Financing problems of photovoltaic panels in cameroon

Research Topic

Financing problems of photovoltaic

panels in Cameroon

Research Paper

Geneva Business School

Degree of Bachelor in Finance

Submitted by:

TCHABA NOUKEU Rommel
Geneva, Switzerland

Approved on the application of

Dr. Brahim GACEM
And

Dr Victor YERIS

March 2013

Summary

Illustrations 3

Abbreviations 4

Forward 1

1 Introduction 1

1.1 Context 1

1.2 The Process of the research 2

1.3 Problematic & Hypothesis 2

1.4 Methodologies 3

1.4.1 Structure 3

1.4.2 Approach and perspectives 3

2 Presentation and aspects of photovoltaic technology in Cameroon 4

2.1 Overview of the sector 4

2.2 Definition of photovoltaic panel 5

2.3 Concepts and method of use of a photovoltaic panels 5

2.3.1 The Concepts of photovoltaic panels 5

2.3.2 Method of use of a photovoltaic panels 6

2.4 Regulatory and institutional aspects 6

2.5 Environmental aspects 7

2.6 Economical and Commercial aspects 8

3 Barriers to financing of photovoltaic panels in Cameroon 12

3.1 Institutional Barriers 12

3.1.1 Question of corruption 12

3.1.2 Question of Competitiveness 13

3.2 Economical and Financial barriers 13

3.2.1 Question of currency 13

4 Analysis of an investment project of photovoltaic panels in Cameroon 16

4.1 Operational hypothesis 16

4.2 Recovery Hypothesis 16

4.3 Result 16

5 Conclusion of the model 19

5.1 General Conclusion: 19

Bibliography & References 19

Illustrations

Figure 1: Map of Cameroon 19

Figure 2 : Solar Panel Diagram 19

Figure 3: solar cell 20

Figure 4: A solar system in a household (with a television) 20

Figure 5: Evolution of the demand and supply of electrical energy 21

Figure 6: Price ranges per kilowatt of the consumption of a solar equipment 21

Figure 7: Installation's cost of a solar systemn in a household in Cameroon 22

Figure 8 : internal rate of return and NPV 22

Abbreviations:

A: Ampere

AC: Alternating current

AES-SONEL: American electronic services -National electric company of Cameroon

AH: ampere by hour

ALUCAM: Aluminium of Cameroun

CEMAC: Central Africa CFA Franc

CPI: Index perception of corruption

DC: Direct current

FCFA: Franc CFA

IRR: Internal rate of return

MVe: Total Market Value of Debt

MVd: Total market Value of shareholder's equity

MW: Megawatts

MWH: Megawatts by hours

NPV: Net present value

KM: Kilometer

KWH: Kilowatt by hour

Rd: Cost of debt in the country

Re: Cost of Equity

T: Corporate taxe rate

OECD: Organisation for Economic Co-operation and Development

VCC: Positive supply voltage

W: Watt

WACC: weighted average cost of capital

Forward

Native from Africa more precisely from Cameroon. The African continent is the most poorly electrified continent. I grew up in an environment where electricity was a luxury or the guarantee of having electricity on a daily basis was uncertain.

Once I integrated the university and studied subjects such as Banking investment, Business Administration, Finance and Development, sociology, the knowledge acquired in these fields of study will serve as tools that will enable me realise Financial and Economic development of electric power in my country.

From my point of view, Cameroon¹ has the potentials to provide significant solar electricity for the entire population. In South Africa, large solar electricity projects have emerged, but in Cameroon solar electricity projects are not as developed those in South Africa. To make my point of view clearer in the field of finance and development I asked myself these questions:

? Can solar energy be a solution to the lack of electricity in Cameroon?

? What are the key solutions to resolve this problem?

? Is it possible to integrate large-scale solar projects in Cameroon to enable people to have electricity?

After attending international seminars on solar energy for Africa, experts said solar energy is clean and inexpensive for Africa. However, I spoke with a Cameroonian expert who explained that Cameroon has natural potentials for unlimited integration of this type of project.

However, the solutions were varied, but then they all depended on the involvement of the state. To this end, the issue of financial aid drew my attention, firstly I would like to identify the obstacles to financing solar photovoltaic panels, my presence in the international seminars on solar energy for Africa allowed me to have a general idea on the importance of this to Africa and on how to reduce electricity deficit in Africa and precisely Cameroon.

1 www.thecommonwealth.org (figure 1)

In addition, my knowledge on Development Finance and banking investment will allow me to establish a plan on how to help raise funding for the purchase price per household. My research paper represents the beginning of my implementation to development finance project and its substitutes that I would like to develop in the future.

1 Introduction

1.1 Context

Without electrical power available and accessible in quantity and quality, no economic development is possible. Considering this reality as a priority, the Government of Cameroon seems to make electricity a priority for action. Unfortunately, these days have witnessed considerable energy deficit, where public policy power lack clarity and consistency. This is why we should consider the issue of solar energy as a solution to energy deficit in Cameroon.

Regarding solar energy, Cameroon has abundant and available potentials especially in its northern part. Several arguments appear therefore in favour of photovoltaic energy: It is clean and requires no external supply of fuel. Moreover, the photovoltaic generator that captures light rays is rather simple and does not virtually require maintenance. Therefore, the required cost of operations and maintenance are relatively low. For example, in Equatorial Guinea , a photovoltaic generator produces an amazing energy equivalent to 25 times faster than the usual operation. And the estimated price rate is 10 Euro per watt of the initial investment. Knowing that a solar panel has a lifespan exceeding 50 years. This simple example shows that solar energy could overcome the lack of hydropower and contribute enormously to the socio-economic development of the country.

The first point of this research is to understand the question of the high cost and lack of electricity in Cameroon. Considering the case of Cameroon, the population suffers the effects of liberalization and market economy.

To this end, AES-Sonel in Cameroon (the Cameroon Electricity Company), which was privatized by an American company, has a monopoly on the supply and distribution of electricity. But it is also at the service of its customers, the largest of its customers is ALUCAM, ALUCAM is one of the greatest electricity consumer in Cameroon and a potential AES sonel customer (Group Anglo-Australian RIO TINTO) it consumes about 45% - 50% of electricity production in Cameroon.²With a consumption like this, it is clear that ALUCAM's demands comes before that of the

2 Armelopost.wordpress.com «ELECTRICITE EN AFRIQUE : L'AUTO CRISE»

population of the country. The agreement signed between ALUCAM and AES-sonel in terms of price per kilowatts is relatively low to that offered to the population per household. The population faces a lot of electricity cuts and suspensions, sometimes for days. At first sight, the energy system is not satisfied, at least there should be renewable energy such as solar energy to overcome this problem for the welfare of the population, during the process of my research my interest would be based on suggesting financing solutions necessary for the long-term resolution of this problem .