How to Start a Solar Power Company
Solar power is known to be the transformation of sunlight into electricity. And, it is another source of power for so many companies and homes in Africa. Due to the fact that, power has always been a major problem in Africa. So many company that cannot withstand the challenges of power in Africa Continent, blame the failure of their business Lack of Power supply in the Continent.
However, the issue of power in Africa has pose a strong business opportunity for people that want to invest in power generation, hence, Solar power emanate as the only source of power that can never fail when every other source of power fails.
Solar power business has become a popular business in Africa due to inadequate power supply encounter throughout the Continent. Because, power challenge has always been a major impediment to the economic development in the Continent.
However, you can enter solar power business through franchise or has a sole business owner. Solar power business comprises of Selling of solar equipment, Distributing solar products, Installation of products, and service and maintenance. Therefore, you have to identify the one you want to go into or you can as well do everything together as a company.
Solar Power Company Registration and Licensing
Registering your company is very necessary in order for you to operate as a recognized solar power company. You have to register your company name with Corporate Affairs and Commission. However, apart from registration, you need to be aware of some legislations guiding solar power business in Nigeria. These legislations are:-
- The Companies and Allies Matter Act (LFN 2004, as amended)
- Nigerian Electricity Regulation Commission Regulation (NERC)
- Renewable Energy Regulation.
Also, you need to license your solar business. This license will give you another authority to operate as a power generating company. In relation to licensing of your solar business in Nigeria, some of the legislation guiding your activities as a solar power company are:-
- Nigeria Electricity Regulation Commission’s Regulation for the Application for License 2010
- Electricity Power Sector Reform Act, 2005 (EPSR Act)
However, before you can obtain solar power generating license in Nigeria, there are some procedures you must follow. Meanwhile, The Renewable Energy Regulation specifies that applications to qualify as a Renewable Energy Generator shall be made together with the applications for license to generate electricity which shall state the technology and capacity size. And, SCHEDULE 1A of the License Regulation provides that the mandatory documents for application for generating license are:-
- Completed Application Form;
- Certificate of Incorporation and Memorandum and Articles of Association, or Deed of Partnership or Deed of Trust;
- Registered Title Deed to Site, or Sale Agreement, or Deed of Assignment/Gift, or evidence of submission of a title deed to a relevant land processing agency (as applicable);
- Tax Clearance Certificate for immediate past three (3) years;
- Ten-year Business Plan;
- Off-take Agreement or Arrangement;
- Environmental Impact Assessment (EIA) Approval Certificate, or Proof of submission and acceptance for processing of the Report on EIA to the Ministry of Environment, or Details on how effluents and discharges will be managed (if proposed capacity is less than 10MW);
- Fuel Supply Agreement, or a letter from a fuel supplier and transporter indicating the inclusion of the fuel needs of the applicant in the supply plans of the fuel supplier and transporter;
- Memorandum of Understanding with or Letter of intent from Engineering Procurement Contract (EPC) Contractor (if applicable);
- Memorandum of Understanding with or Letter of Intent from the technical partner (if applicable)
- Financing Agreements or Letter to fund the project from financial institution(s);
- Timelines for commissioning of the power plant and on the date when different capacities of the plant will come into operation.
Finally, apart from registering and licensing, you will as well register for tax purposes, because you will pay tax to the state or federal government purse.
Processes in Starting a Solar Power Company
In starting a Solar power business, apart from registering your business and licensing it or writing a good business plan; you need to have a good technical know-how of how of solar power business is been handled.
People that run solar power business have a good knowledge of electricity and electrical matters because it involves a lot of electrical wiring. However, if you don’t have an electric or electrical handling experience, you can as well hire or employed an experience electricians to work with you.
However, successful solar panel business owner must a have a strong understanding of marketing and using it to get the greatest effect, generating new contracts for their new company and brand. Meanwhile, your staff must also work to stay current with changing technologies, because solar is still a developing industry in Africa.
Business Plan for the business
In starting any business, the first best thing you can do is to come up with a good business plan that will suits your business. This business plan will answer any question that is related to the business cycle. You must have a well detailed business plan to run your business effectively. For your well-articulated business plan visit www.bullscapitalltd.com
The contents in your business plan will appear thus:-
- Executive Summary
- Product and Service Offerings
- Vision Statement
- Mission Statement
- Business Structure
Role and Responsibilities
- Chief Executive Officer
- Admin and HR Manager.
- Marketing and Sales Executive
- Client Service Executive
- SWOT Analysis
- Market Analysis
- Market Trend
- Target Market
- Competitive Advantage
- Sales and Marketing Strategy
- Sources of Income
- Sales Forecast
- Pricing Strategy
- Payment Options
- Publicity and Advertising Strategy
- Financial Projections and Costing
- Sustainability and Expansion
Funding the Business
In funding your Solar power business, you must have access to Loan from banks and the bank can be either; a Commercial Bank or Bank of Industry. However, the loan from commercial bank can be on ground once, you are able to produce a well-prepared Business plan. However, you also need business plan to secure loan or funds from Bank of Industry, but the different between the two banks is that; Bank of Industry charge a lower interest rate compare to that of commercial banks.
Application for funds or finances from this two banks are different. Therefore, we will summarize the stages and procedures for applying for each bank load below.
- For a Commercial Bank, you will pass through three stages and they are:-
The applicant will open an account with the bank. The account should be at least 6 months (but this can be waived if the applicant’s business plan is formidable. The applicant will apply for loan and state the purpose of loan, amount of loan, tenure of the loan, source of loan repayment and collateral for the loan (i.e. legal mortgage on landed property which is registered with a Certificate of Occupancy; Debenture on assets of the company; Bank Guarantee). The application must be addressed to the branch manager of the branch of bank which its account is domiciled and submit it at the bank for onward processing.
The bank receives the letter and starts processing. The bank reviews the application, writes Credit Appraisal Memorandum (CAM) which highlights the customer’s capacity, character, collateral, condition and capital, generates the loan repayment schedule, prepares the offer letter which specifies the terms and conditions under which the loan will be granted.
The applicant executes the offer letter and meets the conditions precedent to drawdown. The conditions precedent to drawdown includes provision of postdated cheques that cover the entire duration of the tenor of the loan facility, presentation of a reputable guarantor, execution of guarantor’s form and statement of personal net worth form by the guarantor, presentation of statement of account and execution of statement of personal net worth form by the applicant.
- For Bank of Industry, the general requirements for applying for their finance or funds are:-
- The applicant must be a Nigerian company;
- The company must provide at least 20% equity for the project. Equity can be in the form of existing plant and equipment;
- Sufficient industry knowledge, skills and experience related to your business field;
- Prudent and financially disciplined, able to separate personal funds from business funds;
- Passionate, energetic and resilient in the face of challenges and unafraid of competition;
- Evidence of having attended an entrepreneurial development programme;
- An effective working succession plan;
- The company size should define you as an SME;
- The company should have been in operation for a minimum of 3 years with a good track record of sales and profit margin
- Clear, specific and verifiable loan purpose;
- Viable and realistic growth plan;
- Able to provide collateral;
- No history of loan default;
- Good book keeping and accounting;
- Skilled and dedicated workforce;
- Easy access to raw materials;
- Strong demand for products from a loyal customer base;
- All necessary licenses and permits to operate in company’s line of business;
- Belong to the agricultural, manufacturing value chain or related services;
- Safe and secure location of project site and collateral assets;
- Reliable tested technology with long term maintenance agreements;
- Membership of organized private sector associations such as Nigerian Association of Small and Medium Enterprises (NASME), Manufacturers Association of Africa(MAN), Nigerian Association of Small Scale Industries (NASSI) etc.;
- Good corporate citizen up to date with personal and Corporate Income Taxes;
- Company’s business generates sufficient cash-flow to meet loan obligations;
- Company’s business line is legal and permissible;
- Company’s ownership and management should be willing to make full and accurate disclosures to BOI.
Before you can have access to both BOI and commercial banks funding, you must abide with the aforementioned stages or procedures.
Location of the Business
When starting your solar power business, you need to identify a strategic place to locate your business premises or store, where people can meet with you purchase your solar power products or seek for services.
However, when considering your location, it is advisable you consider a place that there is issue of power supply, so that those who are staying there wont have any choice than to patronize you. When they are constantly frustrated by the lack of power supply, they will surely request for your services and buy your solar power products.
Your market share as a solar power company cannot be hard to identify, due to the fact, the need for power can be easily streamlined to houses and companies. Solar power is now available to most homeowners, even small and large businesses are adding solar to their energy programs and they may likely be ready to invest in the installation of sizeable rooftop or otherwise.
Marketing and Sales strategy
In marketing your solar power business, every other normal ways of marketing a services or products can be utilized. You can either advertise your products or services on television, radio and newspapers. And you can as well use your business location as an example for people to see and know the advantage of using solar power in their homes or offices. Using your office as an example, what you need to do is to install solar power on the roof of your office building and put it to work. When people see that, you don’t lack power an moment of the day, they will be moved to patronize you. This can be called marketing by example.
And in makes sales in your solar power business, whether you work with a franchiser or you are wholesaler of solar power products, you will always makes enough sales through the successful installation of solar units.
Another way of marketing your solar power business is by attending home shows as a vendor, purchase on-air and prints ads, you can as well join a local chamber of commerce close to your community in order to make your name known in the locality and every other activities that will market and promote your business.
To make more sales, you can be a solar panel distributors as well as solar panels installator. For you to have more revenue, you can operate in a large scale and employ more experience staff to work for you. However, a residential installation can be priced from 100, 000 to 500,000 or even more. Anyway, your level of sales will depend on how powerful your marketing strategies work.
Branding your Business
Having a strong brand will assist your company in standing out from competitors. You need to know that, your brand is what your business stand for and how it is been viewed in public.
In branding your solar power business, you must inculcate all those things that will make your business stands out among its peers. Apart from designing a logo and attaching it to all your solar products, you must also have a well skilled staff to work with you.
Having a business website will bring your business close to your prospective clients as well as your existing clients. Your business website will allow them to know more about your company and the products and services you do offer.
Having a website will also help you in having a strong online presence, in which customers can request for your products or services anytime of the day, as at when they need it. You can also use your social media handle to attract new clients or customers to your business.
Finally, the introduction of solar energy in Africa has really help to a great extent in solving the Continent’s electricity obstacle which has remain a hindrance to economic growth. And, solar introductions as well will continue to serve as an avenue for more job to be created in the Continent.
About the Writer
Olusipe Abiodun Yinka is an Audit Associate in Bulls Capital Limited. He has a National Diploma in Accounting from Abraham Adesanya Polytechnic as well as a Degree in Accounting from Alex Ekwueme Federal University, Ebonyi State. He is a creative copywriter and a Trendsetter. Apart from writing, Olusipe is also an entertainer.
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