe.
Operating Expenses
The following table shows Abaka's anticipated operating expenses from 2001-2006.
| Operating Expenses | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| SSEW Contracting Fees | 5,000 | 10,000 | 20,000 | 40,000 | 80,000 | 160,000 |
| Maintenance Expenses | 3,000 | 3,150 | 3,308 | 3,473 | 3,647 | 3,829 |
| Marketing Expenses | 3,000 | 3,600 | 4,320 | 5,184 | 6,221 | 7,465 |
| Insurance and Security | 8,000 | 8,000 | 8,000 | 8,000 | 8,000 | 8,000 |
| Total | $19,000 | $24,750 | $35,628 | $56,657 | $97,867 | $179,294 |
DEVELOPMENT STRATEGY
Abaka will assemble a legal team and incorporate during the first quarter of 2000. After completing and revising the business plan, the company will begin to seek grants and investments from accredited private investors, multi-national relief agencies, and, possibly, from large corporations.
There will be some need for product development and prototyping in Karagwe. Solar electric systems consist of four main components. The solar panel harnesses photon energy from the sun, converting radiation into electricity. This electricity is then conditioned by a charge controller before it is sent to a battery for storage. The charge controller regulates the battery's state of charge, preventing it from being damaged. The appliance, then, receives its power directly from the battery. This system has been used and perfected for well over fifty years, and Abaka's kits will not deviate from this simple design. Nevertheless, Abaka's solar electric systems will be sold as pre-assembled kits. Because customers will be expected to perform their own installations, Abaka will need to test customer reaction to these kits. Specifically, Abaka will assemble several versions in order to develop a packaging method that optimizes simplicity for the customer. Prototype testing will be conducted simultaneously with the construction of the power station and will take less than one month to complete.
Once in Karagwe, Abaka and SSEW will focus on developing market demand for the financing services. Because these financing plans will be expensive, and because no equipment will be distributed until all payments have been received, it will take time for Abaka to earn the trust of Karagwe's consumers. However, Abaka is convinced that this can be done within one year. First, utilization of SSEW, a Karagwe company that people already know and trust, will help to lend credibility to Abaka's promises. Second, the power station and community center will represent a symbol of Abaka's long-term commitment to the community. Finally, Abaka will lead by example; when working solar kits are delivered to the first wave of customers, Abaka's trustworthiness will be ultimately confirmed. By this time, Karagwe's demand for these systems will be growing fantastically.
Development Timeline
Project Karagwe will be launched in five major phases, during the following estimated dates:
| Phase 1 | Incorporation: Finalize business plan, incorporate, file with the U.S. SEC, build project website: January-March 2000 |
| Phase 2 | Venture Financing: $1 million for construction of power station and community center, and to jump-start operations: February-September 2000 |
| Phase 3 | Construction of power station and community center: October-December 2000 |
| Phase 4 | Optimize solar kit packaging and assembly: November 2000 |
| Phase 5 | Subscribe customers to solar kit financing plans: December 2000 |
Development Expenses
Abaka estimates that the company will need $2,000 to $5,000 for incorporation and legal fees, which will be paid by Mr. Stiller during the first quarter of 2000.
MANAGEMENT TEAM
Company Organization
Abaka's principal founders, Liam Stiller and Ghin Patel, will control the majority of the company's equity. Abaka will employ both Mr. Stiller and Mr. Patel on a full-time basis. A Board of Directors will be assembled if and when investors demand one. A Board of Advisers has been compiled in the meanwhile. This Board is composed of experts with extensive experience relevant to the area of international rural development. All of these advisers have agreed to lend their assistance free of charge. Please see the Appendix for a detailed description of Abaka's Board of Advisers, and Appendix F for the resume of one of Abaka's founders.
Management Team
Liam Stiller, Executive Officer. Mr. Stiller is Abaka's primary visionary. He will earn his M.B.A. degree in entrepreneurship from the University of Oregon in May 2000. He has taken formal coursework in both PV and wind system design and installation at International Natural Energy (INE), arguably the most respected and well-known RE training facilities in the world. Mr. Stiller has many contacts in the industry, and knows key people at the Renewable Energy Sources Laboratory (RESL), the Public Service Company of Oregon, WorldSolar, Inc., Energy Choices Africa, and the Tanzania Investment Center. He has traveled extensively in East Africa, and conducted market research on solar financing in Karagwe while doing an internship for SSEW during the summer of 1999.
Ghin Patel, Africa Operations Officer. Mr. Patel, Abaka's principal co-founder, will serve as the company's Officer for Africa Operations. Mr. Patel is a native of Karagwe, Tanzania, and is a master electrician. In 1999, he founded the Seattle Solar Electronics Workshop (SSEW) with financial backing from Mr. Stiller. SSEW offers a wide range of electrical services in the Karagwe area and beyond. Mr. Patel has installed over 500 solar electric systems in his career, and he has taught the PV systems design and installation course at the Institute for Solar Training for six years. For the last three of those years, Mr. Patel has served as the school's resident chief of staff. The school itself is located in Karagwe, and is operated and funded by one of Tanzania's most important non-government organizations, the Karagwe Development Association (KARADEA), with which Mr. Patel has very close ties. In a period of only eight years, the Institute for Solar Training has arguably become the most respected solar energy technical school in the southern Hemisphere. Mr. Patel has earned the distinction "Fundi," which, in Kiswahili means "Master Technician." He is unquestionably Tanzania's premier installer of PV systems, and one of the most admired men in Karagwe.
Administrative Expenses
The following table shows Abaka's expected administrative expenses for 2001-2006.
| Administrative Expenses | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Salary, Mr. Stiller | 30,000 | 36,000 | 43,200 | 51,840 | 62,208 | 74,650 |
| Benefits, Mr. Stiller | 3,000 | 3,600 | 4,320 | 5,184 | 6,221 | 7,465 |
| Salary, Mr. Patel | 2,500 | 3,000 | 3,600 | 4,320 | 5,184 | 6,221 |
| Travel Expenses | 4,000 | 4,800 | 5,760 | 6,912 | 8,294 | 9,953 |
| Legal & Accounting Services | 4,000 | 4,800 | 5,760 | 6,912 | 8,294 | 9,953 |
| Office Expenses | 500 | 600 | 720 | 864 | 1,037 | 1,244 |
| Total | $44,000 | $52,800 | $63,360 | $76,032 | $91,238 | $109,486 |
FINANCIAL SUMMARY
Assumptions
The financial statements presented in the Appendix reflect only Abaka's forecasted sales of pre-financing contracts in Karagwe. Revenues generated from community center services are not included in these forecasts, nor are potential revenues generated from projects in locations other than Karagwe. In addition, the financial statements assume that Abaka makes no capital expenditures during the explicit period of 2001-2006. Due to the nature of the pre-financing plans, the bulk of customer payments will be collected before kit components will be ordered. This will have a positive effect on net income and cash flow. The following table presents Abaka's expected operational calendar and shows why reported net income and cash flow will be increased by the nature of the pre-financing plans.
Operational Calendar
| Sign-Up New Customers | Year 0 - Nov. to Dec. |
| Collect Monthly Payments | Year 1 - Jan. to Dec. |
| Order Kit Components | Year 1 - Sep. to Oct. |
| Assemble Kits | Year 1 - Oct. to Dec. |
| Distribute Kits | Year 2 - Jan. to Feb. |
| Charge off Cost of Kits Sold | Year 2 - Jan. to Feb. |
Capital Requirements
Abaka requires $800,000 in start-up capital for the construction of the power station and community center. An additional infusion of $200,000 in cash at the end of 2000 will be needed to jump-start operations; this includes a significant safety cushion in case of financial emergency.
Ratio Analysis
The following table shows Abaka's comparative financial ratios for operational years 2001-2006. The increasing return on equity figures demonstrate that Abaka does not plan to seek further external capital to expand the operation in Karagwe. The return on assets figures do not increase as substantially, because this analysis assumes that Abaka does not expend any cash during the first six years of operation.
| Financial Ratios Profitability | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Cost of Kits Sold | 0.00% | 19.04% | 22.84% | 28.55% | 38.07% | 38.07% |
| Operating Expenses | 74.79% | 30.69% | 15.67% | 10.50% | 9.98% | 10.16% |
| Gross Margin | -74.75% | 14.57% | 44.97% | 51.04% | 44.63% | 45.86% |
| Profit Margin | -74.75% | 8.74% | 26.98% | 30.63% | 26.78% | 27.52% |
| Return on Equity | -6.30% | 2.21% | 17.05% | 38.70% | 50.76% | 78.23% |
| Return on Assets | -6.36% | 1.99% | 11.18% | 16.77% | 15.87% | 17.11% |
| Activity | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Total Asset Turnover | 0.09 | 0.23 | 0.41 | 0.55 | 0.59 | 0.62 |
| Fixed Asset Turnover | 0.12 | 0.39 | 1.13 | 2.63 | 4.74 | 8.88 |
| Liquidity | ||||||
| Quick Ratio | 4.19 | 2.14 | 1.53 | 1.4 | 1.46 | 1.49 |
Ratio Comparisons. There are no comparable businesses that release their financial ratios to the public. Most of the activity in the rural development industry is driven and subsidized by industrialized governments and World Bank contracts. There are several private enterprises that have been largely successful in this realm, but their financial statements are not available for comparison.
Financial Risks
Currency Translation. All of Abaka's revenues will be collected in Tanzanian shillings, and almost every shilling collected will have to be converted into U.S. dollars in order to meet the company's major expense accounts. Although the Tanzanian shilling has deflated considerably against the dollar over the past eighteen months, this trend may not continue. As far as the founders know, there are no market-based instruments available for hedging this currency risk. As such, all financial forecasts assume that Abaka will lose 5 percent of its revenue to currency exchange fluctuations and expenses. In order to minimize exposure, almost all collected Tanzanian money will be immediately converted into U.S. dollars by establishing a corporate forex account at the Tanzania National Bank. This account will allow for currency exchange at a competitive market rate, and will also enable Abaka to automatically wire transfer all funds directly into a corporate account at either Citibank or the Chase Manhattan Bank in Eugene. This will be Abaka's short-term answer to contending with currency risk. For the long-term, Abaka will neutralize currency risk by diversifying its operations and holdings into other areas of the world.
Political and Economic Stability. The countries surrounding Tanzania's western border have experienced a great deal of strife over the past ten years, characterized by anarchy, exodus, bloody violence, and massive inflation. In Tanzania, these regional pressures have contributed to high unemployment and double-digit inflation. Nevertheless, Tanzania has demonstrated 38 years of political stability, during which time the government has transferred power peacefully on three different occasions, most recently in 1994. There is a substantial World Bank presence in Tanzania, as well as in Kenya and Uganda. The Tanzanian government has set up an Investment Center to aid foreigners in identifying lucrative opportunities in Tanzania. Consistent with this measure, the government has also adopted extremely liberal tax and import laws in an effort to attract foreign investment. Abaka is confident that the political and economic climate in Tanzania is becoming more and more favorable for business every day, and that real progress is being made to protect Tanzania's economy and infrastructure from the instability occurring in neighboring regions.
Coffee. Karagwe residents depend heavily on coffee for their revenue. Economically, coffee harvests can be affected by climate or market prices, and this cannot be ignored as a potential threat to Abaka's success in Karagwe. However, Abaka's presence in Karagwe will drastically improve the region's prosperity, and the community center will help to spark an entrepreneurial spirit by providing new opportunities for small businesses in Karagwe. In short, Abaka's commitment for a long-term, value-enhancing presence in Karagwe will itself significantly neutralize this risk by helping the community to diversify and expand its economy. Furthermore, Abaka will explore the possibility of accepting coffee as payment for solar kits, which might prove to be another effective strategy for neutralizing currency translation risk.
Cross-Cultural. There is an operational risk inherent whenever a company in one country attempts to do business in another. This "distance" risk will be mitigated in Karagwe through the partnership with SSEW, which will handle all day-to-day operations of the business. Additionally, Abaka will maintain a full-time Oregon-based staff, as well as an expanding travel budget, so that Karagwe, and future sites in other countries, will be visited on a regular basis.
Exit Strategy
This proposed project in Karagwe will require a long-term commitment. In Karagwe, Abaka will generate cash flows that will be used to finance project expansions into other areas of the world, such as West Africa, Asia, and Latin America. Once Abaka's concept has been proven, and the potential for further growth demonstrated, Abaka will most likely exit via a management buyout. Another real possibility will be to take the company public. Demonstration of substantial and sustainable growth, combined with the establishment of a global brand name recognition, should make this a viable exit option. In the past decade, several mutual funds have been established that explicitly invest with environmental companies, and this demonstrates that there is a public capital market willing to purchase equity in a company like Abaka. In any case, Abaka does not foresee an exit occurring until at least 2006.
For a comprehensive background on the challenges of conducting business in Tanzania, please see the author's paper entitled "Tanzania: Developing Strategies for Effective Business Practices," available in Adobe Acrobat format from the Abaka website, www.Abaka.com.
OFFERING
Investment Requirements
Mr. Stiller has already invested $8,000 in administrative, travel, and research expenses to write this business plan. In the near future, Abaka will require an additional $2,000 to $5,000 for incorporation and legal expenses, plus $1 million in seed venture financing to launch the project in Karagwe. The following table presents an itemized breakdown of the venture financing needed.
Itemization of Investment Needed
| Power Station | |
| 5,000-Watt Solar Array | $50,000 |
| 10,000-Watt Wind Generator | $50,000 |
| Power Conditioning Equipment | $50,000 |
| Power Storage Equipment | $50,000 |
| Security Equipment | $10,000 |
| Wiring and Connectors | $10,000 |
| Labor | $30,000 |
| Total Cost of Power Station | $250,000 |
| Community Center | |
| Coffee and Fruit Processors | $175,000 |
| Refrigeration & Freezing Equipment | $80,000 |
| Computing and Telecommunications Center | $100,000 |
| Water Pumping Facility | $60,000 |
| Convention Center and Theatre | $25,000 |
| Battery Charging Station | $20,000 |
| 2 Work Vans | $20,000 |
| Workshops | $15,000 |
| Office Space | $5,000 |
| Furniture | $5,000 |
| Security Equipment | $5,000 |
| Labor | $40,000 |
| Total Cost of Community Center | $550,000 |
| Totals | |
| Power Station | $250,000 |
| Community Center | $550,000 |
| Cash for Operations | $200,000 |
| Total Venture Round B Investment | $1,000,000 |
In addition, the company will seek assistance in further developing legal, distribution, marketing, and financial strategies for conducting business internationally. Therefore, Abaka will require significant strategic support, as well as capital, in launching this venture.
Project Valuation
The following table shows the valuation analysis for Abaka's project in Karagwe. This estimation is based on expected net income in 2006 multiplied by a factor of three. This multiple reflects Abaka's expectation that the services offered at the community center will be 75 percent of total net income. This valuation analysis unequivocally confirms Abaka's intention to provide a positive return to its investors. This is consistent with the company's mission statement, which mandates that Abaka will profitably empower underprivileged communities through the application of RE.
| Net Income-Based Valuation 2006 | |
| Expected Revenue from Pre-Financing Program | $2,843,100 |
| Expected Revenue from Community Center | $8,529,300 |
| Total Expected Revenue | $11,372,400 |
| Expected Profit Margin | 27.52% |
| Expected Net Income | $3,129,282 |
| P/ E Multiple 10 Expected Valuation | $31,292,815 |
| Discount Rate | 50% |
| Present Value, Year 2000 | $2,243,115 |
Offering
Abaka's required $1 million capital investment will be obtained through a venture round financing period conducted during the first half of 2000. Abaka will attempt to obtain the majority of this capital either from an environmental project investment agency or in the form of a partnership with a large, multinational corporation interested in penetrating emerging market. Ideally, this will be an electronics or telecommunications company that has substantial financial, marketing, and legal resources. Potential corporate partners include companies such as General Electric, Philips, Sharp, Magnavox, Toshiba, Thompson's of France, and a host of streamlined, globally-aggressive telecommunications companies. Abaka will also seek and accept financing from private, accredited investors, in accordance with all U.S. and Tanzanian securities laws.
Abaka will prefer to structure this investment agreement as an exchange of services partnership agreement, but, if necessary, equity can and will be granted in return for capital. Because the founders want to maintain cash flows for use in future project expansions, and not to buy back common stock, Abaka will attempt to retain 67 percent of its equity in the control of management throughout both rounds of financing. Additionally, the company will explore the possibility of leveraging a partnership or equity investment with a loan from a government or nonprofit relief agency such as USAID or the Africa Project Development Fund.
The markets in which Abaka will operate have a tremendous long-term potential for economicdevelopment. Abaka has the knowledge and the local contacts to bring electricity andprosperity to these regions. Eventually, these markets will develop a substantial demand forelectronics, telecommunication, and information technologies. Abaka's ideal investor and/orcorporate partner will have the vision and the desire to penetrate these markets early and aggressively. They will have the resources to provide significant financial, logistical, operational, marketing, and legal support. In exchange, a partner company will be granted exclusive supply and branding rights for all products and services that Abaka offers. In addition, Abaka will actively help a partner company to market its product(s) at the grassroots level by employing locals to build a loyal, long-term customer base within their communities. By providing underdeveloped communities with affordable and dependable electricity, Abaka will help pave the way for prosperity and economic development to permeate emerging markets all over the world.
APPENDICES
Global Entrepreneurial RE Enterprises
| Organization | Type | Location |
| CAT Consultancy | Profit | Wales |
| Cinergy Global Power | Profit | United Kingdom |
| E & Company | Profit | New Jersey, USA |
| Econergy International Corporation | Profit | Oregon, USA |
| Energy & Environmental Ventures, LLC | Profit | New England, USA |
| Energy Alternatives Africa | Profit | Kenya |
| Energy Power Resources, Ltd. | Profit | England |
| Enersol | Nonprofit | New England, USA |
| Global Impressions, Ltd. | Profit | United Kingdom |
| Hyder | Profit | Wales |
| Intermediate Technology Consultants | Profit | United Kingdom |
| Nykomb Synergetics AB | Profit | Sweden |
| Plenum Energy | Profit | Germany |
| PowerGen | Profit | United States |
| Ramboll | Profit | Denmark |
| Solar Bank International | Profit | United States |
| Soluz | Profit | New England, USA |
| SunTree | Profit | Israel |
| The Grameen Bank/Grameen Shakti | Nonprofit/Profit | Bangladesh |
| TradeWind Insurance | Profit | United States |
Survey
During the Summer of 1999, Mr. Stiller conducted an informal survey of Karagwe citizens. As an American, it is very difficult to obtain reliable information from people there, because they will always try to make themselves sound poorer than they really are, in the hope of receiving a handout or "sponsorship." Therefore, questions concentrated on qualitative measures rather than quantitative. In other words, discussion of actual dollar figures was avoided. Nevertheless, a good measure of Karagwe's demand for solar electricity, and why it is not being met, was obtained from these conversations. In some cases, a translator was used. The following questions were posed, generally in this order:
- What other electrical appliances do you own?
- How do you feel about the currently available energy sources in Karagwe?
- What do you know about solar energy?
- Do you know Ghin Patel?
- Why is solar energy not used more readily in Karagwe?
- In which village do you live?
- How big is your house?
- How do you light your house and power your radios?
- What would you use solar energy for, if you could get it?
It is important to note that these questions were not posed in a formal interview environment, but during casual conversation with almost every local that Mr. Stiller met. Most of these conversations took place on the streets, in bars and restaurants, or on shuttle rides between villages. Overwhelmingly, the results of these conversations demonstrated that, in Karagwe, solar power is viewed as an expensive luxury item that only the richest families possess.
Furthermore, it was clear that almost every individual had a basic understanding of what solar energy is, and what it can do. The most important message of these conversations is that a tremendous latent demand for solar energy exists in Karagwe, and that the major obstacle impeding its widespread use is affordability.
Board of Advisors
Mary Flinger. Ms. Flinger has developed RE policy in Bangladesh, in Egypt, and in many parts of Latin America. She worked at RESL's International Programs Division for three years, and graduated from International Natural Energy's RE education program. Most significantly, Ms. Flinger was instrumental in aiding the Grameen Bank of Bangladesh to develop a working micro-finance plan for solar electric systems. The Grameen model is now regarded to be the most successful solar leasing program in the history of the industry, and the bank has become one of the most fortuitous lending institutions in the world with a 95 percent pay-back rate. Ms. Flinger is currently earning her M.B.A. degree at New York University in New York. Her experience developing a successful business plan to bring affordable solar energy systems to families in Bangladesh will be extremely valuable to this project.
Jane Winger. Ms. Winger has over six years of experience in the energy industry, as well as several years' experience in the global development field. Currently, she is employed by Energy Resources International (ERI), where she develops training curriculum for electric utility managers in developing countries. This curriculum, which has been implemented in Ghana, Brazil, and Mexico, teaches utility managers strategies for maximizing energy efficiency. Ms. Winger is currently earning her M.B.A. degree in entrepreneurship and marketing from the University of Oregon. She played an instrumental roe in the preparation of this business plan, and, as one of Abaka's most accessible advisers, will maintain close involvement with Abaka in years to come. At some point in the future, Ms. Winger may join the company's full-time staff.
Rudolph Heisemann. Mr. Bartholf is a director at Energy Resourcs International (ERI), and has over twenty years of experience in the RE industry. During his impressive career, Mr. Bartholf has provided strategic planning, project development, and technical assistance as a consultant to numerous organizations all over the world. Prior to joining ERI, Mr. Bartholf served as a Senior Program Officer at Prouffer International, a nonprofit development assistance organization. While at Prouffer, Mr. Bartholf spearheaded the development of RE projects in several Asian countries. His advice on technical and economic matters, as well as his contacts within the industry, will prove highly valuable to Abaka.
Miller Fried. Mr. Byrne is a British ex-patriot who has been installing solar electric systems off and on in eastern and southern Africa for twelve years. Currently, he is working with the Maasai people in Arusha, Tanzania, on a large-scale solar project to electrify several remote community centers and schools on tribal lands. Mr. Byrne is literally in the trenches, both as a system installer and integrator, and as a fundraiser. He has important contacts with nongovernment organizations throughout Europe and Africa, and knows key RE producers and distributors. His assistance with the Tanzanian government, with suppliers and distributors, and with private fundraisers, will prove vital to Abaka's success in Karagwe. He will also serve as an ideal sounding board for idea testing.
Justin Sangria, Ph.D. Dr. Sangria is a Professor of Finance at the University of Oregon. He specializes in the area of risk management, particularly as it relates to international finance and currency exchange. A native of Peru, Professor Sangria has consulted for numerous banks in Latin America on currency hedging, and has developed financial strategies to help these banks effectively conduct business across international borders. Professor Sangria's expertise in this realm will help Abaka to manage the serious financial risks associated with doing business in Tanzania.
Felicia Strong, M.B.A. Ms. Strong has worked in the U.S. RE industry for over seven years in both the public and private sectors. Most recently, she worked for Kyocera Solar International, one of the world's largest producers of PV technology, as well as for the U.S. Export Council for RE. She is now working for Prouffer International. Ms. Strong has lived and worked in Brazil, and knows the global RE industry as well as anybody. She will aid in developing strategies for executing this business plan, and in locating potential investors.
Joseph Rosenthal, Ph.D. Dr. Rosenthal is a Senior Economist at the National Energy Sources Laboratory (NESL) in Eugene, Oregon. He has been the Senior Analyst of NESL's International and Village Power Program for nine years, and has worked in the RE field since 1978. He specializes in conducting feasibility and optimization analyses for RE projects in developing nations. Dr. Rosenthal will continue to assist Abaka by reviewing and editing the business plan, by providing fresh ideas and approaches, and by connecting Abaka's management team with other key people in the industry.
Samuel Obago. Mr. Obago is a native of Kenya, and is the Chief Operations Officer at Energy Choices Africa (ECA), probably Kenya's pre-eminent large-scale RE consulting firm. He has seven years of hands-on experience installing solar electric systems. For ECA, Mr. Obago evaluates project financing and feasibility, and negotiates contracts with the World Bank and other international lenders. He is fluent in Kiswahili, and knows key people in East African government, financial, and nonprofit organizations.
Jake Rossimond, owner of Rossimond Power and Light, has been designing, installing, repairing, and building wind generators for twenty years. He is perhaps the nation's best-known specialist in the commercial wind energy industry, and has worked on RE development projects in 23 foreign countries. He has consulted for NESL, as well as numerous other energy organizations all over the world, and has taught the wind energy class at INE for the past six years. In addition to serving as a consultant for the business plan, he has agreed to oversee the design and construction of Abaka's power station and community center in Karagwe.
Mitchell Bumholtz. Mr. Bumholtz served two years in Paraguay with the Peace Corps, and has since graduated from INE's RE education program. He has consulted for the World Conservation Project, and for the past two years has been instrumental in the establishment of a large-scale commercial wind power project in New England. Mr. Bumholtz has been a dedicated proponent of this project since its inception, and may join the Abaka management team as a full-time employee within a year.
Jimmy Wise. Mr. Wise has been an Executive Director of International Natural Energy (INE), arguably the world's most respected RE training center, since 1991. He has been training people in RE installation since 1981, and has nearly thirty years of experience as a licensed general contractor in solar home building and design. During his career, Mr. Wise has taught solar installation in developing countries all over the world. He has agreed to assist with the on-site design and construction of Abaka's power station and community center.
Jacob Black, Ph.D. Dr. Black is a Senior Analyst at NESL's International Programs Division. He has over twenty years of experience advising and consulting on RE projects in sub-Saharan Africa, and has traveled extensively in the region. As one of Abaka's most accessible and supporting advisers, Dr. Black will continue to provide constructive criticism, new ideas, and liaison with potential consultants and investors.
Resume of Liam Stiller
OBJECTIVE: To build Abaka Energy Solutions into a global provider of renewable energy products and services
EDUCATION & EXPERIENCE
University of Oregon
Master's Degree in Business Administration
Expected Graduation, May 2000
- Major in Entrepreneurship; 3.7 cumulative GPA
- Awarded $3,500 in merit-based fellowships for study in Entrepreneurship
- Helped WorldSolar, Inc. of Eugene, OR develop a marketing strategy for introducing their solar module into East Africa as an independent project for M.B.A. credit
- Teaching Assistant, M.B.A. Business Statistics course
Seattle Solar Electronics Workshop, Karagwe, Kagera, Tanzania
Summer Internship, June-August 1999
- Conducted the feasibility analysis for the Abaka business concept
- Forged a business partnership with Ghin Patel, Tanzania's leading installer of solar electric systems
- Made contacts with key industry people including Samuel Obago and Miller Fried, as well as officials at the Karagwe Development Association (KARADEA), the Tanzania Foreign Investment Center, the Tanzania Revenue Authority, the Tanzania Electric Supply Company, and the Africa Projects Development Fund
International Natural Energy, Eugene, OR
Renewable Energy Education Program, June-August 1998
- Completed coursework in PV system design and installation
- Helped to install a 1.5 kW grid-tied PV system on a home in Edwards, CO
- Completed coursework in the fundamentals of wind generator operation and installation
- Helped to install a 1.5 kW wind generator on a remote home near Fairplay, CO
Amgen, Inc., Portland OR
Department of Inflammation November 1993-May 1998
Research Associate in Cell Biology & Immunology
- Worked on over 20 project teams to develop novel therapeutics for treating inflammatory diseases
- Responsible for researching the effects of drugs on cells and organ systems, reporting data at team meetings, contributing to strategies for drug development, and coordinating cell biology research efforts with those of other departments
- Supervised 3 student interns to help with research and project implementation
- Wrote 2 and co-authored 7 scientific papers
- Promoted twice for ability to work in teams, handle multiple responsibilities, conduct sound science, function without supervision, and take primary initiative
- Presented data in front of 200 cell biologists at the international Keystone Symposium
University of Chicago, Chicago, IL
Bachelor's Degree in History & Immunology, Graduated June 1993
- Chairman of fraternity committee; led the most successful recruitment program on campus
- Chairman of Philanthropy committee; led an effort which raised $79,000 for cancer research, and honored by the Saturn Corporation for dedication to community service
ADDITIONAL INFORMATION
- Skilled in Microsoft Office, including Access databases, as well as using Excel spreadsheets for financial analyses and optimization modeling (maximizing profits or minimizing costs using the Solver function)
- Written and conversational literacy in Spanish
- Able to travel extensively, and to remote locations (have been to 17 countries on 4 continents); self-sufficient and culturally adaptive
FINANCIAL STATEMENTS
Pricing Strategy and Sales & Revenue Forecasts
| Pricing of Financing Contracts | Plan 1 | Plan 2 | Plan 3 | |||
| per month | per contract | per month | per contract | per month | per contract | |
| Price | $24.00 | $288 | $48.00 | $576 | $72.00 | $864 |
| Gross Profit Margin | 72.46% | 80.00% | 94.59% | |||
| Anticipated Sales Breakdown | Plan 1 | Plan 2 | Plan 3 | |||
| Percent of Total Sales | 85% | 13% | 2% | |||
| Sales Forecasts | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Sales Growth Rate | 200% | 150% | 100% | 50% | 50% | |
| Kit Sales, Plan 1 | 213 | 638 | 1,594 | 3,188 | 4,781 | 7,172 |
| Kit Sales, Plan 2 | 33 | 98 | 244 | 488 | 731 | 1,097 |
| Kit Sales, Plan 3 | 5 | 15 | 38 | 75 | 113 | 169 |
| Total Kits Sold | 250 | 750 | 1,875 | 3,750 | 5,625 | 8,438 |
| Total Customers Served, 2001-2006 | 20,688 | |||||
| Revenue Forecasts | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Plan 1 | $61,200 | $183,600 | $459,000 | $918,000 | $1,377,000 | $2,065,500 |
| Plan 2 | $18,720 | $56,160 | $140,400 | $280,800 | $421,200 | $631,800 |
| Plan 3 | $4,320 | $12,960 | $32,400 | $64,800 | $97,200 | $145,800 |
| Total Revenue | $84,240 | $252,720 | $631,800 | $1,263,600 | $1,895,400 | $2,843,100 |
Pro-Forma Cost of Kits Sold and Inventory Holding Schedule
| Cost of Kits Sold | Plan 1 | Plan 2 | Plan 3 | |||
| Description | Cost | Description | Cost | Description | Cost | |
| Photovoltaic Module | 13 Watt | $69.00 | 30 Watt | $125.00 | 48 Watt | $171.00 |
| Battery | 12 V, 20 Amp-Hr | $20.00 | 12 V, 60 Amp-Hr | $60.00 | 12 V, 100 Amp-Hr | $100.00 |
| Charge Controller | 2.5 Amp | $30.00 | 5 Amp | $50.00 | 5 Amp | $50.00 |
| Loads | 1 light, 1 radio | $10.00 | 2 lights, 1 radio | $15.00 | 3 lights, 1 radio | $20.00 |
| Connectors & Wiring | $15.00 | $25.00 | $35.00 | |||
| Mounting | $10.00 | $15.00 | $20.00 | |||
| Shipping (Whole Kit) | $13.00 | $30.00 | $48.00 | |||
| Total Unit Cost | $167.00 | $320.00 | $444.00 | |||
| Inventory Holding Schedule | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Inventory at Beginning of Year | 0 | 250 | 750 | 1,875 | 3,750 | 5,625 |
| Kits Installed During Year | 0 | 250 | 750 | 1,875 | 3,750 | 5,625 |
| New Kits Ordered at End of Year | 250 | 750 | 1,875 | 3,750 | 5,625 | 8,438 |
| Inventory at End of Year (Units) | 250 | 750 | 1,875 | 3,750 | 5,625 | 8,438 |
| Inventory at End of Year (Value) | $48,108 | $144,323 | $360,806 | $721,613 | $1,082,419 | $1,623,628 |
Consolidated Pro-Forma Financial Statements, 2001-2006
| Income Statement | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Revenue | $84,240 | $252,720 | $631,800 | $1,263,600 | $1,895,400 | $2,843,100 |
| Cost of Kits Sold | $0 | $48,108 | $144,323 | $360,806 | $721,613 | $1,082,419 |
| Gross Profit | $84,240 | $204,613 | $487,478 | $902,794 | $1,173,788 | $1,760,681 |
| CSEW Contracting Fee | $5,000 | $10,000 | $20,000 | $40,000 | $80,000 | $160,000 |
| Administrative Expense | $44,000 | $52,800 | $63,360 | $76,032 | $91,238 | $109,486 |
| Maintenance Expense | $3,000 | $3,150 | $3,308 | $3,473 | $3,647 | $3,829 |
| Marketing Expense | $3,000 | $3,600 | $4,320 | $5,184 | $6,221 | $7,465 |
| Insurance & Security Expense | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 |
| Total Operating Expenses | $63,000 | $77,550 | $98,988 | $132,689 | $189,106 | $288,780 |
| Operating Profit | $21,240 | $127,063 | $388,490 | $770,105 | $984,682 | $1,471,901 |
| Currency Exchange Loss | $4,212 | $10,231 | $24,374 | $45,140 | $58,689 | $88,034 |
| Depreciation Expense | $80,000 | $80,000 | $80,000 | $80,000 | $80,000 | $80,000 |
| Earnings Before Income Taxes | ($62,972) | $36,832 | $284,116 | $644,965 | $845,992 | $1,303,867 |
| Income Tax Expense | $0 | $14,733 | $113,646 | $257,986 | $338,397 | $521,547 |
| Net Income | ($62,972) | $22,099 | $170,470 | $386,979 | $507,595 | $782,320 |
| Balance Sheet | ||||||
| Assets | ||||||
| Cash | $206,874 | $313,492 | $588,437 | $1,091,318 | $1,701,810 | $2,614,063 |
| Inventory | $48,108 | $144,323 | $360,806 | $721,613 | $1,082,419 | $1,623,628 |
| Equity in CSEW | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 |
| Total Current Assets | $258,982 | $461,815 | $953,244 | $1,816,930 | $2,788,228 | $4,241,691 |
| Property, Plant, & Equipment | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 |
| Accumulated Depreciation | $80,000 | $160,000 | $240,000 | $320,000 | $400,000 | $480,000 |
| Net Fixed Assets | $720,000 | $640,000 | $560,000 | $480,000 | $400,000 | $320,000 |
| Total Assets | $978,982 | $1,101,815 | $1,513,244 | $2,296,930 | $3,188,228 | $4,561,691 |
| Liabilities | ||||||
| Accounts Payable | $48,108 | $144,323 | $360,806 | $721,613 | $1,082,419 | $1,623,628 |
| Accrued Expenses | $4,846 | $5,965 | $7,614 | $10,207 | $14,547 | $22,214 |
| Accrued Taxes Payable | $0 | $3,400 | $26,226 | $59,535 | $78,092 | $120,357 |
| Total Liabilities | $52,954 | $153,688 | $394,647 | $791,355 | $1,175,057 | $1,766,199 |
| Stockholders ' Equity | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 |
| Retained Earnings | ($82,972) | ($60,873) | $109,597 | $496,576 | $1,004,171 | $1,786,492 |
| Total Liabilities & Stockholders ' Equity | $978,982 | $1,101,815 | $1,513,244 | $2,296,930 | $3,188,228 | $4,561,691 |
| Statement of Cash Flows | ||||||
| Beginning Cash | $185,000 | $206,874 | $313,492 | $588,437 | $1,091,318 | $1,701,810 |
| Net Income | ($62,972) | $22,099 | $170,470 | $386,979 | $507,595 | $782,320 |
| Change in Inventory | ($48,108) | ($96,215) | ($216,484) | ($360,806) | ($360,806) | ($541,209) |
| Depreciation Add-Back | $80,000 | $80,000 | $80,000 | $80,000 | $80,000 | $80,000 |
| Change in Accounts Payable | $48,108 | $96,215 | $216,484 | $360,806 | $360,806 | $541,209 |
| Change in Accrued Expenses | $4,846 | $1,119 | $1,649 | $2,592 | $4,340 | $7,667 |
| Change in Accrued Taxes Payable | $0 | $3,400 | $22,826 | $33,309 | $18,556 | $42,265 |
| Total Adjustments to Cash Balance | $21,874 | $106,618 | $274,945 | $502,881 | $610,492 | $912,253 |
| Ending Cash | $206,874 | $313,492 | $588,437 | $1,091,318 | $1,701,810 | $2,614,063 |
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Consolidated Monthly Pro-Forma Financial Statements, Year 2001
| Income Statement | Jan | Feb | Mar | Apr | May | Jun | Jul |
| Revenue | $7,020 $7,020 | $7,020 | $7,020 | $7,020 | $7,020 | $7,020 | |
| Cost of Kits Sold | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Gross Profit | $7,020 | $7,020 | $7,020 | $7,020 | $7,020 | $7,020 | $7,020 |
| CSEW Contracting Fee | $417 | $417 | $417 | $417 | $417 | $417 | $417 |
| Administrative Expense | $3,667 | $3,667 | $3,667 | $3,667 | $3,667 | $3,667 | $3,667 |
| Maintenance Expense | $250 | $250 | $250 | $250 | $250 | $250 | $250 |
| Marketing Expense | $750 | $0 | $0 | $750 | $0 | $0 | $750 |
| Insurance & Security Expense | $667 | $667 | $667 | $667 | $667 | $667 | $667 |
| Total Operating Expenses | $5,750 | $5,000 | $5,000 | $5,750 | $5,000 | $5,000 | $5,750 |
| Currency Exchange Loss | $351 | $351 | $351 | $351 | $351 | $351 | $351 |
| Depreciation Expense | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 |
| Earnings Before Income Taxes | ($5,748) | ($4,998) | ($4,998) | ($5,748) | ($4,998) | ($4,998) | ($5,748) |
| Income Tax Expense | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Income Tax Credit | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Net Income | ($5,748) | ($4,998) | ($4,998) | ($5,748) | ($4,998) | ($4,998) | ($5,748) |
| Balance Sheet | |||||||
| Assets | |||||||
| Cash | $191,669 | $192,588 | $194,257 | $195,926 | $196,845 | $198,514 | $200,183 |
| Inventory | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Equity in CSEW | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 |
| Total Current Assets | $195,669 | $196,588 | $198,257 | $199,926 | $200,845 | $202,514 | $204,183 |
| Property, Plant, & Equipment | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 |
| Accumulated Depreciation | $6,667 | $13,333 | $20,000 | $26,667 | $33,333 | $40,000 | $46,667 |
| Net Fixed Assets | $793,333 | $786,667 | $780,000 | $773,333 | $766,667 | $760,000 | $753,333 |
| Total Assets | $989,002 | $983,255 | $978,257 | $973,259 | $967,512 | $962,514 | $957,516 |
| Liabilities | |||||||
| Accounts Payable | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Accrued Expenses | $5,750 | $5,000 | $5,000 | $5,750 | $5,000 | $5,000 | $5,750 |
| Accrued Taxes Payable | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Total Liabilities | $5,750 | $5,000 | $5,000 | $5,750 | $5,000 | $5,000 | $5,750 |
| Stockholders' Equity | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 |
| Retained Earnings | ($25,748) | ($30,745) | ($35,743) | ($41,491) | ($46,488) | ($51,486) | ($57,234) |
| Total Liabilities & Stockholders ' Equity | $989,002 | $983,255 | $978,257 | $973,259 | $967,512 | $962,514 | $957,516 |
| Statement of Cash Flows | |||||||
| Beginning Cash | $185,000 | $191,669 | $192,588 | $194,257 | $195,926 | $196,845 | $198,514 |
| Net Income | ($5,748) | ($4,998) | ($4,998) | ($5,748) | ($4,998) | ($4,998) | ($5,748) |
| Change in Inventory | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Depreciation Add-Back | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 |
| Change in Accounts Payable | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Change in Accrued Expenses | $5,750 | ($750) | $0 | $750 | ($750) | $0 | $750 |
| Change in Accrued Taxes Payable | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Total Adjustments to Cash Balance | $6,669 | $919 | $1,669 | $1,669 | $919 | $1,669 | $1,669 |
| Ending Cash | $191,669 | $192,588 | $194,257 | $195,926 | $196,845 | $198,514 | $200,183 |
| Aug | Sep | Oct | Nov | Dec | Year |
| $7,020 | $7,020 | $7,020 | $7,020 | $7,020 | $84,240 |
| $0 | $0 | $0 | $0 | $0 | $0 |
| $7,020 | $7,020 | $7,020 | $7,020 | $7,020 | $84,240 |
| $417 | $417 | $417 | $417 | $417 | $5,000 |
| $3,667 | $3,667 | $3,667 | $3,667 | $3,667 | $44,000 |
| $250 | $250 | $250 | $250 | $250 | $3,000 |
| $0 | $0 | $750 | $0 | $0 | $3,000 |
| $667 | $667 | $667 | $667 | $667 | $8,000 |
| $5,000 | $5,000 | $5,750 | $5,000 | $5,000 | $63,000 |
| $351 | $351 | $351 | $351 | $351 | $4,212 |
| $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $80,000 |
| ($4,998) | ($4,998) | ($5,748) | ($4,998) | ($4,998) | ($62,972) |
| $0 | $0 | $0 | $0 | $0 | $0 |
| $0 | $0 | $0 | $0 | $0 | $0 |
| ($4,998) | ($4,998) | ($5,748) | ($4,998) | ($4,998) | ($62,972) |
| $201,102 | $202,771 | $204,440 | $205,359 | $207,028 | |
| $0 | $0 | $0 | $0 | $48,108 | |
| $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | |
| $205,102 | $206,771 | $208,440 | $209,359 | $259,136 | |
| $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | |
| $53,333 | $60,000 | $66,667 | $73,333 | $80,000 | |
| $746,667 | $740,000 | $733,333 | $726,667 | $720,000 | |
| $951,769 | $946,771 | $941,773 | $936,026 | $979,136 | |
| $0 | $0 | $0 | $0 | $48,108 | |
| $5,000 | $5,000 | $5,750 | $5,000 | $5,000 | |
| $0 | $0 | $0 | $0 | $0 | |
| $5,000 | $5,000 | $5,750 | $5,000 | $53,108 | |
| $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | |
| ($62,231) | ($67,229) | ($72,977) | ($77,974) | ($82,972) | |
| $951,769 | $946,771 | $941,773 | $936,026 | $979,136 | |
| $200,183 | $201,102 | $202,771 | $204,440 | $205,359 | |
| ($4,998) | ($4,998) | ($5,748) | ($4,998) | ($4,998) | |
| $0 | $0 | $0 | $0 | ($48,108) | |
| $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | |
| $0 | $0 | $0 | $0 | $48,108 | |
| ($750) | $0 | $750 | ($750) | $0 | |
| $0 | $0 | $0 | $0 | $0 | |
| $919 | $1,669 | $1,669 | $919 | $1,669 | |
| $201,102 | $202,771 | $204,440 | $205,359 | $207,028 |
Consolidated Monthly Pro-Forma Financial Statements, Year 2002
| Income Statement | Jan | Feb | Mar | Apr | May | Jun | Jul |
| Revenue | $21,060 | $21,060 | $21,060 | $21,060 | $21,060 | $21,060 | $21,060 |
| Cost of Kits Sold | $48,108 | $0 | $0 | $0 | $0 | $0 | $0 |
| Gross Profit | ($27,048) | $21,060 | $21,060 | $21,060 | $21,060 | $21,060 | $21,060 |
| CSEW Contracting Fee | $833 | $833 | $833 | $833 | $833 | $833 | $833 |
| Administrative Expense | $4,400 | $4,400 | $4,400 | $4,400 | $4,400 | $4,400 | $4,400 |
| Maintenance Expense | $263 | $263 | $263 | $263 | $263 | $263 | $263 |
| Marketing Expense | $900 | $0 | $0 | $900 | $0 | $0 | $900 |
| Insurance & Security Expense | $667 | $667 | $667 | $667 | $667 | $667 | $667 |
| Total Operating Expenses | $7,063 | $6,163 | $6,163 | $7,063 | $6,163 | $6,163 | $7,063 |
| Currency Exchange Loss | $1,053 | $1,053 | $1,053 | $1,053 | $1,053 | $1,053 | $1,053 |
| Depreciation Expense | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 |
| Earnings Before Income Taxes | ($41,830) | $7,178 | $7,178 | $6,278 | $7,178 | $7,178 | $6,278 |
| Income Tax Expense | $0 | $2,871 | $2,871 | $2,511 | $2,871 | $2,871 | $2,511 |
| Income Tax Credit | $16,732 | $0 | $0 | $0 | $0 | $0 | $0 |
| Net Income | ($25,098) | $4,307 | $4,307 | $3,767 | $4,307 | $4,307 | $3,767 |
| Balance Sheet | |||||||
| Cash | $190,659 | $203,604 | $217,448 | $225,551 | $238,495 | $252,340 | $257,931 |
| Inventory | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Equity in CSEW | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | $4,000 |
| Total Current Assets | $194,659 | $207,604 | $221,448 | $229,551 | $242,495 | $256,340 | $261,931 |
| Property, Plant, & Equipment | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | $800,000 |
| Accumulated Depreciation | $86,667 | $93,333 | $100,000 | $106,667 | $113,333 | $120,000 | $126,667 |
| Net Fixed Assets | $713,333 | $706,667 | $700,000 | $693,333 | $686,667 | $680,000 | $673,333 |
| Total Assets | $907,993 | $914,271 | $921,448 | $922,884 | $929,162 | $936,340 | $935,264 |
| Liabilities | |||||||
| Accounts Payable | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Accrued Expenses | $7,063 | $6,163 | $6,163 | $7,063 | $6,163 | $6,163 | $7,063 |
| Accrued Taxes Payable | $0 | $2,871 | $5,742 | $2,511 | $5,382 | $8,253 | $2,511 |
| Total Liabilities | $7,063 | $9,034 | $11,905 | $9,574 | $11,545 | $14,416 | $9,574 |
| Stockholders' Equity | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 |
| Retained Earnings | ($108,070) | ($103,763) | ($99,456) | ($95,690) | ($91,383) | ($87,076) | ($83,310) |
| Total Liabilities & Stockholders' Equity | $907,993 | $914,271 | $921,448 | $922,884 | $929,162 | $936,340 | $935,264 |
| Statement of Cash Flows | |||||||
| Beginning Cash | $207,028 | $190,659 | $203,604 | $217,448 | $225,551 | $238,495 | $252,340 |
| Net Income | ($25,098) | $4,307 | $4,307 | $3,767 | $4,307 | $4,307 | $3,767 |
| Change in Inventory | $48,108 | $0 | $0 | $0 | $0 | $0 | $0 |
| Depreciation Add-Back | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $6,667 |
| Change in Accounts Payable | ($48,108) | $0 | $0 | $0 | $0 | $0 | $0 |
| Change in Accrued Expenses | $2,063 | ($900) | $0 | $900 | ($900) | $0 | $900 |
| Change in Accrued Taxes Payable | $0 | $2,871 | $2,871 | ($3,231) | $2,871 | $2,871 | ($5,742) |
| Total Adjustments to Cash Balance | ($16,369) | $12,945 | $13,845 | $8,102 | $12,945 | $13,845 | $5,591 |
| Ending Cash | $190,659 | $203,604 | $217,448 | $225,551 | $238,495 | $252,340 | $257,931 |
| Aug | Sep | Oct | Nov | Dec | Year |
| $21,060 | $21,060 | $21,060 | $21,060 | $21,060 | $252,720 |
| $0 | $0 | $0 | $0 | $0 | $48,108 |
| $21,060 | $21,060 | $21,060 | $21,060 | $21,060 | $204,613 |
| $833 | $833 | $833 | $833 | $833 | $10,000 |
| $4,400 | $4,400 | $4,400 | $4,400 | $4,400 | $52,800 |
| $263 | $263 | $263 | $263 | $263 | $3,150 |
| $0 | $0 | $900 | $0 | $0 | $3,600 |
| $667 | $667 | $667 | $667 | $667 | $8,000 |
| $6,163 | $6,163 | $7,063 | $6,163 | $6,163 | $77,550 |
| $1,053 | $1,053 | $1,053 | $1,053 | $1,053 | $12,636 |
| $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | $80,000 |
| $7,178 | $7,178 | $6,278 | $7,178 | $7,178 | $34,427 |
| $2,871 | $2,871 | $2,511 | $2,871 | $2,871 | $30,502 |
| $0 | $0 | $0 | $0 | $0 | $16,732 |
| $4,307 | $4,307 | $3,767 | $4,307 | $4,307 | $20,656 |
| $270,875 | $284,720 | $290,311 | $303,255 | $317,100 | |
| $0 | $0 | $0 | $0 | $144,323 | |
| $4,000 | $4,000 | $4,000 | $4,000 | $4,000 | |
| $274,875 | $288,720 | $294,311 | $307,255 | $465,422 | |
| $800,000 | $800,000 | $800,000 | $800,000 | $800,000 | |
| $133,333 | $140,000 | $146,667 | $153,333 | $160,000 | |
| $666,667 | $660,000 | $653,333 | $646,667 | $640,000 | |
| $941,542 | $948,720 | $947,644 | $953,922 | $1,105,422 | |
| $0 | $0 | $0 | $0 | $144,323 | |
| $6,163 | $6,163 | $7,063 | $6,163 | $6,163 | |
| $5,382 | $8,253 | $2,511 | $5,382 | $8,253 | |
| $11,545 | $14,416 | $9,574 | $11,545 | $158,738 | |
| $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | $1,009,000 | |
| ($79,003) | ($74,696) | ($70,930) | ($66,623) | ($62,316) | |
| $941,542 | $948,720 | $947,644 | $953,922 | $1,105,422 | |
| $257,931 | $270,875 | $284,720 | $290,311 | $303,255 | |
| $4,307 | $4,307 | $3,767 | $4,307 | $4,307 | |
| $0 | $0 | $0 | $0 | ($144,323) | |
| $6,667 | $6,667 | $6,667 | $6,667 | $6,667 | |
| $0 | $0 | $0 | $0 | $144,323 | |
| ($900) | $0 | $900 | ($900) | $0 | |
| $2,871 | $2,871 | ($5,742) | $2,871 | $2,871 | |
| $12,945 | $13,845 | $5,591 | $12,945 | $13,845 | |
| $270,875 | $284,720 | $290,311 | $303,255 | $317,100 |