Background and Potential Opportunities for SELCO

1
Background and Potential Opportunities for
SELCO

• Harish Hande
• VP
• November 2003

2

• Background Overview
• Recent Developments
• Long-term Opportunities
• Next Steps

3
Background Overview
Company History

• The Solar Electric Light Company (SELCO) was
  founded in 1997 to manage subsidiary companies
  engaged in the selling and servicing of solar
  electric lighting systems.
• SELCO was started by the Solar Electric Light
  Fund (SELF) to commercially scale-up a
  distribution and retail network through which to
  sell and service household lighting systems.
• The Company is a Delaware-registered US
  corporation with majority interests in two
  operating subsidiaries in India and Sri Lanka,
  and maintains a project office in Vietnam.
• The company is approaching profitability at
  revenues of 5 million per year, and employs 350
  people

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Background Overview
The Market

• Throughout the world, people lack access to
  reliable sources of electricity
• Un-served Approximately 2 billion people lack
  access to primary grid electricity
• Underserved Many of those who actually have
  access to the grid do not reliably receive it
• Without reliable access to electricity,
  households and businesses are using alternative
  sources of lighting and electricity
• Kerosene for wick lamps
• Dry-cell batteries for flashlights and radios
• Recycled car batteries for lighting and TV
• Generator sets as AC electricity backup
• Solar home systems for DC electricity
• In addition to home lighting and electricity,
  there are other significant needs waiting to be
  met
• Communications
• Clean drinking water and efficient irrigation
• Water heating
• Refrigeration
• Other Productive Uses

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Background Overview
Current Products- Home Lighting Systems

• SELCOs primary product is a solar-photovoltaic
  home lighting system. A solar photovoltaic
  module is used to charge up a deep-cycle battery
  during the day, and discharged during the evening
  to run lights, TV, radio, and other small DC
  appliances.
• Most of SELCO home-lighting systems are custom
  designed to cater to the varied needs of rural,
  semi-rural, semi-urban and urban clients.
• SELCO stocks a range of DC lighting options to
  meet the particular needs of individual
  customers.
• Reading Lights
• Night Lights
• Focus Lights
• Corridor Lights
• Outdoor Lights
• Portable Lights
• Restroom lights
• Each solar home lighting includes installation
  and four service visits during first year.

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Background Overview
Current Products- 12-volt and AC appliances

• In addition to SHS, SELCO sells other 12V DC
  appliances
• 12 volt Cassette Recorders,
• Radios,
• Black-and-white color televisions,
• Soldering Irons
• Fans
• Door Bells
• Other
• SELCO sells systems for AC appliances
• Mixers,
• Color TVs,
• EPBAXs etc.
• CFLs for energy efficient lighting
• SELCO designs photovoltaic systems for
  residential and commercial users needing
• Back up power
• Primary power
• Short Term Emergency power

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Background Overview
Current Products Large Installations

• In addition to individual systems for homes and
  businesses, SELCO also designs, installs, and
  services large-scale systems including
• Large AC and DC systems of up to 20KW
• Solar PV/ Grid-intertied AC hybrid systems
• Water heating systems up to 1k liters/day
• Water pumping systems from 7k to 120k liters/day
  of surface and submersible pumping.
• Telecommunication repeater stations
• Over 25 KM of installed DC electric fencing
• Example of customers for such large scale systems
  are
• Seminaries and religious complexes
• Residential Dormitories for Schools
• Financial Institutions.
• Wild Life Parks and Remote Recreation Centers
• Approximately 15 of SELCOs revenue comes from
  large-scale projects.

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Background Overview
Solar Water Heating
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Background Overview
Distribution Network
HQ Each subsidiary has a headquarters located in
large commercial city, responsible for overall
company management.
SSCs SELCOs retail showroom, inventory depot,
and base of sales and service operations. Located
in central rural towns.
Regional Offices Located strategically
throughout service territories, each office
directly manages between 5-10 SSCs
Salesforce Dealers SELCOs direct sales force
and shops (dealers) market SELCOs products to
potential customers
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Background Overview
Subsidiary Headquarters Reg. Offices

• Headquarters SELCO subsidiary operations are
  managed through country-level subsidiary
  headquarters operations located in a central
  commercial city. Headquarters operations are
  responsible for
• Central Management
• Operations Management
• Finance Accounting
• Purchasing
• Regional Offices centers have recently been
  introduced for better management of SSCs.
  Regional operations are responsible for
• Management of SSCs under its jurisdiction
• Local sales marketing
• Expansion in its area of operations.
• There are currently two regional offices in each
  India and Sri Lanka.

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Background Overview
Sales Service Centers (SSCs)

• SELCO sells its products through a wholly-owned
  network of sales and service centers (SSC)
  located throughout the areas of its operations.
• Each SSC contains a showroom for products and
  serves as the basis for sales and service
  operations for the given geographic territory
• SELCO currently has 32 SSCs in India and Sri
  Lanka, with plans for over 50 additional SSCs in
  the next five years.
• It is anticipated that new centers will be a
  combination of wholly-owned stores and franchised
  dealerships operating under defined company
  policies.

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Background Overview
Sales Executives and Agents

• Salesforce
• SELCO employs a direct salesforce of 90
  salespeople in India and Sri Lanka.
• Salesmen visit customer homes to introduce SELCO
  products and services. They also introduce
  financial packages to the potential clients
• Dealers
• In addition to its sales executives, SELCO
  utilizes a network of independent dealers to
  market its products.
• Dealers introduce potential customers to SELCOs
  products and steer interested ones directly to
  SELCO SSC or sales executives to close the sale.
  For their efforts, dealers are paid commissions
  of between 5 and 10.

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Background Overview
Installation and After-Sales Service

• SELCO provides installation and after-sales
  service packages on all products sold.
• Prior to closing a sale, an installation
  technician will visit customers home to tailor
  product to best fit customer electrical and
  lighting needs.
• After sale, trained SELCO technicians visit
  customer home for installation. On a periodic
  basis, service technicians visit customers homes
  to check on system performance.
• After the initial 1-year of included service,
  annual maintenance contracts (AMCs) are available
  for purchase by SELCOs customers.
• SELCO believes that its commitment to high
  quality service and lasting customer
  relationships will be its key to long-term
  success.

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Background Overview
Consumer Finance

• SELCO also provides access to consumer financing
  through its partners. As its primary products
  represent large customer purchases, typically 3-6
  months salary or equivalent, SELCO bundles
  purchasing with finance through local financing
  organization.
• With financing at 10-20 p.a., a 400 solar home
  lighting system at 20 down can be purchased over
  four years for between 10-12 per month, which is
  similar to expenditures for competing power
  sources.
• SELCO has developed relationships with over
  thirty rural banking networks in rural India and
  Sri Lanka, as well as working extensively with
  credit cooperatives, leasing companies, and other
  local sources of finance.
• Through the provision of financing, SELCO aims
  to provide one-stop shopping for customers
  seeking reliable home lighting and electricity.

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• Background Overview
• Recent Developments
• Long-term Opportunities
• Next Steps

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Recent Developments
Product Line Expansion

• SELCO has recently expanded its product offerings
  beyond solar electric lighting systems
• With its network of service centers, trained
  sales force, and service technicians, SELCO has
  the opportunity to introduce additional products
  and services
• Telecommunications
• Water Pumping coupled with drip Irrigation
• Refrigeration
• Other productive uses, e.g., powering rice mills,
  spray painting machines etc.
• SELCO believes that it can be a valuable channel
  partner for manufacturers and distributors
  lacking direct retail access to customers.
• SELCO also believes that with its network of
  service centers coupled with its excellent
  relationship with rural financial institutions,
  it can provide a fantastic opportunity to like
  minded organization to sell and promote
  technologies that could directly impact the
  quality of life in the rural areas.

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Recent Developments
Telecommunications

• SELCO has entering the home and small business
  telecommunications market through sales of
  wireless local loop telephones.
• In late August, 2003 SELCO sold its first 50
  wireless local loop (WLL) telephone systems
  through Mobitel and the Sri Lankan
  Telecommunications administration.
• Each WLL unit employs a radio to connect
  individual homes to central transmitter/receivers.
  
• The combination of wireless telephone and power
  provide families and businesses with the enter
  the 21st century without waiting for wired power
  or communications.

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Recent Developments
Water Pumping Micro-Drip Irrigation

• Solar water pumps can be coupled with drip
  irrigation kits for water conservation and
  increased economic activities. Kits range in size
  from a 20-litre bucket irrigating 25 m² to
  customized systems covering 1000 m² or more.
• Crops irrigated by drip systems show water
  savings of up to 50 percent resulting in reduced
  labor and energy costs.
• Controlled application of water to the plants
  suppresses weed growth, further reducing labour
  costs.
• Increased frequency and uniformity of water
  application plus reduced competition from weeds
  results in improved plant growth and yield
  increases of 30 to 50 percent.

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Recent Developments
Product Design

• SELCO has entered into product development and
  product design Currently developing an integrated
  type wall-mounted battery box.
• With its installed base, technical capabilities,
  and understanding of the market, SELCO believes
  it can be a SELCO is tremendous source of
  information in product design.
• SELCO expects to take control of product
  development and design, but partner with contract
  manufacturer rather than begin manufacturing
  directly.
• SELCO can be a source of value for other product
  design firms interested in direct testing, market
  feedback, and beta-testing.

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Recent Developments
Other Productive Uses

• SELCO is beginning to package solar electric
  systems with productive loads to sell or lease to
  rural entrepreneurs
• SELCO is currently introducing the first 12V DC
  refrigerators for rural store owners. We have
  partnered with one of Sri Lankas largest
  beverage distributors and refrigerator
  manufacturer to undertake a marketing study to
  determine potential market for small
  refrigerators.
• SELCO is looking at a number of potential
  productive use applications, including
• Sewing machines
• Market stall light rental
• Entertainment products (TV/DVD, Karaoke, Games)
• SELCO is a finalist in the World Banks
  Development Marketplace, which includes 250,000
  in grant funds for development and testing.

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• Background Overview
• Recent Developments
• Long-term Opportunities
• Next Steps

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Long-Term Opportunities
Expanded SELCO Vision Moving beyond Strictly
Solar

• Sustainable
• High-Quality
• Branded
• Consumer Durables
• Empowering customers

Installation and after-sales service at the
Customer Home on all company products sold
Service
Product
Consumer Durables Financing
Finance
SELCO has the potential to utilize its
distribution network and customer relationships
to be at intersection of product, service, and
finance Selling high quality, branded consumer
durable products coupled with after-sales service
and consumer financing
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• Background Overview
• Recent Developments
• Long-term Opportunities
• Next Steps

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Next Steps
Summary

• SELCO anticipates seeking additional equity in
  mid-2004 to undertake additional opportunities.
• We believe there are a number of milestones that
  should be completed prior to a successful equity
  offering.
• These milestone relate to
• Advancements in SELCO Operations
• Identification of New Opportunities
• Preparation for Investment Offering
• SELCO believes that it will be able to complete
  these required tasks and begin full equity round
  by March, 2004, complete equity round by
  mid-to-late 2004.

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Next Steps
Milestone Schedule
Target

• Operational Improvements
• Roll-out of Company-wide Management Information
  System
• Standard company structures and policies
  implemented
• Parent company management team fleshed out
• Indian PVMTI investment-led growth in sales
  outlets
• Sri Lankan -- Cashflow improvements realized A/R
  reduced
• Vietnam future resolved (closure or scale-up as
  project office)
• New Opportunity Identification
• Next 2-3 Country Opportunities Identified
• Feedback from additional products introductions

12/03
3/04
Early 2004
12/03
12/03
11/03
2/04
12/03
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Next Steps
Investment Related
Target

• Investment Materials Preparation
• Business Plan written
• Financial Projections Complete
• Polished Investment Presentation Ready
• Offering Documents Drafted
• SELCO consolidated March 31, 2004 audit
• Investors Identification Roadshow
• Potential Investors identified
• Initial contact made and shortlist identified
• SELCO full road show presentations to interested
  investors
• Closing
• Closure of 2 to 5 million in equity

10/03
12/03
1/04
2/04
5/04
11/03
Early 2004
Starting 4/04
Mid-2004
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Next Steps
Questions.

• Who is the appropriate investor audience for
  SELCO?
• What additional information / backup
  documentation/proof is needed to present a truly
  compelling story?
• How should we prioritize milestone achievement
  prior to equity round?