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Amidst ICO Flurry, This Social Entrepreneur Seeks $50M for Clean Energy In Developing World
This post was originally produced for Forbes.
Everyone seems to want in on it. Even my septuagenarian neighbor who recently retired from her position as a clerk has taken up trading cryptocurrencies. Bitcoin jumped in value more than 50% in October alone. Hundreds of millions of dollars are being raised in new coin offerings every month. This surprising source of capital may be a natural match for social entrepreneurs.
Dan Bates, 60, the founder, president and CEO of ImpactPPA is now conducting presales in anticipation of a $50 million initial coin offering or ICO in the coming weeks. Bates has been doing clean energy projects in the developing world for a decade but ImpactPPA is a new business.
It will use not one but two cryptocurrencies. The first, a utility token, it calls NRG will be used to sell the electricity it produces on micro-grids and small utility-scale solar and wind projects. The second token, MPAQ, the one that will be offered in the ICO, will give the holders a voice in selecting the next projects. In part to avoid securities issues, MPAQ holders will not receive ownership or dividends.
Bates’s plan is to use the financing to fund projects that might otherwise have been financed by governments and big NGOs, including the World Bank. Those financing mechanisms are relatively slow.
Of the small villages and communities he works with, he says, “They don’t need to hire a lobbyist in Washington to try and get them a loan guarantee. They need power.”
Once the initial capital is deployed, Bates hopes that the sale of energy will provide adequate cash flow to fund more projects, allowing the company to snowball without the need to repay the initial $50 million.
That, of course, begs the question of why investors would put their money into the project if they won’t get ownership or dividends. The MPAQ token won’t be used in the sale of energy; that function will be accomplished with the NRG token. The “White Paper” just published by ImpactPPA is intended to answer the question.
A white paper plays the role of a prospectus in the wild west of initial coin offerings. As the name implies, a white paper has not been reviewed or approved by any regulatory body. Such a review would seem to violate the libertarian ethos of the crypto community.
Most of the white paper is devoted to the business plan.
Bates says the company has already lined up projects in Africa, Haiti and Latin America. In the developing world, reliable access to power can be life-changing.
Dan Bates, ImpactPPA
Bates shared an example from his work in Africa:
“My favorite project that we have is a guy who has the smallest unit that we make, a 750-watt device that runs a fan. That’s all it runs. But he lives in Nigeria and he had a chicken farm and his chickens were outdoors and they were being eaten by the wild animals. He moved them indoors but it’s so hot that they died of heat. So, now he takes one of these units and the fans blow air through it to keep the chickens cool. And, sure enough, he has a business now.”
Other projects he reports completing include a 150-kilowatt project in Haiti that serves a hospital and a school. “The project is completely expandable, so we will get to all 15,000 residents over time.” In Sudan, he’s looking at four 10 megawatt projects. Another 50-megawatt project may be on the table in Rwanda, he adds. “ImpactPPA has identified greater than 200 megawatts of projects and revenue opportunities in the near term.”
He adds that projects can be completed just 60 to 90 days after funding so the impact could be quick. It could also be significant. “Power begets education. Education, of course, begets a better way of life, better quality of life,” he says.
Today, about 1 billion people lack access to electricity. Billions more lack reliable access.
During the interview with Bates, which you can watch in the player at the top of the article, he shared his history with renewable energy:
When I started this project 10 years ago, it was designed to be U.S.-based; U.S. urban residential wind and solar is needed in the United States. But we pay 10 cents a kilowatt hour kilowatt hour average. And the lights always go on when you flip the switch
I met some guys in India. I traveled to India to see what the market would bear there and literally, Devin, in every meeting that I had on my first trip, the power would go off and the generator would kick back on a minute or two later and I thought to myself, I have a clean energy product. It’s scalable. It fits anywhere in the world. Why am I looking at the United States as my sole market? The globe is my market.
We started exploring opportunities in India. I was able to build a factory there to manufacture our products in Hyderabad. We’ve electrified over 150 or so off grid rural schools already. We’re selling the product to all sorts of people in the major cities as well as the rural areas.
Bates argues compellingly that “distributed energy will be the biggest driver for social change in the near future.”
Of course, to have the intended impact, customers need to be able to buy the power efficiently and affordably. Could the introduction of blockchain technology via the NRG token into the transaction prove to be a barrier?
Bates says the technology works now and is completely invisible to consumers. He argues that because people in the developing world are more accustomed to storing value on their phones and exchanging it for goods and services that they will painlessly adopt the new service. “They don’t need to know that it’s a blockchain device that’s running it.”
Vince Molinari, CEO of LiquidM Capital, LLC, (also a past client) who has spent decades on Wall Street and is now focused on cryptocurrencies, looked at the ImpactPPA website and provided some feedback.
First, he suggests some preliminary due diligence questions:
Is there expectation to speculate on the ICO itself as an alternative currency or an expectation of a rate of return from the underlying business or project?
The key to much of this is, is the token regulated and or approved in the jurisdiction of where it is being purchased and issued?
Is there alignment of the token holder and the issuer?
Are there investor protections for the token holders and fiduciary responsibility in place from the Issuer?
While it is beyond the scope of this article to answer those questions, they highlight some of the issues that those considering investments in ICOs should consider before investing.
Molinari, long an advocate for impact investing, says, “There is a massive opportunity for ICOs to be used to facilitate and aggregate capital to companies and projects globally which are doing levels of environmental, societal or cause-related good.” He points out that the crowdfunding approach that ICOs have been using may allow for issuers to connect effectively with affinity groups and diaspora communities that have a favorable predisposition to the offering.
Molinari is also a fan of the blockchain technology that underlies the ICO. “The ability to use smart contracts in the form of ICO is massively powerful and laudable. The ability to utilize the transparency of and immutable nature of blockchain to move capital to need, while reducing the ability for corruption and having the enabling outcome of disrupting and innovating energy generation and its associating financing is the epitome of democratization of access to capital and energy in one.”
Bates agrees. “I think the blockchain allows for this is be truly a disruptive technology if we do this right.”
Could ICOs provide a ready source of capital for more social enterprises? I can’t wait to find out.
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Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!
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