Broad Peak Energy Solutions

A social business plan submission by:

Jonathan Torn & Ahmed Malik

The Fletcher School, Tufts University

Jonathan.Torn@tufts.edu 917 543 3040

Ahmed.Malik@tufts.edu 703 309 1615

1

BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad BroadBroad

TABLE OF CONTENTS

EXECUTIVE SUMMARY-----------------------------------------------------------------------------------------------------3

1. Background-------------------------------------------------------------------------------------------------------------5

1.1 The context------------------------------------------------------------------------------------------------------------5

1.2 Opportunity-----------------------------------------------------------------------------------------------------------5

2. Our product: “Suraj” System------------------------------------------------------------------------------------------7

2.1 Value add for customers-------------------------------------------------------------------------------------------7

2.2. Market appeal of product-----------------------------------------------------------------------------------------7

3. Market---------------------------------------------------------------------------------------------------------------------10

3.1 Pakistan Solar industry analysis---------------------------------------------------------------------------------11

3.2 UPS market analysis-----------------------------------------------------------------------------------------------11

3.3 Target market-------------------------------------------------------------------------------------------------------11

3.4 Competition----------------------------------------------------------------------------------------------------------12

4. Market entry and growth strategy---------------------------------------------------------------------------------13

4.1 Branding, Marketing and promotion--------------------------------------------------------------------------13

4.2 Sales Strategy--------------------------------------------------------------------------------------------------------14

5. Operations----------------------------------------------------------------------------------------------------------------14

5.1 Distribution strategy-----------------------------------------------------------------------------------------------15

5.2 Operations strategy------------------------------------------------------------------------------------------------15

6. Team-----------------------------------------------------------------------------------------------------------------------16

6.1 Management Team------------------------------------------------------------------------------------------------16

6.2 Mentors---------------------------------------------------------------------------------------------------------------16

7. Financial Summary-----------------------------------------------------------------------------------------------------17

7.1 Startup costs---------------------------------------------------------------------------------------------------------17

7.2 Projections-----------------------------------------------------------------------------------------------------------18

7.3 Capital Budgeting---------------------------------------------------------------------------------------------------19

7.4 Capital Budgeting9

2

EXECUTIVE SUMMARY

The issue of power shortages is widely prevalent throughout South Asia and particularly in Pakistan. In order to have power when grid electricity is not available, many households use Uninterruptible Power Systems (UPS). UPS are devices that store a small amount of power from the grid for use during electricity outages. They have the perverse effects of adding costs to the consumer and increasing the burden on an overtaxed grid. Our value proposition is to leverage the vast numbers of installed UPS in residences and small business, and to retrofit them with solar Photovoltaic(PV) panels to increase backup output and decrease demand on the grid.

By being the first to introduce the widespread use of small scale solar power in Pakistan, Broad Peak will also raise awareness of the social and environmental benefits of renewable energy.

Our innovation is an interface called the Suraj system which enables us to retrofit existing UPS with solar PV panels. The Suraj system offers users a number of advantages:

1.) Provides users with up to 2 more hours of additional backup output than a grid dependent UPS2.) Extends the lifetime of installed UPS systems by switching it off automatically when the battery is discharged to a point where further use would damage it3.) Offers savings on electricity bills by generating electricity with solar PV panels

Broad Peak currently has a fully functional beta prototype1 in Pakistan, which is providing conclusive data quantifying savings from using solar panels in conjunction with existing UPS. The data provides a base case for savings that can be generated by any household or small business.

With a $533 price point, Broad Peak’s product, the Suraj 200,(a UPS retrofit with a 200W solar array), is one-third the price of the least expensive solar system currently on the market. This competitive price point is achieved by leveraging already installed UPS inverters & batteries. In a commercial setting, it has an attractive payback period of less than 2 years (4 years for residential) versus 10 years + for other independent retail solar installations. We believe this model will provide a strong incentive to cost-conscious consumers in emerging markets like Pakistan to adopt residential solar power for back-up needs.

By investing heavily in marketing, Broad Peak Energy aims to educate an urban demographic that is not usually targeted about the social and environmental benefits of solar power. It also seeks to promote the wider use of this sustainable technology to an audience that will drive much of the world’s future energy demand. Broad Peak estimates the number of currently installed UPS in the city of Lahore, which has a population of 10 million2, at 400,000 and growing. Given the wide use of UPS in Pakistan and across South Asia, this project is highly scalable.

As a socially driven business, Broad Peak’s Suraj systems also have compelling environmental

benefits. They will directly replace use of grid electricity, two-thirds of which in Pakistan is generated with costly and polluting fossil fuels. If widely installed, it could relieve the grid during peak demand hours thus decreasing power outages and the need to install new centralized power generation plants.

1 A tutorial of the prototype can be seen at: http://www.youtube.com/watch?v=spOHSzUTcyE&feature=youtu.be2 http://www.intersafeexpo.com/exhibiting/lahore.html

3

By extending the useful life of lead-acid batteries in the UPS, it could reduce the environmental harm resulting from their disposal.

Broad Peak’s entry strategy is to first penetrate Lahore, as it is familiar with the market and it has an established partnership with Eco-gen, a local energy service company. Lahore suffers from regular and increasing power outages and UPS use is extremely common. Lahore also has other attractive features for this venture. It has very regular solar exposure and very few days of precipitation per year. Lahore’s small number of high rises maximizes the number of homes that can have optimal solar exposure for any installed domestic PV system by minimizing interference from other buildings.

4

1. Background

1.1 The context

Pakistan has been suffering from a severe and worsening electricity crisis for the past decade. Insufficient installed capacity combined with the issue of circular debt due to lack of financial resources has been the main driver of the energy shortage in Pakistan. According to the Economist, power shortages lead to a loss of 3-4% 3 of GDP growth in 2011. For residential and commercial consumers alike, this means up to 16 hours of power outages in a day. Widespread frustration is felt throughout Pakistani society which often boils over into violent riots that have caused many casualties4.

The structural causes of the power shortage are not being addressed, and the government’s long term propositions have not progressed at all due to a dysfunctional political system.5 This leaves electricity consumers no option but to independently arrange for distributed sources of backup power.

1.2 Opportunity

In order to have power when grid electricity is not available, many households use Uninterruptible Power Systems (UPS). UPS are inverters which combined with a lead-acid battery store a small amount of power from the grid for use during power outages (The entire system, UPS & battery is referred to as UPS as shorthand). These range from 500 Watts to 1500 Watts inverters and correspondingly 12Volt/80 Ampere to 12Volt/150 Ampere batteries as per customer affordability and backup needs. UPS are mostly used to power a combination of lights and fans to cover basic needs in the absence of grid electricity. There are an estimated 400,000 UPS currently installed in Lahore alone, which is Broad Peak’ initial target market.6 Broad Peak views this situation as an opportunity to introduce environmentally sustainable alternatives to improve the quality of life of those affected by power cuts. Our value proposition is to leverage the vast numbers of installed UPS in residences and small business, and to retrofit them with solar PV panels to increase backup output.

3 http://www.economist.com/node/215314954 http://dawn.com/2012/03/27/power-riots-in-punjab-leave-worker-dead/5 http://www.economist.com/node/215314956 From field interviews with UPS distributors in Pakistan, January, 2012.

5

The diagram below depicts how a UPS works:

Simplified Stand alone UPS diagram Photograph of a UPS in a residence

Benefits of UPS

UPS provide certain benefits which explain their widespread adoption:- They are much less expensive than generators with an average price of $400. Also, generators

rely on diesel fuel, which makes operating them significantly more expensive than charging UPS with grid electricity.

- They provide up to 2 hours of backup power when fully charged- They switch on instantly & automatically when power is cut

Deficiencies of UPS

UPS have the following limitations:- The intermittent nature of power outages sometimes does not allow for the battery to charge

completely, which decreases the amount of backup time- Even in instances where the battery is fully charged, if the power outage lasts more than two

consecutive hours, the UPS will not provide backup power beyond that time. - In cases where the battery is close to being fully discharged, the system does not shut off

automatically, which damages the battery and reduces its lifespan. - Grid electricity is subject to frequent voltage fluctuations7. This damages and sometimes

completely destroys the UPS inverter and/or the battery

UPS are inherently inefficient due to conversion losses from charging and discharging of the battery from the grid. They have the perverse effects of drawing power from an overtaxed grid, adding costs to the consumer and increasing the burden on the overall system. This problem is amplified when UPS get

7 http://tribune.com.pk/story/188904/how-to-stay-neutral-when-all-the-appliances-in-your-house-are-blowing-up/

6

AC/DC charge

Grid A/C IN

A/C power OUT DC/AC

discharge

UPS

Battery

charged during peak hours, when electricity is expensive to generate and in short supply. This is recognized as serious issue in South Asia. In 2010, the Government of Nepal passed legislation banning the import of UPS in an attempt to reduce the burden on the grid .8

2. Broad Peak’s product: Suraj System

The Suraj System (Suraj means ‘sun’ in Urdu, the official language of Pakistan), is an innovative interface that enables solar panels to be retrofitted to existing UPS. Suraj 200 refers to a system retrofitted with 200W solar panels. The photograph below shows our prototype which is currently being used to gather data in Lahore. The diagram on the left depicts how the Suraj system is retrofitted to an existing UPS. (See UPS diagram above)

Suraj: Simplified Diagram Suraj beta prototype with 200W panels

2.1 Value add for customersThe Suraj system provides several benefits to UPS users:

Provides an instant, predictable and increased electrical backup output A traditional UPS with a fully charged 12V/100a/h battery will typically run out of power within 1-2 hours. However, during the daytime, the same system retrofitted with 200W solar panels (Suraj 200 system), will be continuously charged at the same rate as it would from the grid, even during a power outage. It can offer 1-2 hours of extra usable time per day (one full battery charge). It guarantees at least a minimal amount of backup electricity throughout the day, enough to run 3 light bulbs and 1 fan.

The Suraj system is completely modular and can be expanded by adding solar panels incrementally. Suraj can also switch back to grid charging, should the solar panels not generate electricity at a given point in time ensuring that the system will outperform any solely grid-dependent UPS.

8 http://www.ekantipur.com/2010/02/11/top-story/import-of-power-inverters-banned/308150.html

7

interface

Grid A/C IN

A/C power OUT DC/AC

discharge

UPS

Battery

DC/DC charge

Reduces system maintenance costs & electricity expendituresBroad Peak’s primary research indicates that frequent fluctuations in voltage damage and sometimes destroy the UPS inverter and/or batteries. By retrofitting UPS with solar panels, Suraj will provide a more stable and dependable source of backup electricity. Residential grid electricity is currently priced at $0.13/kWh and has been increasing at a the very rapid rate of 20% per year9. Suraj will help reduce these costs by using solar panels to charge the UPS battery.

Protects the battery and appliances from damageIn a standalone UPS, if the power outage lasts more than the UPS’ capacity to provide backup, then the battery is excessively discharged unless all appliances powered by it are manually switched off. If appliances are not switched off, it damages the battery, reduces its lifetime, and increases the risk of damaging appliances, especially fans. Fahd Rafiq, director of sales for Royal Fans, one of the largest fan companies in Pakistan has confirmed the damaging effect of the low voltage supplied by over-drained UPS batteries on fans.10

The Suraj system includes a switch that automatically turns the battery off if it does not have enough power to supply safely to appliances. It also features a charge controller between the panel and battery to avoid overcharging the battery. Both help increase the lifespan of the battery as well as appliances connected to it.

2.2. Market appeal of product

Broad Peak’s product proposition offers benefits to the customers in an affordable manner. The factors below enhance the financial attractiveness of the Suraj system to potential customers

2.2.1 Lowest price ticketBy leveraging the existing inverters and batteries within already installed UPS, Broad Peak offers by far the lowest price ticket retail solar installations in Pakistan. No such offering exists in the market currently. Independent solar systems available in the market require installing an entire system comprising of an inverter, battery, charge controller, solar panels and wiring be purchased collectively.By leveraging already installed UPS, Broad Peak is able to offer a product priced at one-third the price of the nearest equivalent independent solar system.

2.2.2 Quick paybackThe dire situation with several hours of power cuts every day translates into heavy costs for individuals and businesses alike. The opportunity cost of not having electricity far surpasses the cost of grid electricity price per kWh of $0.13. It also encompasses the inability to work, sleep or study due to the lack of electricity. In commercial settings, where this cost is easily quantifiable, Broad Peak has taken it

9 http://tribune.com.pk/story/352876/power-tariffs-to-rise-by-as-much-as-21/10 From in person interview Dec 30th, 2011

8

into account in its payback calculations

Residential users’ payback:

The below calculation presents a unique opportunity where, without any subsidies, Broad Peak is able to achieve a short 4 year payback as opposed to much higher industry benchmarks. This is enabled by leveraging the UPS already installed in households and also monetizing inherent costs brought about by an inefficient and unreliable grid system.

Payback for residential usersCost of Suraj 200 system (US$) 533Loss to household over 4 year period without use of solar power/Suraj 200 (in $US)Cost of battery replacement 132Cost of UPS inverter replacement 150Discounted cost of grid electricity for 4 years 237Total cost - UPS without solar power 519Net gain after 4 years -14

For residential users, this table shows the calculation for roughly a four year payback on the investment of $533 in a Suraj 200 system. Details of some cost items are discussed below:

- Cost of battery replacementOur surveys indicate that 44% of those surveyed replaced their batteries due to damages from fluctuations in the past year. We have taken a conservative estimate of 2 batteries ($150 each) that might be replaced in 4 years.

- Cost of UPS inverter replacement60% of those surveyed replaced their UPS inverters in the past one year due to damages from power fluctuations. We have taken the conservative number of 1 inverter ($250) replacement in 4 years.

- Discounted cost of grid electricity for 4 yearsCurrent cost of electricity is $0.13 per kWh, which is estimated to increase by 20% per year based on historical evidence11. The figure ($237) represents the discounted value of 1kWh of electricity per day for 4 years provided by a 200W solar panel array.

11 http://tribune.com.pk/story/352876/power-tariffs-to-rise-by-as-much-as-21/

9

Commercial Users payback:

The Suraj system becomes even more financially attractive in commercial applications. Small businesses can use extra electricity to capture otherwise lost economic opportunities. We have demonstrated that a payback of 2 years can be achieved by deployment of the Suraj 200 system.

To illustrate this, Broad Peak performed a case study on a small barber shop in the city of Lahore. The below table shows the savings brought about by the installation of a Suraj 200 system to the existing UPS at the barbershop.

ItemBefore Suraj 200

After Suraj 200

Explanation

Number of working hours lost per week due to power outages

10.5 hrs 7.5 hrs Suraj 200 would provide conservatively at least 3 extra working hours of electricity per week, lowering the hours lost to 7.5 per week.

Weekly opportunity cost of power outages $21.0 $15.0 The most conservative per working hour profit of the

barber shop is $2 per hour

Annual opportunity cost of power outages $1,092.0 $780.0 Losses due to power outages reduced by $312 per year

With an initial investment of $533 in the Suraj 200 system, even a small business like a barbershop can attain a quick payback of 1.7 years. If economic benefits of lower maintenance & replacement costs of UPS inverters and batteries & electricity savings are factored in, the simple payback period can be further reduced. However, the above calculation is kept intentionally conservative and simple enough for small business owners to understand.

10

The high marginal utility of added The high opportunity cost of power outages: inability to

3. Market

Broad Peak views South Asia as the long term market for Suraj systems. However, in the short run, the company will focus on establishing a brand name in Pakistan. Broad Peak’s entry point into Pakistan will be through Lahore, a city of over 10 million people12. Lahore suffers from regular and increasing power outages. 12 hours of outages per day are commonplace and up to 16 or 20 hours occur regularly especially during summer months. Lahore is host to about 400,000 UPS. Lahore’s small number of high rises maximizes the number of homes that can have optimal solar exposure for any installed domestic PV system by minimizing interference from other buildings. Lahore’s climate makes it ideally suited for solar power generation. It averages over 8 hours of sunlight per day and only 49 days with precipitation per year.13 Furthermore, Broad Peak’s co-founder, Ahmed Malik, hails from Lahore and has an extensive social and professional network that can be leveraged for Broak Peak’s success.

3.1 Pakistan Solar industry analysis

The solar Industry is in its early stages in Pakistan and is estimated to be approximately $35-40 million in 2011. The vast majority of sales have been for small-scale utility size projects and rural off-grid electrification. Demand is driven mostly by non-governmental organization (NGOs) and government sponsored projects that focus on utility scale projects. In order to boost solar power use and encourage private sector investment, the government of Pakistan has offered incentives such as eliminating duties on solar imports. 14

Some companies, such as Akhter Solar, assemble solar cells into panels but no cells are currently manufactured in Pakistan. The Industry is highly fragmented. Many companies operate a solar division as part of their larger electronics or engineering business interests.15 Retail sales are almost non-existent in urban areas. Companies contacted all reported under 5 systems sold in Pakistan’s principal urban areas - Karachi, Lahore and Islamabad- all of which were to institutional clients such as universities.

3.2 UPS market analysis

Since the Suraj System is based on retrofitting existing UPS, the size of the market is determined by the number of UPS currently installed. Currently, installed UPS retail at around $400. While exact figures are not currently available, our primary research, a combination of surveys and interviews with UPS distributors, indicates that conservatively, 20% of households have a UPS installed. With an average household size of 7, Lahore has at least currently 400,000 installed UPS. Lahore concentrates a large market of UPS users with more disposable income than the Pakistani average.

3.3 Target market

12 http://www.intersafeexpo.com/exhibiting/lahore.html13 http://www.climatetemp.info/pakistan/lahore-punjab.html14 From interview with various private sector players: Akhter, DACC and the CEO of Alternate Energy Development Board (AEDB), Arif Allaudin15 http://www.rural-electrification.com/cms/upload/pdf/Lis-solar-companies-Pakistan040407.pdf

11

The initial target market for Suraj systems is the city of Lahore. In later stages, Broad peak will expand to cities. While working in Lahore for the first 4 years of operations, Broad peak will differentiate target market segments as below:

3.3.1 Innovators

The initial primary target market is middle and upper middle class, urban, retail residential UPS users. Broad Peak believes this market segment concentrates about 20% of total UPS in Lahore or approximately 80,000 UPS. We will particularly focus on young professionals (25-40), in annual income brackets from $14,000- $25,000 who value electricity services and have ample disposable income to pay for a product that improves their UPS performance. This market segment is also more likely to be aware of environmental issues and be sensitive to this aspect of the product. Over 65% of those surveyed indicated that if such a product had environmental benefits it would encourage their purchase. Broad Peak also believes this market segment to be key influencers who can bring awareness to other market segments such as older demographics and/or small business owners.

3.3.2 First movers

After market penetration through innovators, first movers would be next in line to adapt to Suraj. This market segment is categorized by individuals and small businesses that may not necessarily place a premium on environmental benefits, but value the extra productivity that arises through the use of Suraj. This consists of young professionals and small businesses alike. The short payback periods shown earlier in exhibit 2.2.2 for residential and commercial users will incentivize adoption of Suraj systems in this demographic.

3.3.3 Early majority

This market segment represents both categories of UPS users identified above, as well as mid-career professionals and more businesses that will be reached through offering credit sales in partnerships with local banks. Broad Peak is in talks with local banks in Pakistan which have expressed interested in offering consumer financing for Suraj systems. Once market penetration has reached higher levels through innovators and first movers, the volumes would provide meaningful business opportunities to banks and increase market access for Suraj systems.

3.4 Competition

Broad Peak has no direct competitors in Pakistan. Other solar companies only offer entire solar systems when it comes to retail solar. The smallest, least expensive system on the market is a 500 Watt system for $1500. Payback times for these systems are over 10 years. These systems have a higher capacity,

12

that is, 500 Watts as compared to our lowest capacity of 200 Watts. However even if a 200 Watt whole system is compared to Broad Peak’s 200 Watt system, the price of the former would be at twice that of Broad Peak’s Suraj 200 system.

There are no international players in this market. The three main local companies that operate in Lahore and deal in solar energy are Izhar, IJSS and Solar System Pakistan. For two of these companies, solar is not their main concern, rather an outgrowth of an existing business. Through these businesses they have an existing distribution network and a solid technical knowledge of electronics.

These companies could become potential competitors if they chose to emulate Broad Peak’s model of UPS retrofits and smaller sizes of solar arrays. However, they do not have any strong brand recognition in the retail market nor are they particularly large established players.

4. Market entry and growth strategy

Broad peak currently does not face any competition, and will have the first mover advantage in the retail solar energy market. However, its entry would encourage incumbent players to replicate Broad Peak’s Suraj system. In the absence of strong proprietary and intellectual property laws in Pakistan, the company intends to use its first mover advantage to establish a strong brand name as the leading solar retail solutions provider through Suraj systems. Given the vastness of the market, Broad Peak believes it can operate profitably even if other players enter the market.

4.1 Branding, Marketing and promotion

Broad Peak aims to build a brand name known for reliability, cost-effectiveness and quality service. As a first mover, the business will be able to establish this image in the market, capitalize on rising grid energy costs and decreasing solar PV costs in order to become the premier retail solar panel distributors in Pakistan. During the first year of operations Broad Peak will spend over US$21,000 on advertising, promotion and events to build brand awareness and educate potential customers. This ambitious advertising campaign will be maintained throughout the first years of operation so as to establish strong brand awareness using:

4.1.1 Local Environmental NGOs

Broad Peak will launch a campaign to create awareness about Suraj by partnering with local NGOs such as the Pakistan Sustainability Network. By promoting the Suraj systems through reputable NGOs, Broad Peak will strengthen the product’s environmental credentials. This strategy capitalizes on emerging environmentally conscious consumer trends among higher income brackets in Pakistan (ie the “innovators” from 3.3.1)

4.1.2 Visual media

Broad Peak has very good contacts with respected television channels in Pakistan, especially with Express News. During the initial marketing campaign, Broad Peak can get one of these channels to

13

report on the Suraj system and its benefits. This report will be free of cost, and part of news features covering initiatives to alleviate the energy crisis, which is one of the most prominent issues in Pakistan.

4.1.3 Radio

We will advertise on traditional media such as popular radio channels such as CityFM89 and FM91 which are both very popular amongst the youth as well as the educated middle class of Pakistan.

4.1.4 Social media

While the television and radio marketing campaigns gain traction, Broad Peak will be working with Bramerz, one of Pakistan’s leading digital media campaign companies, to launch marketing campaign on Facebook, Twitter and other avenues in this space.

4.2 Sales Strategy

Sales agents will perform outreach, answer questions, take orders and perform after sales customer service through dedicated phone lines and also perform field visits. They must be knowledgeable about the product, be able to answer questions and educate consumers on how the product works and its benefits.

4.2.1 Sales Force

Broad Peak will hire degree holders with sales experience -preferably in the electronics markets- and proven communication skills. In order to attract the best talent, compensation will be set at a 20% premium over market rates. In addition to attractive salaries, salespeople will be offered a commission of $11 per unit sold. To contextualize this, the minimum wage in Pakistan for unskilled labor is $80 per month.16 Each of our sales agents will be paid $330 per month for the first year, which when combined with incremental revenues from commissions, leads to a lucrative opportunity.

4.2.2 Training

In order to maintain strict quality standards, Broad Peak’s founders will train sales agents. In addition, a manual will be made which will be used as a training tool and kept for reference during inquiries.

4.2.3 Sustainability Ambassador Program

Broad Peak will introduce the Sustainability Ambassador Program (SAP), which will allow existing customers to enroll as sales agents of Suraj systems. If an existing customer becomes a “Sustainability Ambassador”, by referring a new customer they will also be eligible for an $11 cash reward or can pass

16http://www.dailytimes.com.pk/default.asp?page=2010%5C05%5C02%5Cstory_2-5-2010_pg1_1

14

savings on to the new customer. This will allow Broad Peak to reach a wider audience, improve sales and spread awareness of Suraj’s environmental benefits.

5. Operations

Broad Peak’s operational strategy is to maintain a lean organization with low overhead costs. For this reason, Broad Peak has strategically partnered with Eco-Gen, a Lahore-based engineering firm which is well-known in energy market space. Broad Peak’s co-founder, Ahmed Malik, has strong family ties to the company, which enabled a trustworthy partnership formation. Eco-Gen has been subcontracted for distribution and deployment of Suraj systems, while Broad Peak will focus on marketing, brand-creation and raising required funding during the formative years of the business.

5.1 Distribution strategy

The venture’s distribution strategy is based upon its partnership with Eco-Gen, which has an established presence in Lahore and the surrounding area as well as experience in selling and servicing retail energy products such as UPS and diesel generators. Broad Peak will leverage Eco-Gen’s existing infrastructure, technical expertise and distribution network.

Broad Peak will act as an interface between solar panel manufacturers, Eco-Gen and the end customer. Broad Peak will be in charge of importing solar panels, sales and customer service. Technicians from Eco-Gen will deliver, install and perform any required maintenance on the systems. This agreement ensures that Broad Peak keeps its fixed overhead costs low.

5.2 Operations strategy

Initially, Broad Peak will rent warehouse space from Eco-gen to store imported solar panels. This arrangement will also ensure Broad Peak ease of installation and coordination with Eco-gen for day to day operations.

Broad Peak will contract Eco-Gen’s technicians to deliver, install and perform maintenance on the systems. In exchange, Broad Peak will pay Eco-Gen a fixed fee of $33 per installation. This ensures Eco-gen a fixed stream of risk free income and Broad Peak a distribution mechanism that requires little up-front capital expenditures.

5.2.1 Ongoing operations

When a sale is made, Broad Peak employees will input customer information in a data-base and pass the order and delivery schedule to an Eco-gen technician. Delivery and installation will be performed within

15

24hrs of order. Cash or current check payment will be collected upon delivery by the Eco-Gen Technician, and later handed over to Broad Peak.

5.2.2 Inventory management

New panels will be ordered based on pace of sales. It takes an estimated 3 months for panels to arrive once an order is placed. Broad Peak will place an order when it estimates having 4 months worth of panels in inventory. This will ensure it has stock if the delivery is off schedule while avoiding excessive inventory accumulation. Other parts can be purchased on credit from the local market with few delays.

5.2.3 Sourcing local equipment

Initially, Broad Peak will purchase as much equipment through the local market as possible, ensuring attractive prices with electronics suppliers. This strategy seeks to minimize large inventories that tie up a lot of the enterprise’s cash. This is especially important given that Broad Peak will have a significant amount of cash tied up in solar panel inventories.

6. Team

Broad Peak has a highly qualified management team, and is fortunate to have a number of high level distinguished advisors and active supporters.

6.1 Management Team

Ahmed Malik is currently pursuing a Master of International Business at the Fletcher School, Tufts University focusing on Strategic Management and International Environment & Resource Policy. He hails from Pakistan, where he has worked at Citibank, as well as in the textile industry. He brings to Broad Peak a strong finance background as well as practical field knowledge of the business environment of Pakistan, in addition to an effective professional network. At Broad Peak, Ahmed will focus on running local operations including sales, supply chain and marketing.

Jonathan Torn is pursuing a Master of Law & Diplomacy at The Fletcher School, Tufts University. He brings over three years of field experience in the renewable energy sector in South Asia. In Bangladesh, he worked with Grameen Shakti and as an energy consultant to Gemcon, one the country’s largest conglomerates. He brings practical and technical experience of successful implementation of renewable energy projects.At Broad Peak, Jonathan will focus on the technical aspects of the venture as well as sourcing panels, raising funds and international expansion.

6.2 Mentors

Antje Danielson, Co-founder of Zipcar and Director of the Tufts Institute of Environment.

16

Arif Allauddin, Director of the Alternate Energy Development Board has endorsed this venture on record.

Bhaskar Chakravorti, Executive Director of Business in the Global context, Ex-McKinsey partner, recognized authority on strategy and innovation.

Qamar-uz-Zaman Chaudhry, Advisor to the Government of Pakistan on Environmental affairs and Country Lead on Climate Change Policy.

Wardah Inam, PHD candidate MIT, electrical engineering advisor.

William Moomaw is a Fletcher professor of Environment Policy, co-recipient of Nobel Peace Prize for work with ICCP and established authority in the renewable energy field.

7. Financial Summary

7.1 Startup costs

The first fiscal year (FY), 2012-2013, will be spent in setting up the business so there will be no sales.

Broad Peak Energy Solutions

Income Statement for period ending April 30, 2013, with explanations of itemsRevenues 0 Cost of Goods Sold 0 No Sales, so no cost of goods soldGross Margin 0 Startup Expenses Field testing 2,778 Installation of 5 systems for pilot testing

System monitoring 833 Meters/ regular checkups of the previously installed 5 pilot systems

Company incorporation 500 Cost of company incorporation

Office Equipment 1,680 Cost of two personal computers, 2 cell phones and 2 landline connections

Website design & set up 2,900 Hire website developer and pay over three months until website is up and running

Travel to Pakistan 3,400 $1700 per trip per principal to go to Pakistan after graduation

Total startup expenses 12,091 Operating Expenses Local transportation 1,556 Transportation

17

Salaries 3,111 SalariesRent & Facilities 2,000 Rent & FacilitiesTotal Operating Expenses 6,667 Net Income (18,758)

18

7.2 Projections

Below are the financial projections from FY 2014-2017.Broad Peak Energy Solutions

Projected Income Statements (in US$) for the period ending April 30,:US$ rate in Pak Rs. 95 100 105 110 2014 2015 2016 2017Number of units sold 840 4,100 10,800 29,300Revenues 444,644 2,152,500 5,670,000 15,395,818Cost of Goods Sold 298,801 1,486,250 3,918,857 10,734,455Gross Margin 145,843 666,250 1,751,143 4,661,364Gross profit ratio 33% 31% 31% 30%Total Operating expenses 88,051 294,813 267,571 589,361EBIT 57,792 129,250 129,250 129,250Interest expense 3,081 1,823 1,736 1,657 Earnings before Taxes 54,711 369,615 1,009,336 2,697,596Taxes 5,471 36,962 100,934 269,760Net Income 49,240 332,654 908,402 2,427,836Net profit ratio 11% 15% 16% 16%

The general assumptions for revenues and operating expenses in the above pro-formas are stated below:

Number of units sold Estimates based on the assumption that higher sales will be attained by establishing a strong brand name

Salaries & Administrative

Salaries and compensation is set to be 6.5% of Sales

Local Transportation Taken to be 1% of salesInternational Travel Trips for sourcing of solar panelsRent & Facilities Monthly rental of office space/warehouse + utilities to increase by 25% each yearAdvertising & promotional

Taken to be 5% of annual sales

In FY 2014, net profit margin will be lower than the next few years. This is on the back of a higher percentage of revenues being spent on advertising and promotion for Broad Peak’s brand creation and recognition.

19

7.3 Capital Budgeting

The business requires relatively low startup capital, that too in the first two years. Total equity ($249,000) is the sum of Owners’ Equity and non-dilutive equity from grants and awards. Here, the expectation is to raise the maximum amount through grants, awards and other non-dilutive funding in order build a self-sustaining business model. The total amount of grants & awards equal $220,000, which signifies that this funding would be sufficient to launch a financially self-sustainable business without the need for successive rounds of funding. The primary uses of capital will be to launch an extensive marketing campaign to create a strong brand, and to secure two containers of solar panels (600 200W systems) in order to start the sales cycle. The business environment in Pakistan is cash oriented, which works to Broad Peak’s advantage as all sales will be cash on delivery, whereas we will get 30-45 days credit from our suppliers in China.

7.4 ROI & Payback

The investment has a high ROI initially, as supplier credit and cash sales allow for fast growth, and then ROI decreases on the back of higher equity because earnings are ploughed back into the company.

The payback period for the equity investment of $249,000 is around 3 years, as can be seen from the table below.

Broad Peak Payback Calculation (US$)Year 1 2 3 4 5 Net Income (18,758) 27,635 332,654 908,402 2,427,836 PV at 12% discount (16,748) 22,031 236,776 577,306 1,377,620 Cumulative PV (16,748) 5,283 242,059 819,365 2,196,985

20

Capital Uses ( US$) 2012 2013

Startup costs 19,000 -

Ordering 600 systems 0 144,000

Cash for monthly expenses 0 112,000

Total capital 19,000 256,000

Capital Sources (US$) 2012 2013

Owners Equity 9,000 20,000

Grants & Awards 10,000 210,000

Debt 0 26,000

Total capital 19,000 256,000