Can Malabites Crowd Fund A Renewable Energy Project In Unical As A Social Investment?
The Oasis Reporters
April 7, 2024
By Prof. Yakubu Ochefu
Introduction
The following concept note is a fall out of a paper I presented in Unical in 2016. It proposes that we as alumni engage in and apply critical thinking to an old problem.
As you may be aware in the last 20 years, radical and what is often referred to as “disruptive thinking processes“ have created society transforming institutions in ways that the ordinary mind would not have envisaged.
Powered by opportunities created by information and communication technologies, new ways of doing old businesses have emerged and created commercial behemoths like AirBnB for accommodation services, Uber for commercial transportation and Amazon and Alibaba for commerce that clearly show the trajectory the world is going.
My presentation will be a demonstration of how University of Calabar can apply creative funding in the area of Energy supply for staff and students as a social investment using its alumni as a pool of investors.
Social Investment and Crowd Funding
A social enterprise is any organization that applies commercial strategies to maximize improvements in human and environmental well being such as maximizing social impact alongside profits for external shareholders.
The critical distinguishing factor of a social enterprise is that their social mission is as core to their success as any potential profit. This is usually referred to as a social investment or impact investment. Social enterprises can be structured as a profit or non-profit.
A multipurpose cooperative, community Investment Company or a foundation/trust fund can operate as a social enterprise. Social investors typically invest in organizations with a strong social change mission, who generate an income, but are not considered commercially attractive as their ROI is usually between 1 and 5%.
Crowd funding is alternative financing by which small businesses, corporate organizations and individuals can raise money from the general public through an online portal called a Crowd funding Portal.
The theory behind this is that if a large number of people, referred to as the “crowd”, each provide monetary contributions then it is possible to raise substantial sums of money. Thus, Crowd funding provides an alternative finance model, which is taking grip in Europe, the US and Asia as fast as the platforms can be set up.
There are today some 1000 Crowd funding portals worldwide supporting a multi-billion pound industry in the UK.
Global Crowd funding experienced accelerated growth in 2014 to reach $16.2 billion in the US. In 2015 the industry raised over $34.4 billion.
The purpose of Crowd funding is to provide investment opportunities for would-be investors and to provide funding for start-ups and individuals to finance or refinance their businesses. Crowd funding in the European market has reached a value of EUR 1 billion, this market is made up of various funding models such as consumer lending, debt and equity financing for small and medium sized enterprises and donations for philanthropic causes.
Funds raised by way of Crowd funding ensure that small businesses have the credit to grow their business, which in turn creates jobs and stimulates economic growth.
According to Massolution, the leading Crowd funding data aggregation company, four categories of crowd funding platforms exist. These are equity based crowd funding, lending based crowd funding, rewards and donations based crowd funding.
A proposed crowd funding model for University of Calabar.
Our proposed crowd funding model leverages on the University of Calabar alumni as an “investor feedstock” and a solar energy farm and an “Common campus” accommodation as projects. A preliminary energy audit of University of Calabar shows that it requires a minimum of 2 MVA of power to operate efficiently. It is currently only able to generate slightly under 1 MVA to augment public power supply. The role of constant and sustainable energy supply for any institution of higher learning cannot be understated.
University of Calabar spends approximately 150 million naira annually to keep its array of generators supplied with diesel and properly maintained. By the time Professor Akpagu is through as Vice-Chancellor, the University would have spent over half a billion naira on diesel alone.
But with the massive ongoing technological advances in the world’s Solar energy market as against the skyrocketing cost of conventional energy, providing a sustainable, clean, affordable and environmentally compatible source of electrical energy for the University is possible.
The model being suggested here is 3MWp farm deployed as an EPC & F (Engineering, Procurement, Construction & Financing) between the University and any technical partners it selects from a pool of interested actors under an innovative “No Initial Capital- Minimal Operational Cost- Revenue Generating” Model that guarantees earnings for a minimum of 15(Fifteen Years) years.
At an estimated cost of approximately six billion naira, the project can be conceived as a for- profit social investment, and can be funded using either equity, mezzanine or hybrid capital with the University as a core investor and the alumni association, staff and students and crowd funders.
In this regard the proposed project structure will look like this:
Project Name: Unical Independent Power Project
Total Value of Project : N6,000,000,000
Shares Definition @ N10, par Value of N1: 1,100,000,000 Shares Units.
Shares Distribution:
University of Calabar (Promoter) 15% = 165,000,000 shares Unit
“Unical Alumni 40% = 440,000,000 “
University Community 5% = 55,000,000
Cross River State Government 5% = 55,000,000
Other Nigerians 10% = 110,000,000 “
Strategic Investors 10% = 110,000,000 “
Total 100% = 935,000,000
Terms of the offer:
Not more than 1 million units for individuals
Not less than 500 units for individuals
Not more than 5 million shares for groups (organizations)
Not less than 1 million units for groups
If fully subscribed the investment will attract social equity funding to the tune of 4 billion naira. If the Alumni Association keys into the project and succeeds in getting 25,000 of its members to invest a minimum of =N=50,000.00, they would have raised =N=1,250,000.00. The campaign for crowd funding will be driven by a roboust social media campaign. The University on its part can incentivize the crowd funding appeal with admission advantages for holders of the equity certificate subject to their meeting other minimum entry requirements.
Public Private Partnership (PPP) Relationship/model(s)
BUSINESS RELATIONSHIP MODEL
BRIEF DESCRIPTION/KEY FEATURES
BENEFITS OF PROPOSED BUSINESS RELATIONSHIP
DESIGN-BUILD- OPERATE(D-B-O)
– Retainer ship/Fee Based Consultancy and Business Advisory Model
This involves University of Calabar engaging the technical services of a consortium of local and international partner institutions for the design, construction, operation and maintenance of the proposed 3MWp Solar PV Plant in in Calabar
.
This would include the payment of a retainer ship fee by the University to the Technical consultants alongside consulting fees prior to construction of the Solar PV Plant precedent upon consolidation of a contract agreement between both parties;
Technical consultants will assist in raising finance for the University where it will take the position of obligor for the loan tenure;
University will be responsible for donating the site for the construction of the 3MWp Solar PV Plant to supply electrical energy to University and its environs.
University shall sign a Power Purchase Agreement(PPA) with the interested parties in its environs
Ownership of plant by the University of Calabar;
Revenue Generation and immediate cash flow from inception of the Solar PV Plant construction;
Contract documentation is easier;
BUILD-OPERATE TRANSFER(B-O-T)
This will involve a model where Technical Partners will be responsible for design, construction, operation and maintenance of the 3MWp Solar PV Plant for the University on and agreed site for an agreed contractual tenure(15-20 Years) upon which full ownership reverts the University.
Consortium of local and international technical and financial partners shall be responsible for financing the proposed Solar PV Plant;
The University will be handed over the ownership of the Solar PV Plant at the point when the consortium of local and international partner institutions have been paid a satisfactory amount for its investment in the Solar PV Plant;
The Technical partners if required, will be responsible for running the operations and maintenance after ownership of the Solar PV Plant have been transferred to the University.
No capital and operational cost incurred by the University
Efficient operations of Solar Plant by the Consortium of local and International Partner Institutions;
Innovative and qualitative end product operated efficiently and effectively;
Risk is effectively shared between the University (Project Promoter) and Technical Partners ( Special Purpose Company);
Speed of project delivery is enhanced; End-users benefit enormously due to strict performance criteria ultimately guaranteeing quality and durability of the end product;
Conclusion
I hope I have sufficiently challenged you on how we can apply creative thinking to unlock opportunities that exist within our eco-system that can be exploited to help sustain the University system. The clarion call is for us to promote out of the box thinking amongst our constituents.
The phase of marketization of services such as operating guest houses, running bookshops, operating bottled water plants, campus shuttle services, Microfinance banks and all other “low hanging fruits” to generate revenue internally should now be replaced by more aggressive forms of business that draws on our creative intellect and operations in a knowledge driven society and economy.
In an era where corporate gift giving has declined considerably and a general donor fatigue persists, Universities can take advantage of crowd funding to mobilise funds for small and large projects from municipal services to research-to-market ideas and other creative ventures.
I posed the question of whether crowd funding as a creative social investment can sustain the Nigerian University system. For me the answer is a resounding yes.
There is virtually no limit to how we can apply our creativity in crowd funding. All we need to do is to think smart, think alternatives, think efficiency, think innovation, think in 3-Dimensions and think virtual. By so thinking, we can be rest assured that sustaining the future of the university system in Nigeria would have been well thought of and need not cause us to fear.
Thank you for your attention.
Prof. Yakubu Ochefu
SG, Committee of Vice-Chancellors.
Professor Yakubu Aboki Ochefu is a historian and a scholar-practitioner. He holds degrees in History, Political Economy and Economic History from the Universities of Calabar and Birmingham. His academic career traverses the University of Calabar and Benue State University, Makurdi.
