Ramping Up CaaS Investment Across regions and Industries

During the 1 December global CaaS E-Summit morning session on the investors’ perspective on CaaS, expert panelists elaborated their views and experiences with CaaS, the barriers and how to overcome these from an investment perspective, and the tremendous potential the model provides.

The panel featured a wide variety of global stakeholders, including Jonathan First, Lead Specialist from the Development Bank of South Africa; Csaba de Csiky, Chairman and Managing Partner at EnerSave Capital; Vladimir Dugin, Principal at Energy Access Ventures (EAV); and Mike Peo, Head of Infrastructure, Energy Telecoms at NedBank. 

Before jumping into the topic, Jonathan First reminded the audience of the solid monetary value that cooling represents. With a market cap of $135 billion per year today, estimated to rise beyond $170 billion by 2030, cooling represents a strong opportunity for green investing, especially when investments can influence the roll-out of more energy efficient and “cleaner” cooling technologies. First also expressed the importance of The Lab’s endorsement of the CaaS mechanism. Over the last six years, The Lab has developed and endorsed 49 financial instruments that have been endorsed by over 60 private and public institutions and has, most importantly, catalysed $2.3 billion in investment.

Through the highly interactive discussion that followed, the panellists shared valuable information for investors, but also solution providers looking to apply CaaS.

Csiky described the importance and benefits of contract standardisation when creating capital market products such as CaaS, and how these models can be deployed to bring huge value to both the developing and developed markets. He shared the relevance to structure contracts in a modular fashion to be easily adapted to different markets and products, while ensuring the core of the contract respects the legal systems of specific countries. Csiky further added that the challenge may stand to find sizeable projects (on option being bundling projects) which then make the investment cost worthwhile for the institution involved.

Peo expressed that servitisation is not new in banking, explaining how South Africa’s NedBank took a leading role in investing in CaaS; adding that the construct of transforming CAPEX into OPEX to reduce the actual investment cost associated with that switch has been very well accepted and tested globally in finance. Peo shared the example of how 10-12 years ago, base stations for telecommunications companies were outsourced when they realised it was no longer needed for a mobile network operator to own every single piece of infrastructure. He further elaborated the importance of selecting highly credible off-takers with good credit history to lower the risk of the first investment and avoid the need of credit enhancing products (such as guarantees and insurance products).

Dugin from EAV, with experience in investing in off-grid refrigeration, exposed the huge value these projects bring to both the solution providers but also the farmers who can increase their revenues by 50%. He described how his company designed and implemented solutions to effectively overcome key financing, technological, and regulatory barriers; and what they have learned over the past years – stressing the importance of creating value for each of the stakeholders involved in the process: the end-user, the solution provider and the investor.

Panellists agreed on the importance to tailor the mechanism per country and per project, adding that as one evolves from strong credit valuable off-takers with several locations and multi-country presences to single retailers or small farmers – this can, and does, massively change the funding model and commercial banks will require credit enhancement from develop finance institutions to support a CaaS programme. In the scenario of large clients with multiple presences, Peo added that one can bundle these projects to easily develop a portfolio of assets that give enough security without the need of credit enhancement. Furthermore, panellists added that the model will certainly evolve over time as more projects are implemented and data on creditworthiness is collected.

The panellists also answered questions from the audience about securitisation of projects, especially for small off-grid cold rooms, and about managing financial risk posed by less creditworthy counterparts. The role of blended finance to give commercial banks comfort for as-a-service projects was also discussed.

For more details around the conversation, we highly encourage readers to view the recording of the panel and to connect with the CaaS team for further questions. We also recommend downloading the CaaS toolkit and reviewing the case studies panels from the E-Summit to see where and how CaaS is already being applied.