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Monetising SA’s sunshine: Solar leasing startup eyes raising $1m in ICO pre-sale

JOHANNESBURG — Abe Cambridge’s ‘The Sun Exchange‘ is a business that finds itself on the cutting-edge of two technologies that have the most potential to disrupt our world today: solar panels and the blockchain. Founded in 2016, Sun Exchange runs a blockchain-based solar micro-leasing marketplace to facilitate financing for small commercial and industrial solar projects in South Africa and other developing regions. There are two key sides to the business. Firstly, it allows people to buy solar panels (using Bitcoin or fiat currency) from as little as R100 up to literally hundreds of thousands of rands and then lease these panels out to small businesses. Earnings can thencom be cashed out in Bitcoin or even rands. On the other side, businesses can lease these solar units without having to put down the large amounts of capital required for installation and purchase, resulting in dramatically lower energy costs. Interestingly, Sun Exchange has also launched an Initial Coin Offering or ‘ICO’ in which it has developed a new digital currency dubbed ‘SUNEX’. In this podcast, Cambridge explains the ins and outs of all of this. – Gareth van Zyl

It’s a pleasure to welcome Abe Cambridge, the CEO and founder of a very interesting local energy business called ‘The Sun Exchange;. Now, Abe, your business describes itself as a solar micro leasing marketplace. Can you unpack that for us?

Yes, we have enabled anybody in the world to purchase solar cells, which are six-by-six inch silicon wafers, which are the business-facing end of solar panels, and release them into projects in SA. We call it micro leases because these fractions of solar panels are very small and our members can actually purchase single units of them and lease them out, which means that anybody with less than R100 can now own an operating solar cell asset. Previously, going solar meant installing a whole system on the roof of your own home, if you’re lucky to own your own home, and lucky enough to have all the capital outlay to purchase the whole system. So, our platform decentralises the ownership of solar power plants and opens it up to everybody.

Does this lower the cost for people who are leasing it? Can you give us an idea of how much less it would cost?

Yes, it eliminates the cost for people who are leasing the system because they get to enjoy the benefits of solar energy at no upfront cost at all. I’ll just give you an example of our first project, which we did a couple of years ago, which was the Stellenbosch Waldorf School. They were frustrated with the rate of increase that the electricity tariffs were going up. There was excessive inflation, so we came along and said that we can lease you a solar energy power plant that you don’t have to pay for upfront, and we can assure you that the energy costs that you are now buying from Eskom are going to reduce. This is because we’re complementing most of your energy demands with solar power. We then leased the system to them at a rate which is tied to inflation and at a rate which is lower than the alternative of buying from Eskom. That is the whole point in solar power is that it’s cheaper than fossil fuels but it’s just unfortunate that for most businesses and communities the actual capital outlay is something which is just unfeasible. If you’re a small business operator, you want to use your capital to expand your business. You don’t want to put your capital into buying this lump of hardware which is just going to produce electricity, and which at the end of the day, is seen as a variable cost to businesses. So, we’ve effectively provided an easy way of lowering energy costs.

Are you mainly targeting small businesses then, in terms of the people who going to lease these solar panels? Or can homes also lease these panels from you and you guys come in and install it?

We are deliberately just focusing on small businesses for the simple reason that businesses are operating in the daytime and, therefore, the energy demand of a business very nicely matches the energy output of a solar power plant. There’s great efficiency in solar powering these businesses, which are the life-blood of the economy. And if you lower the energy cost for businesses, you are going to boost the economy because there’s more revenue that the business can use in growing their operations. On the residential side, people generally aren’t at home in the daytime. So, you have to export your energy or store it in a battery. Both those things add an additional cost which makes residential systems less economically viable. Also, when you are dealing with residential homes, essentially, there would have to be many of them to equal the same impact as compared to just one large commercial plant. That’s why we focus on commercial projects because you’re getting a bigger impact, a bigger environmental impact, and a better socioeconomic impact in one hit.

Just to give us an idea, how big are some of these installations that you’ve done (in terms of kilowatts as well)? I see you’ve installed 4 or 5 projects so far?

Yes, so, we’ve done it pretty much all around the country. The first one was in Stellenbosch. That was a 15 kilowatt system. So, 15 kilowatts met the entire peak energy demand of the school. This is a fairly large school: there’s about 200 to 300 pupils, they have onsite kitchens, workshops, etc. The solar plant then meets their entire daytime load and they have a little bit of a surplus of energy, which we unfortunately have to lose outside of peak hours, so weekends and holidays, etc. But that’s all factored into our model. Then the second project we did was up in Rustenburg, in which we had to solar power a tyre recycler who supply tyres to mines. Mining is an extremely important part of the economy so to solar power the different parts of the supply chains is important to green mining. We did a 45 kilowatt system on there that was around 10 000 solar cells, which was quite a jump and three-times larger than the previous projects we did.

Then we’ve gone to Durban and solar powered CROW, which is a wildlife sanctuary – they look after and rehabilitate wildlife and release them back into the wild. Then we went to Knysna, to the Knysna Elephant Park, who take in orphaned elephants and hold them until they find parks and move them to. More recently, we’ve also done ‘South South North’ in Cape Town, who do amazing work with climate mitigation measures. That was our most recent project and that was 18 kilowatts. So you can probably see that there’s quite a social slant to a lot of our projects. It wasn’t entirely deliberate but certainly we like to do projects that actually are sending out positive messages about the kind of activities that are happening, and the kind of operations that we want to support and reduce running costs for.

And all of these businesses are completely off the grid from Eskom now or they just don’t depend on Eskom anymore?

No, want them to be grid tied. There’s no point in making them off-grid entirely. That will be massively, overly complicated. Put on a huge cost and also, probably mildly inconvenient for the customer because if you take yourself off the grid entirely, you’ve got to install batteries and the actual economics aren’t really there at the moment, to compete with Eskom. Putting in batteries just doesn’t work so, yeah, that’s why we keep them grid tied because you can use the grid as a battery. So, when you do have surplus you can theoretically export it. Although, the regulations are quite not there yet, in this country for exporting electricity at a rate, which is actually favourable to the exporter, but that is coming.

In terms of the people who participate in buying these solar units and then leasing them out — can you give us an idea of how many people have bought these units and how much has been spent in total on these units thus far?

Yes, sure, the minimum amount anyone can buy is a single solar cell, which is, on average, R100. But we’ve had several customers who buy thousands and thousands of them. However, the median is probably around 100 to 200 solar cells per project. We’ve got about 5 000 members on the platform, who have registered. We figure that around 500 people, as separate individuals, own solar cells, most of whom own them across multiple projects. Most of our customers are from SA, I would say, in terms of which country we’ve got the most members from. But actually we’ve got members now located in 70 countries, and the reason why people all around the world can do this is because we utilise the Bitcoin Blockchain to transfer payments. By sending Bitcoin payments, you can do them in tiny fractions, very cheaply, very quickly, and very securely to anywhere in the world.

Abe Cambridge
Abe Cambridge.

We now have this single financial layer to transact with the whole planet, and that’s why we’ve felt it massively complemented solar energy because with solar power you have this universal resource that some countries are blessed with more than others. So, there are people living in, say, the North of Scotland or the North of Norway who would love to own a solar panel but can’t because it’s just unpractical. They can now own a solar panel which is located in SA and still lease it out and be economically viable. It’s entirely down to blockchain technology that connects those two parties together and that’s what we’ve built this all around.

Abe, can you give us an idea of the proportion of members who have actually signed up and paid using Bitcoin?

Yes, when we pre-sell the solar cells, I’d say around half of sales are in Bitcoin and around half are bought using the Rand. However, with solar panels that people buy using the Rand, around three-quarters of those people request their rental income payment to be made in Bitcoin. This indicated to us that, actually, Bitcoin is an increasingly popular currency, and so it should be. It’s brilliant. It’s game changing. It shows that people who feel they’ve missed the boat or feel that buying Bitcoin directly is quite a risky thing to do, they can actually now buy a solar panel and just get paid once per month as their rental income, paid in Bitcoin at whatever the value of the Bitcoin is at during that time. So, they’re accumulating Bitcoin over long, extended periods of time rather than just buying it outright. And just to give you an idea with respect of the value of Bitcoin: the actual target we have for a project is for the owners of the solar cells to earn an average of 10% IRR per year, over a period of a 20-year lease.

Can you just explain what IRR is?

It’s Internal Rate of Return, so it’s an average return over the course of a period. If you tie it to inflation, we expect energy costs to increase over time, and the lease cost will increase over time. In the first couple of years, you will probably getting around maybe 6% to 7% return, and by the end of the lease, the return will be far greater than that, but the average is 10%, which is probably slightly more favourable than keeping money in a bank account, and apart from that, you know where your money is and they know it’s doing good.

Are you mainly just using Bitcoin? You’re not using Ether or any of these other cryptocurrencies that exists out there?

Yes. So, we also pay people Solar Coin. We’re an affiliate of the Solar Coin Foundation, which is a cryptocurrency that was launched in 2014, which was created just to give to people who owned solar panels. So, if you own a solar array you can claim these Solar Coins and they’re completely free to claim. Most people don’t know it exists but we basically just give people these tokens for free because we know they bought solar panels from our platforms, and we can add or drop them into their accounts. So that’s what we’ve been doing for a while. (And by the way, that was on the Litecoin Blockchain – the Solar Coin is what’s called the Litecoin Blockchain.) I’m trying not to get too technical but it’s very cool and we realise what they’re doing at Solar Coin. We’re now also releasing our own currency called SUNEX, which is, in theory on blockchain.

Yes, I wanted to chat about that. Obviously, you’ve launched your own ICO (Initial Coin Offering) earlier this week so, can you explain how this token works and where you can buy it? Can you buy it on other exchanges or only through your platform – how does it work?

Yes, so people can buy it through our platform at the SUNEXchange.com. To explain what SUNEX is, I’ll compare it to something which everyone is probably familiar with, which is air miles in airlines. Seeing as we’re in SA, let’s just refer it to the Voyager Air Miles program as an example. So, imagine that SAA say, right, we’re releasing a new loyalty program and we’re going to presell our air miles for a massive discount. That’s basically, what we’re doing. We’re preselling our reward tokens, which are called SUNEX, at the largest discount upfront for any dealer who wishes to buy them. There’s only a finite number that is ever going to be in circulation. There’s only going to be 266 million so, we’re putting them all upfront for sale in one go, and however many we sell within a two-month buying period, is how many are sold in the token sale. And any that aren’t sold are burnt, which basically creates a finite supply and we are holding a certain amount in reserve.

Just over one third of the tokens that get created are going to be held in a reserve, which will be issued to people as and when they use the Sun Exchange platform and earn them through our rewards program. Now, the point with SUNEX is the more you accumulate, the more you have, the greater the level of discount you get on our platform and you also get bonus release payments for higher lease payments, depending on your membership tier. And depending on which membership tier you have, you get priority access to actually buying into each project. So, there’s 11 membership tiers named after the stages of a star formation. It starts on ‘Hydrogen’ and goes up to ‘Supernova’, and we’ve got one called Power of Ra, which is our level 11 category, which we hope our most aspirational members would like to use. But basically, buying tokens and token sales gives you this shortcut to higher membership levels. If you don’t take part in the token sale then the only way you can get SUNEX tokens is to accumulate them over time using the platform, which could take a very long time.

So, we’re issuing SUNEX through the rewards program itself at the rate of one token per accruing R100 spend. They also get issued SUNEX that could be earned by doing certain tasks from our platform, and we’ve heavily gamified this rewards program to the point where if you buy a solar panel in Africa, you’ll get an African Sun Award and if you put a solar panel in a school, you’ll get a School Award. So, you’re building a really diverse solar portfolio from our platform and you are earning more and more SUNEX. But it will take time so that’s why we’re pre-selling this whole thing, in the hope that we’ll give people a chance of stripping the whole gamified thing, and just getting the top membership tier in one go.

ICOs are typically, nowadays associated with raising capital so, can you tell us how much you’ve raised so far from this ICO? How many people have perhaps bought tokens or how many tokens have been sold?

Let’s just look at ICOs in general for a moment. ICO’s are basically ideas, and the company just says right, we’ll do an ICO, and they can raise stupid sums of money. I’ve seen some concepts that have raised perhaps $13m just on an idea, with an unproven business. But that’s why didn’t just go straight to an ICO. We actually built a solid business beforehand. Maybe even raised institutional C-capital last September from [Kay? 0:16:50.3] Long Ventures and MNS, and network site ventures in New York and Johannesburg, respectively so, we’re an operating core business that is now doing an ICO to expand and putting an additional layer into our platform. That’s kind of how we see ICO as slightly different from others that people may be familiar with. But the point to this is to raise capital and also, to attract new members into our platform, and how we’re actually going to be utilising the money we raise is we want to seed a solar projects insurance fund so that all our projects are protected financially against a consumer lease default. We’re also going to go into pre-funding solar power plants and also, put it into research and development of innovative types of solar projects, such as [inducible 0:17:41.3] micro quotes with cryptocurrency in mining embedding.

Now, to date, in the prominent presale that actually closes on Saturday so, if anyone wants to get on that private presale list, there’s a 40% bonus of tokens available for anybody who wishes to get in, at a minimum of R120k in the private presale. But they get 40% more tokens out of this and then that private sale ends on the 21st April. Now, on the 21st, we’re launching SUNEX to the public at an event being held on Clifton Third Beach. We’re screening a premier screening of a feature film called ‘Orange Sunshine.’ We’re having [inaudible 0:18:23.1] and we’re showing our promotional video, and that marks the start of the public sale of SUNEX. But to date, so far, in the private presale we’ve raised probably, I’d have to check because it’s changing all the time – I think we’ve now raise around $500k through private presale. We’ve even got a few more select. We’re targeting $1m by the end of this week.

On a Medium post that you wrote there was the dateline that included ‘Delaware’ in the US so, is this ICO being managed and created from there?

No, it’s actually being managed by an entirely different entity in Malta because the ICOs, and it’s a very new thing for businesses to do. No one can quite fit it into a box of what it is. Is it an IPO? Is it crowdfunding? Is it just selling a product? No one really knows. It’s kind of undefined so, doing an ICO legally, from the actual registered company that’s hosting it, you need to host it in a country which has actually declared what their position is on ICOs. So, you need to go to what’s called an ICO favourable location. Those places are Malta, Gibraltar, Singapore, Cayman Islands, and I believe Mauritius. So, that’s why the actual ICO will be the foundation that’s being set up – or the set up rather for the ICO is not going to be Delaware or SA. But it hasn’t been collected in digital currency. Okay so, the digital currency is being collected in Ether and Bitcoin, but as and when we have to bring proceeds into SA to deploy, it then becomes a taxation event. So, we’ve had to ringfence a significant portion of our proceeds to cover for bringing in capital into SA from overseas that we’ve raised. It is basically a digital product. It’s almost like we’re are just selling product and that’s how we have to treat it as such.

The whole ICO space is quite controversial, especially in the US at the moment, and obviously, you’ve avoided the US, it seems. But in America, the SEC has said that these ICOs are securities. What do you make of that?

Basically they’ve said that some could be seen as securities and there are some tokens, which are security tokens and some which are utility tokens. It’s how they’re offered and to whom they’re offered that changes whether it’s a security or not. Yes, in the US it is still a huge grey area. There’s absolutely no black and white as to what is what and there is no real precedent that’s been set as to what is and what isn’t a security token. But you can look at it like this: if you buy a token from somebody and just through the nature of buying it you’re then making money – that’s probably going to be a security. But if you buy a token and the only way you’re ever going to get value out of it is to actually utilise and deploy that token through a platform, and actually do things to make it worthwhile buying it, then that’s a utility token.

So, with our token at Sun Exchange, you can buy it but just holding this token is not going to do anything. You need to use it on the Sun Exchange platform to actually make it worthwhile purchasing.

If people want to get involved in this how do they contact you guys? How do they get involved, either if they want to lease or buy units, or get involved in the ICO?

There are a number of ways. The easiest way is to just get on our website at Sunexchange.com. You can see the projects that we’ve hosted, we’ve got new projects coming up. From there, you can contact us. You can click on our token sale site or click on our token sale. The coolest thing that we’re currently doing is setting up a Telegram Channel. Telegram is like ‘WhatsApp’ on steroids. It’s very cool – we like it a lot. It’s very easy to use, if you use WhatsApp you’ll be immediately be at home with Telegram. So, we have a Telegram community channel operating. Basically, we’ve now got thousands of Sun Exchange members, who are members of this channel – you can chat to each other easily, and we’ll have a 24/7 agent, who’s just there, responding to questions that people may have. It’s like a live Sun Exchange chat room where people can meet other members, ask questions about what we do, ask questions about our tokens, and that’s the point of it. So, it’s going to be far better than sending us emails: it’s literally just getting on our Telegram and chatting with us live.

Or you can just send us an email. We’ve got a contact form, on our website, where people can drop us a line, people can register for solar projects if they want to be solar powered and we’re also looking for anybody that’s interested in working with us. We’re a growing business and we’re growing our team. If anybody feels they’ve got what it takes and they’ve got the passion and the motivation to come and work with such an innovative, fast moving company, then we’re open doors.

Abe Cambridge, thanks a lot for taking the time to chat to me today and to tell me about your interesting business.

Cool, no problem at all. Thank you.

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