Berhan Business Plan

Business Plan
Berhan Energy PLC

Business Plan
June 2009
Berhan energy PLC, Business Plan 2010
Contents
1 Executive Summary----------------------------------------------------------------------------------1
2 The Company------------------------------------------------------------------------------------------ 3
2.1 Background-------------------------------------------------------------------------------------- 3
2.2 Ownership---------------------------------------------------------------------------------------4
2.3 Vision & Objectives of the Company------------------------------------------------------4
2.4 Key Success & Risk Factors-------------------------------------------------------------------5
2.4.1 Risk Factors-------------------------------------------------------------------------------- 6
3 Product Description---------------------------------------------------------------------------------- 7
3.1 The product-------------------------------------------------------------------------------------- 7
3.2 Product Design & Presentation-------------------------------------------------------------7
3.3 Benefits & weaknesses of the product----------------------------------------------------9
4 Market Study----------------------------------------------------------------------------------------- 11
4.1 General------------------------------------------------------------------------------------------ 11
4.2 The energy sector & Lighting in Ethiopia------------------------------------------------12
4.3 Solar powered Market----------------------------------------------------------------------- 14
4.3.1 Supply------------------------------------------------------------------------------------- 14
4.3.2 Demand for solar powered lamp---------------------------------------------------15
4.3.3 Demand Projection--------------------------------------------------------------------17
4.3.4 Target Market---------------------------------------------------------------------------19
4.3.5 Strategy----------------------------------------------------------------------------------- 19
4.3.6 Pricing------------------------------------------------------------------------------------19
4.3.7 Product Distribution-------------------------------------------------------------------22
4.3.8 Promotion-------------------------------------------------------------------------------23
5 Technical Study-------------------------------------------------------------------------------------- 24
5.1 Location----------------------------------------------------------------------------------------- 24
5.2 Product Technology--------------------------------------------------------------------------24
5.3 Manufacturing Process----------------------------------------------------------------------25
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5.3.1 Soldering--------------------------------------------------------------------------------- 25
5.3.2 Initial Assembling----------------------------------------------------------------------25
5.3.3 Electrical Wiring Connection--------------------------------------------------------25
5.3.4 Quality Control-------------------------------------------------------------------------26
5.3.5 Final Assembly--------------------------------------------------------------------------26
5.4 Materials--------------------------------------------------------------------------------------- 26
5.4.1 Super White LED-----------------------------------------------------------------------26
5.4.2 LED Holder------------------------------------------------------------------------------- 27
5.4.3 Reverse Diode--------------------------------------------------------------------------- 27
5.4.4 Rectifiers---------------------------------------------------------------------------------27
5.4.5 Transformer-----------------------------------------------------------------------------27
5.4.6 Lead Acid Battery----------------------------------------------------------------------27
5.4.7 Holder------------------------------------------------------------------------------------28
5.5 Equipments------------------------------------------------------------------------------------ 28
6 Organization & Management--------------------------------------------------------------------29
6.1 Organizational Structure--------------------------------------------------------------------29
6.2 Staffing------------------------------------------------------------------------------------------ 30
7 Financial Estimation & Projection---------------------------------------------------------------31
7.1 Investment Cost------------------------------------------------------------------------------- 31
7.2 Source of Finance----------------------------------------------------------------------------- 31
7.3 Assumptions Employed---------------------------------------------------------------------32
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List of Tables
Table 2-1share distribution of shareholding members---------------------------------------------4
Table 4-1: Number of Customers of EEPCO by Tariff Category----------------------------------13
Table 4-2 Import of portable lamps, parts etc------------------------------------------------------15
Table 4-3: Electrified houses----------------------------------------------------------------------------18
Table 4-4 Demand projection--------------------------------------------------------------------------- 18
Table 5-1 Equipments------------------------------------------------------------------------------------- 28
Table 6-1: Manpower Requirement------------------------------------------------------------------30
Table 7-1 Financing Structure--------------------------------------------------------------------------- 31
List of Figures
Figure 3-1 Solar powered lamp with plastic cover--------------------------------------------------8
Figure 3-2 Size features of solar powered lamp------------------------------------------------------8
Figure 4-1 electrified towns,----------------------------------------------------------------------------13
Figure 4-2 : Number of Customers--------------------------------------------------------------------14
Figure 5-1: Solar powered lamp system--------------------------------------------------------------24
Figure 6-1: Organizational Structure------------------------------------------------------------------29
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1 Executive Summary
Berhan Energy Private Limited Company was established as per the
commercial code of Ethiopia To engage in solar power equipment assembly
business; in solar products import and export business and to do other
business activities which are related directly or/and indirectly to the above
Solar energy related business with a paid up capital of Birr 1.4 million.
Berhan Energy in collaboration with Navcom Energy has been exploring

business opportunities in solar energy businesses. In this regard, the
companies developed portable lamps that can work with solar energy and
conventional grid electricity to charge embedded batteries.
In Ethiopia, the current electrification rate is only 22% and majority of the rural
people are living in darkness. In addition, power disruption has become a
serious problem in urban areas due to the hydro based power plants are
unable to generate adequate electricity for low level of water in dams.
The portable lamps are presented as alternative solutions both to rural and
urban dwellers for lilting their households.
The market assessment was conducted taking into account the proxy sector of
the energy sector. Accordingly, the demand for portable lamps was estimated
to be 4,685,181 in the year 2010 and 2,267,562 in the year 2015. As more
electrification is done in rural areas, the demand will decrease. However, it is
expected that the current trend of the power shade will most likely continue in
the future. The main reason for this is that the impact of the climate change
on rain and thereby low level of water in dams to run the turbines of the hydro
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power plants. Hence, it is imperative to harness solar energy resources for

lighting purpose.
Owing to the lucrative business of supplying alternative lighting products,

Berhan Energy is planning to establish a portable lamp manufacturing unit that
can work both with solar and conventional electricity at Kality.
Berhan Energy’s proposed manufacturing unit will be structured to have a

General Manager who is responsible to plan, organize coordinate and
supervise overall activities of the unit. In addition it will have functionally
related departments namely, technical, administration, Finance and marketing.
The total investment cost of the project is estimated to be Birr 9,572,447 of

this; Birr 1,159,038 is the cost of fixed investment items whiles the working
capital is estimated as Birr 8,413,409.
The project’s investment cost is planned to be covered from owner’s equity

and Bank loan. Out of the total planned investment of Birr 9,572,447, Owner’s
equity is expected to cover birr 2,871,734 and while the rest Birr 6,700,713 will
be covered from the bank loan. The financial forecast made indicates that the
project is financial profitable and liquid. The projected profit and loss
statement of the company forecasted for the period 2010 to 2019 shows that
net profit at initial will be Birr 5,805,368. The net profit at the end of
projection period, 2019, is projected to be Birr 6,995,084. The cumulative cash
balance is projected to grow throughout the projection period.
2
2 The Company
2.1 Background
Berhan Energy Private Limited Company was established as per the

commercial code of Ethiopia With the primary objective of exploiting the
alternative Energy of the country giving emphasis on renewable energy
resources such as Wind and Solar energy.
The project promoters (Navcom Energy) has taken a big project in Sasit, Mehal
Meda to develop wind turbines and at this moment, it is working in
conjunction with a Chinese company, Fuwausun, to introduce solar products in
Ethiopia. Currently, the company is in the final stage of a deal that would
enable it to bring solar panel manufacturing facility to the country. It is
believed that such establishment will supply solar energy equipments not only
to Ethiopia but also to neighboring countries.
Berhan energy is affiliated with Navcom Antillen NV, of Curacao, Nederlandse

Antillen ,which was established in February, 1993 G.C. Navcom Antillen NV.
holds 5 US patents and one European patent in the field. Navcom BV has
promoted this product in Holland after it received NLG 3,000,000.00
investments from Faber Electronica BV, a company in Netherlands.
In the US it has worked for the Department of Public works under a

contractual agreement of $600,000.00 to equip the department’s public works
vehicles.
3
In the coming months, Berhan Energy Plc has a plan to start a manufacturing
facility in Kaliti to produce portable solar lamps specially designed for the rural
areas of Ethiopia.
2.2 Ownership
Berhan Plc is established by three shareholders with a total paid-up capital of

birr 1,426,000. As stipulated in the company’s Memorandum of Association
the name, address & distribution of shares among share holding members is
presented here under: -
Table The Company-1share distribution of shareholding members
No. of shares Par-value per Total Value in Birr

No. Name share in Birr
1 Admasu Gebrie Bune 862 1000 862,000
2 Access capital Services S.C 564 1000 564,000
Total 1,426,000
2.3 Vision & Objectives of the Company
Berhan Plc has established and clearly defined its vision; that is becoming ‘a
high class renewable energy products manufacturer & supplier’. This will be
achieved through becoming a multifaceted company committed to providing
maximum customer satisfaction.
To achieve this vision, it has been resolved upon a set of strategies. Executing
these strategies translates directly in to the ability to serve the company’s
vision and objectives. The company’s visions are to be implemented through
local and external partnership.
The company has the following objectives;-
 To generate income (profit) to the shareholders;
 To supply quality renewable energy product and service to the
Ethiopian market.
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 To contribute to the socio-economic development of the nation at

large and to the energy sector in particular.
The company leverages the intrinsic values of the in-house capacity by
adopting and integrating it with new practices and efforts through
partnerships that complement the company’s core objectives thereby allowing
it to operate at maximum efficiency.
2.4 Key Success & Risk Factors
a) Success Factors at Macro Level

 Conducive environment
Political stability
Political stability is realized in the country since change of Government in 1991.
Security
Inevitably, investors require security for their investments. This has been given
close attention by Government that enhances trade and investment.
 GDP growth
The overall performance of the macro economy, as measured by real GDP
growth rate, was very encouraging during the year under review. According to
government statistics Ethiopian economy is projected to 10.1% for 2009/10
Marked the sixth consecutive year of double-digit GDP growth. A sustained
period of such strong growth is rare both in Ethiopia’s own economic history
and in the experience of other African countries. Indeed, this level of growth
is the highest registered among non-oil exporting countries in Africa, and only
a handful of other non-oil producing countries worldwide (China among them)
have sustained double-digit growth rates during this same time frame .
Although growth has been still driven by the agricultural sector, it has been
complemented by strong performance in Manufacturing and Construction as
well as service sectors.
 Overall national, physical and institutional infrastructure
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It is paramount that improved physical, as well as institutional infrastructures exist

for any real developmental investments and trade to take off. Reports assert that
main and feeder road constructions, electricity and telecommunication coverage is
positively growing. The on-going transformation program of public institutions to
improve service delivery is also a case in point indicative of the general trend
towards transforming institutions.
b) Sector Specific Factors
The success of the sector is dependent
 On the success and competitiveness of the Energy sector.
 Good renewable energy harnessing technology.
 Building reliable relationship with clients.
2.4.1 Risk Factors
 Competition that comes from companies importing similar products.

 The reliability of the existence of a good and long term market.
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3 Product Description
3.1 The product
The products are a solar powered and conventional grid electricity powered
portable lamps used to light rural and urban households. The solar powered
lamp has been designed as a low-cost alternative to a solar home system and
is intended to allow rural families to climb the first step on the "energy
ladder". It can also be used for urban dwellers as an emergency lamp during
power disruptions. It is cheap to maintain and harnesses a free and plentiful
source of energy as it is powered by sunshine free of any consumption fee.
The electricity powered lamps also uses conventional electricity to charge the
batteries.
Required service characteristics:
 The solar powered lamp should provide light for users up to five hours
each evening
 Customers should have access to affordable and readily available
spares
 The product has a minimum lifetime of five years
3.2 Product Design & Presentation
The product design is made to take the advantage of aesthetic value and
gloomy appearances that provides quality lighting for the end users. It may be
presented in different designs, size and color with different material
components to meet the unique needs of various market segments.
In general, before starting with the manufacture of the solar powered lamp in
mass, designers should choose the lantern's components so that its spare
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parts would be easily obtained. The design process should also be set out to
driven down cost factors while maintaining a robust and reliable product.
Plastic should have been used for the body and lamp rather than metal, wood
and glass as its cost is lower and the design should be kept simple to allow
injection molding.
Berhan has developed a solar powered lamp product with plastic cover design.
It is designed in such a way that it has attributes of aesthetics, strength,
portability, etc. The product is depicted in the figures bellow.
Figure Product Description-1 Solar powered lamp with plastic cover
Figure Product Description-2 Size features of solar powered lamp
Design characteristics:
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 The portable lamps provide a 360 degree spread of light

 The bulb enclosure allows maximum transmission of light with
minimum dispersion effects
 The lamps should be portable and weigh no more than 2.5 kg
 The lamps should be stable with a good base
Some of the extra features that potential customers expressed a need for:
 An indicator to show that the battery is charging and a unit device
installed for back-up purpose.
 A warning light to show that the lamp is about to switch- off when the
battery is low
 A power output socket to allow a small radio or mobile charger to be
connected to the unit
3.3 Benefits & weaknesses of the product
Our new product has advantages over existing traditional kerosene lanterns
and hurricane lamps in that:
 Durability: It has long life span as compared to the traditional kerosene
lantern and hurricane lamp. This is because the product holder and its
basic components are made of strong and quality materials from
reputable suppliers.
 Solar lanterns provide excellent accent of lighting to households and
combine style with functions that mitigates the problem of poor quality
and insufficient quantity of light by traditional lighting devices.
 It is easy and safe to use even around small children.
 It saves transportation cost, time and effort as its source of energy (sun
radiation) is found at the place where it is needed.
 Compared to other traditional sources of light, the utilization of solar
lanterns is cheap and has no hazardous consequences to the
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environment and human health. There are no fumes, smokes and

carbon dioxide from solar lanterns unlike kerosene lanterns. This
reduces the risky of respiratory damage from inhaling kerosene fumes,
eye disease, and lung cancer
 Architecture & aesthetics: Design of the holder is made to have
attributes of good architecture and aesthetics and
 It relieves the critical problem of kerosene in rural society that eats up
the substantial financial resources
On account of the above mentioned benefits, rural households using solar

lanterns as their only source of improved lighting might found its portability
and better illumination very useful for their indoor use as compared to
kerosene lamps. Urban populations might find it useful as an emergency light
device in the event of power disruption.
In spite of its advantage, there would be the under mentioned problems and
weaknesses for the said product in the entire market penetration process:
 Affordability problem: the product would be some what expensive to
rural communities unless and otherwise a financing scheme is devised.
Arrangement of continuous assistance from micro - credit and
financing institutions, NGOs and government is by far imperative to
reduce such burden.
 Our product may encounter slow pace of technology transfer due to
low level of public awareness about the new technology.
 Provision of credit facilities using commercial banks or micro-finance or
soft loans, if any, will be problem unless potential users are organized
into manageable and bankable groups.
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4 Market Study
4.1 General
The long-term goal of the five year development strategy, PASDEP (Plan for
Accelerated and Sustained Development to End Poverty), is for Ethiopia to
become a middle income country in 20-30 years. Since Ethiopia is not an oil
producing country, it should achieve this target by strong industrial
development.
A stable supply of enough energy is a must for industrialization. However, the
access to energy in Ethiopia is relatively low, as little as 22% (2008), while the
average access rate of Sub-Sahara Africa is 26%. The access to energy is
gradually improving by the efforts of the EEPCo (Ethiopian Electric Power
Corporation) and the GoE (Government of Ethiopia) constructing new power
plants and expanding the national grid, although it is still lower than the Sub-
Sahara African average. In addition, some say that this figure is not reflecting
the number of the population who are actually using electricity. The official
number, 22%, is calculated by the population living in the electrified area
(which means the area the national grid reaches) but many of the poor do not
have money to pay the cost for distribution lines from the national grid to their
houses and they are left without electricity. The real access rate of the
population that is actually using electricity is said to be much lower, about 6%.
In addition to the low access rate to electricity, another problem in the energy
sector is that Ethiopia is too dependent on hydro power, which causes
brownouts during the dry season/ drought.
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Majority of the Ethiopian population (85%) lives in rural areas where many
household do not get access to electricity. In urban area, power disruption
and rationing has become common especially in the hottest months of the dry
season, from February to June. However, using renewable energy resources
for lighting purpose is almost nonexistent in the country.
Berhan Energy Plc has developed a portable solar lamp that can light millions
of households, both in rural and urban Ethiopia.
4.2 The energy sector & Lighting in Ethiopia
The PASDEP sets its target in the energy sector to increase the access rate from
16% (2005/06) to 50% (2009/10) by the augmentation of energy generation
from 791MW to 2,218MW and the expansion of the grid to 13,054km. The
improvement of efficiency of the existing energy resources is another target.
The energy loss is to be reduced from the current level of 19.5 % to the
international average, 13.5%, during the same period of time. The total cost is
estimated to be 51 billion birr (equivalent to 5.3 billion US $) for five years
which is almost equal to the annual national budget. This is a very ambitious
plan and therefore, the government is aggressively mobilizing new resources
such as financing from the Chinese in addition to the conventional resources,
such as the World Bank (WB).
Presently the Ethiopian Electric Power Corporation maintains two different

power supply systems; namely, the Interconnected System (ICS), which is
mainly supplied from hydropower plants, and the Self-Contained System (SCS),
which consists of mini-hydropower plants and a number of isolated diesel
generating units that are widely spread over the country.
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Figure Market Study-3 electrified towns,

Source: EEPCO
With in regards to EEPCO’s customers, which indicates the connectivity level

again is very low even with the standard of least developing countries,
Ethiopian electric consumption per capita reach 41.28 Kwh /capita in the year
2008/9 and it has shown tremendous increase within the last five years that is
38% growth. The following table depicted the growth of electricity in Ethiopia.
According to the World Bank report and EEPCO, unlike with increase in
consumption per capita in Ethiopia, the consumption per capita is still below
the developing countries consumption, the following table depicted the
consumption per capital comparison between least developing countries
including Ethiopia.
13
As shown above the under develpoed energy sector of Ethiopia has needs to
be given a priority since energy is the a major input for the development of
once economy. In line with this, The Ethiopian government is implementing a
rural based development strategy with the expectation of rapid and equitable
development in the energy sector.
EEPCO is exerting effort to electrify more households, currently it’s customer

number has reached 1.8 million; showing 22% increase within the last 2 years.
4.3 Solar powered Market
4.3.1 Supply
Traditionally, majority of the rural houses are lit by kerosene fuel fired device
called KURAZ. As indicated above, the urban dwellers are the main users of
electricity. Besides, during power disruption, flash light, portable lamps that
are energized with dry cells are being used. Due to re-current power shades,
14
import and subsequent uses of such lamps has shown dramatic increase,
especially in urban areas.
Currently, portable lighting lamps are not manufactured in Ethiopia. The only
source is import from countries like China, Turkey, etc. The table bellow
indicates the import quantity.
Table Market Study-2 Import of portable lamps, parts etc

Year 2003 2004 2005 2006 2007
Customs Value Customs Customs Customs Customs
HS \ Indicators
(Birr) Value (Birr) Value (Birr) Value (Birr) Value (Birr)
85131090:--- PORTABLE LAMPS
WORKED BY DRY BATTERIES 5,442,082 2,849,155 2,834,209 11,542,033 7,540,906
,ACCUMULATORS , MAGNETOS
85139090:--- PARTS OF PORTABLE
ELECTRIC LAMPS OF 85.13(EXC 262,868 80,655 136,027 302,097 41,077
8513.1010)
90066100:DISCHARGE LAMP
228,181 50,486 31,692 137,489 776,439
(ELECTRONIC) FLASHLIGHT APPARATUS
94052000:Electric table, desk, bedside
1,784,487 2,075,153 2,648,758 2,986,841 3,406,487
or floor-standing lamps
94055010:--- LAMPS FOR USE WITH
5,051,149 6,843,808 6,054,925 8,512,218 5,177,733
KEROSENE OR OTHER OILS
Total 12,768,767 11,899,257 11,705,610 23,480,678 16,942,642
Source: Ethiopian Customs Authority
As shown in table 4-2 above, import of portable lamps has shown progressive
increase over the years indicating that its use especially in urban places is
being accustomed by dwellers.
4.3.2 Demand for solar powered lamp
The demand for solar powered lamp depends on interrelated factors such as,
affordability of the product and related running costs, electrification status and
power supply, population growth, urbanization rate, and etc.
1. Electrification Status: Electricity is essential both as an input into the

growth of the modern sector, which is needed to provide jobs and export
earnings, but also as an essential ingredient of the rural transformation agenda
15
to provide the basis for businesses and production in small to medium-sized

towns, and as an input into agriculture, for irrigation pumping, commercial
agricultural production, and processing. It is also an important part of the
social transformation, allowing children the light for studying, providing basic
cold-chain services at health centers, and the use of more modern techniques
and equipment at hospitals and secondary schools.
People in poverty-afflicted rural areas frequently suffer from the so-called
'vicious circle' of energy poverty. As they are energy poor, they have no energy
to operate machines, so they achieve low productivity. Low productivity results
in small surpluses and little cash, and hence less money to buy improved
energy services.
A major element of the program during the PASDEP (2005/6- 2009/10) period
will be the launch of a large scale rural electrification program, called the
Universal Electrification Access Program (UEAP). Over 6,000 rural towns and
villages are identified for electrification in all regions of the country. At the
moment, the access to electric power in rural areas is almost nonexistent.
Hence, the electrification rate is planned to reach 50% by 2010.
2. Population: The percentage share of Ethiopia's population out of total

population of Africa, SSA and the world stands at 8.1%, 9.7% and 1.1%,
respectively. The country also accounts for 3.8%, 5.4%, and 0.8% compared to
the total surface area of Africa, SSA and the world. The root cause of high rate
of population growth is the combination of high fertility and declining
mortality. Though fertility has fallen over time, it is still very high, at an
estimated 5.4 (6.0 in rural areas, 2.4 in urban areas) births per woman, which
is high by African and world standards. Population growth rate stands at
2.73%. Infant mortality rate stands at 73/1,000 as well.
16
Currently, the official population number is about 73 million (with rural to

urban population ratio of 86:14) and the annual growth rate is estimated to be
2.62%.
According to the 2004/05 WMS, the average household size for the country is
4.8, (4.9 in rural areas and 4.3 in urban). It is estimated that about 16% of
households are urban dwellers and 84% rural.
3. GDP: The overall performance of the macro economy, as measured by real GDP
growth rate, was very encouraging during the year 2006/7. More specifically, the
Ethiopian economy has witnessed an annual average real GDP growth rate of 11.8 %
during the last four years ending 2006/07. There has been a shift in the growth path
of the economy. Although growth has been still driven by the agricultural sector, it has
been complemented by strong performance in Manufacturing and Construction as
well as service sectors. Prudent fiscal management and stable macro economy (fiscal
deficit including grants narrowed from 4.6 % of GDP in 2005/06 to 3.6 % in 2006/07);
External Sector: Merchandize exports registered substantial growth. Accordingly,
during 2006/07 export earnings reached USD 1.2 billion (18.5% increase over its level
in 2005/06) and the Balance of Payments showed quite a significant surplus of USD
85.1 million.
Monetary & Financial Sector: The number of Commercial Bank branches
increased from 421(as at June 2006) to 487(as at June 2007); Thus, in 2006/07,
altogether 66 new commercial banks started operation; The proportion of non-

performing loans of commercial banks has declined to 10 % in 2006/07 from 14% in
2005/06; About 94% of the disbursement was extended to the private sector,
indicating the prominent role played by commercial banks in supporting private
investment and the Government's policy to encourage private sector development
through financing.
Agriculture: Total area cultivated under major crops during the Main (Meher) season
of 2006/7 increased to 10,576 thousand hectares (4 % increase over 2005/06). Total
production of major crops by private peasant holdings during the main season
increased to 149 million quintals (12% increase over 2005/06);
17
4.3.3 Demand Projection
The demand for solar powered lamp is projected on the basis f the following
assumptions:
1. The total population of the country is 73 million with average house
hold size of 4.8 and believed to grow at a rate of 2.73%.
2. The current electrification rate is 22% and assumed to grow at a rate of
10% for the next 5 years.
3. it is also assumed that 50% of the un electrified houses demand the
product.
4. Demand for solar powered lamp is taken to equal 50% of un electrified
houses plus 5% for demand in electrified houses, eg for use during
power interruptions.
Table Market Study-3: Electrified houses

No of un
No of Electrification Un electrified
year population electrified
households rate rural houses
houses
2008 73,000,000 15,208,333 22% 11,862,500 9,964,500
2009 74,992,900 15,623,521 32% 10,623,994 8,924,155
2010 77,040,206 16,050,043 42% 9,309,025 7,819,581
2011 79,143,404 16,488,209 52% 7,914,340 6,648,046
2012 81,304,019 16,938,337 62% 6,436,568 5,406,717
2013 83,523,618 17,400,754 72% 4,872,211 4,092,657
2014 85,803,813 17,875,794 72% 5,005,222 4,204,387
2015 88,146,257 18,363,804 72% 5,141,865 4,319,167
2016 90,552,650 18,865,135 72% 5,282,238 4,437,080
Table Market Study-4 Demand projection

Demand for
year solar powered
lamps
2008 5,231,363
2009 4,685,181
2010 4,105,280
2011 3,490,224
2012 2,838,527
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2013 2,148,645
2014 2,207,303
2015 2,267,562
2016 2,329,467
As shown in the table above, there is a huge demand for solar powered lamp
in Ethiopia and is worth undertaking it.
4.3.4 Target Market
The target markets for solar powered lamp are both urban and rural dwellers.
In urban areas shops, restaurants and others are also niche markets.
The product market can also be easily expanded to east African countries such
as Rwanda, Uganda, Sudan and others which have electricity constraint if the
product is made with competitive quality and export standard.
4.3.5 Strategy
The company will sell solar powered lamp product to individuals and their
representatives. The company will follow a strategy that focuses on customers.
It is a paramount issue for our company to stay in touch with customers to be
able to satisfy their needs and anticipate their wants. The company
acknowledges that each customer is a potential wealth of innovative ideas and
the most product idea will stem from listening to customers' complaints,
suggestions and questions. Marketing approach also needs to be highly
completed and integrated. This meant the compny have to supply product
components whenever needed and offer any necessary maintenance and
installation services by well trained technicians to make the product
sustainable and reputable.
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4.3.6 Pricing
Price should be another issue that needed to be tackled by our marketing

effort particularly in rural areas. The consumers' willingness to pay for a
product is drastically influenced by the products' price as customers are highly
price sensitive. In extending solar powered systems to low income areas where
local consumers are poor and the demand of electricity for productive
purposes is absent; low levels of demand, low revenues, and high initial costs
are obstacle to our investment. Studies indicate that the key constraint to
energy supply for rural communities is access to the initial capital needed to
buy the equipment to harness the resource. This forced rural communities to
choose energy options that are cheap on a day-to-day basis, but offer poor
quality light and are expensive over the longer term.
So to be successful in our marketing effort, the company have to keep the

initial costs of manufacturing solar powered lamp as minimum as possible.
This is because the capital cost of setting up the power plant and maintaining.
For many low and middle income rural households, the purchase price of our
solar powered lamp may be highly unaffordable.
The price of the solar powered lamp then might be one of the greatest
barriers to ownership among the majority of our rural customers especially
given the virtual absence of credit. Presumably, majority of the households in
rural area may be very much excited to pay cash for the solar powered lamp
when credit purchases are available or a financing scheme is considered.
However, it is essential to be cautious and a down payment of 70-80% is often
required as creditworthiness of customers is very poor if credit purchases are
given to customers. This financing scheme by itself requires local organizations
to collect the credit facility in three installments of three months.
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To reduce our processing and installation costs and product price, we should
work with well known committed NGOs, microfinance institutions and
governmental agencies; who will arrange for the funding of the project and
financing of our customers. These institutions might give personal loans to our
rural customers for the purchase of solar powered lamp since our project has
rural community development motive. Thus, we need to establish strong and
networked relationship and try hard to get commercial banks and
microfinance institutions to give loans to villagers buying our products. But
banks and microfinance institutions prefer to give loans to products that are
familiar with. Therefore, it is up to the company trying to make the banks and
microfinance institutions aware of the positive cost- benefit ratios of the solar
powered lamp project so that they will be convinced to grant loans.
Further more, the pricing of our new product should carefully be done in a
way that it takes into account the following factors:
 Since the product is being new to the market, it is pre-assumed that in
the society particularly in rural sector which is very much resistance to
changes should be compensated with cheap price to deep penetrate the
market up to the grass root level.
 To reduce production costs which will result higher product price, full
economies of scale and size at our company should be employed.
 At the initial periods of our market, profits should be kept as minimum as
possible so as to exploit the market significantly.
 The compnay’s management should strive in reducing the cost of
transportation; warehousing and packaging as well as make a due effort
to produce solar powered lamp using local raw materials with adequate
quality and standard.
 Being our project is a developmental focus, it is essential to lobby the
government to avoid any tariff and value added tax on our project inputs
21
and outputs except withholding tax in our entire production and

marketing process.
 Along with other partner institutions and organizations, it is crucial to
extend advance loans to customers. The loans can then be paid back to
our company in easy installments. If our company consistently follows
solar lantern credit financing, then its market size is supposed to
explode rapidly.
Generally, the price of the product should be kept as minimum and

competitive as possible that takes into account the cost of the product and
economic status of users and their affordability.
Hence, to startup, the company will selling price is indicated bellow.
Selling Price in Birr ( with out VAT) Birr/unit
solar powered portable lamp 500

Electric Powered portable Lamp 375
4.3.7 Product Distribution
It is indispensable to use different means for the distribution of solar powered

lamp. The company will deliver solar powered lamp to rural customers through
their representatives mainly through farmers' cooperatives. Establishing a
strong partnership with farmers' cooperatives and developmental focused
governmental agencies at Kebele and Woreda levels and retail shops at rural
towns is also another critical channel that needs to be considered as they
interact directly with farmers.
The company will also distribute and sale the products through dealers, who
also create awareness and educate the end-users on the products'
22
functionality. We must establish a strong bond with them by providing

progressive commissions to them as incentive especially in rural areas
Additionally, volume discounts may be introduced so as to line as many
wholesalers and retailers as possible. At the same time, it is imperative to
provide intensive and continuous training to selected distribution agents
throughout our distribution outreaches.
It is also very imperative to establish so many outlets in different areas of the
country. This is because the product needs a strong well- organized and patient
outreach initiatives as the market is highly lucrative and non-exploited to date
throughout the nation. The company should be equipped with sound
distributor and dealer network in different parts of Ethiopia.
In an attempt to take our products to customers of urban population, the
company needs to open a network of solar powered lamp shops and branches
at different major cities and towns. These shops will provide access and
visibility to solar products (solar powered lamp) thereby improving sales. The
company shall also beef- up our dealership network.
4.3.8 Promotion
As the product is new for the market, the company shall use extensive
promotional campaign so as to create product awareness in the rural and
urban society. The product should be extensively promoted as a viable
alternative to kerosene lanterns and lights in rural environments and as
emergency lights in urban environments during power disruptions.
The company may use different promotional approaches among which

personal selling, product shows or demonstrations and radio will be the best
of them for rural customers. But in urban areas, the company might also use
television, news paper, brochures, pamphlets, trade fairs and exhibitions.
23
Product demonstrations will be made at pilot areas of rural market

intervention in all outreaches. It is also essential to spread awareness about
solar powered lamps and their applications through seminars, workshops and
public gatherings (mostly at religious and marketing places).
5 Technical Study
5.1 Location
The location for the production site is in Akaki-Kality Subcity, kality town, some
15 km from the capital Addis Ababa. The location provides proximity to
market center and regional distribution center which is Merkato. In terms, of
material supply, the location is best for both local and imported items.
Berhan Energy has acquired a big warehouse in kality with reasonable rent.
5.2 Product Technology
The solar powered lamp receives its power (12volt) from either a solar panel
or grid electricty. The 12 volt input passes through the reverse diode to the
battery from which the LED lamp is powered. The solar panel will be fitted at
the top of the lamp, by which the solar energy is used to charge batteries.
Small Solar Panel

(Fitted at the top of the lamp)
Charge Controller
2x6 volt Rechargeable

Btteries 24
Super White Leds

Electricity
Figure Technical Study-4: Solar powered lamp system
As indicated in the above figure, the lamp receives power either from home
electric outlet or solar power. Electric power from home electric outlet (220
volt) is allowed to pass through a transformer to step down the voltage to 6
volt AC. The transformer out put of 6 volt alternating current is converted in to
direct current (DC) by the help of a rectifier charging the battery that powers
the LED lamp during power interruptions. When powered from solar panel,
the system follows that of solar powered lamp.
5.3 Manufacturing Process
The solar/electric powered lamp as a final product is assembled manually

along the line starting from soldering stage to final assembling stage. In each
of the assembling stages, unique tasks are performed by assigned individuals
until the final product is ready for delivery. Bellow is description of the
manufacturing process in brief.
5.3.1 Soldering
It is the stage by which workshop technicians are assigned to solder the super
white LED ends on the imported LED board in order to create the LED lamp.
48 LED will be soldered per single lamp.
25
5.3.2 Initial Assembling
Basic components of the solar powered lamp like lead acid battery, LED lamp
and reverse diode (for electric source lamp) are assembled vertically by
workshop technicians.
5.3.3 Electrical Wiring Connection
The LED wire passing through the switch is connected with the lead acid
battery and the lead acid battery is again connected to the charging inputs at
this stage.
5.3.4 Quality Control
This is the stage by which the technician checks-up the flow of current and
other technical specifications to make sure that the semi-assembled product
comply with the required standard.
5.3.5 Final Assembly
This is the last stage of the assembling process by which the internal
components of the solar powered lamp are inserted in the plastic holder.
5.4 Materials
Both solar and electric source powered lamp share same basic components
though some parts are peculiar. The solar powered lamp contains super white
LED, LED board, reverse diode, lead acid battery and holder, where as electric
source powered lamp contains a transformer in addition to these components
and rectifiers instead of the reverse diode.
5.4.1 Super White LED
A LED is a type of solid state lighting that utilizes light-emitting diodes (LEDs) as
a source of illumination rather than electrical filaments or gas. LEDs can
26
consume less electricity than conventional lighting and can produce less of the
parasitic by-product heat.
It was possible to create white light by combining the light of separate LEDs
(red, green, and blue), or by creating white LEDs themselves by means of
doping. Low power consumption, high luminosity and longer life time
properties of LED made it perfect for the product.
5.4.2 LED Holder
A LED holder is made of thin plastic material and is used to hold LEDs. The
board has narrow holes in which LEDs are placed. About 48 LEDs are placed
on a single LED holder.
5.4.3 Reverse Diode
Diode is an electronic device that allows the passage of current in only one
direction. The diodes most commonly used in electronic circuits today are
semiconductor diodes. The reverse diode in the solar powered lamp allows
passage of current to the battery and protects back ward flow of current to the
solar panel.
5.4.4 Rectifiers
A rectifier is an electronic device that converts alternating current to direct

current. The electric sourced lamp has rectifier fitted inside that converts
home electric outlet to be supplied in the form of DC voltage and current.
5.4.5 Transformer
The first element in an internal DC power supply is a transformer, which steps

up or steps down the input AC voltage to a level suitable for the operation of
the product. A secondary function of the transformer is to provide electrical
ground insulation of the device from the power line to reduce potential shock
27
hazards. The transformer is then followed by a rectifier. The transformer in the

electric source powered lamp steps down 220 volt to 6 volt, 2 ampere out put.
5.4.6 Lead Acid Battery
Lead acid battery is a type of rechargeable battery that can be restored to full
charge by the application of electrical energy. Lead acid batteries are
susceptible to damage due to reverse charging. The product is made with lead
acid battery installed in it in order to store electrical energy by charging either
from solar or home electric outlet to be used for lighting.
5.4.7 Holder
The holder holds all the main parts of the product. It is made from plastic at a
local company.
5.5 Equipments
The manufacturing unit will have Benches, necessary tools, etc. The table
bellow summarizes type of equipments and their costs.
Table Technical Study-5 Equipments
S.No. Fixed Asset Category Cost
1 Injection tools (molds) 284,038

2 Equipments( work benches+ Tools) 300,000
3 Vehicles 500,000
4 Office Equipment and Furniture 75,000
Total 1,159,038
28
6 Organization & Management
6.1 Organizational Structure
Berhan Energy Plc will have functional type of organizational structure which
eases communications between departments for efficient work flow. The
proposed organizational structure is presented bellow.
General
Manager
Secretary
Janitor
Technical Administration &

Marketing
Supervisor Finance
Electrical wiring
LED soldering Pre- assembler Quality controller Administration
connector
Finance
29
Figure Organization & Management-5: Organizational Structure
As shown in fig 6-1, the General Manager heads the Technical, administrative
& Finance and marketing. The General Manger is Engineer Admasu Gebre who
has deep knowledge in the field. His managerial ability coupled with his
technical knowledge will make Berhan successful and profitable. Other
department heads will also be professionals that support the general manger.
6.2 Staffing
The personnel requirement of the proposed manufacturing unit at the start of

its operation and expected salary payments to be effected is summarized in
the following table.
Table Organization & Management-6: Manpower Requirement
Annual
S.N Position Number Monthly salary
Salary
1 Manager 1 3,000 36,000
Technical
2 1 2,000 24,000
supervisor
3 Secretary 1 700 8,400
4 LED solder 15 500 90,000
Pre-
5 15 500 90,000
assembler
Electrical
6 wiring 15 500 90,000
connector
Quality
7 3 600 21,600
controller
8 Administrator 1 1500 18,000
Finance 2 1200 28,800
9 Janitor 1 250 3,000
8 Sales person 2 700 16,800
Total 57 426,600
The total manpower requirement of the proposed manufacturing unit is 57.

The annual salary payment is estimated to be Birr 426,600.
30
7 Financial Estimation & Projection
7.1 Investment Cost
The total investment cost of the project is estimated to be Birr 9,572,447 of

this; Birr 1,159,038 is the cost of fixed investment items whiles the working
capital is estimated as Birr 8,413,409.
7.2 Source of Finance
The project’s investment cost will be covered from owner’s equity and Bank
loan. Out of the total planned investment of Birr 9,572,447, Owner’s equity is
expected to cover birr 2,871,734 and while the rest Birr 6,700,713 will be
covered from the bank loan. The detail is summarized in the table below
Table Financial Estimation & Projection-7 Financing Structure
Descripiton Total Cost Bank Loan Equity

Injection tools (molds) 284,038 198,826 85,211
Equipments( work
300,000 210,000 90,000
benches+Tools)
Vehicles 500,000 350,000 150,000
Office Equipment and Furniture 75,000 52,500 22,500
Working Capital 8,413,409 5,889,387 2,524,023
Total 9,572,447 6,700,713 2,871,734
31
Debt- Equity Ratio 100% 70% 30%
7.3 Assumptions Employed
1 Capacity and Capacity Utilization

Capacity
1.1 Annual capacity 100,000 Units
2 Product Mix
solar powered portable lamp 80%
Electric Powered portable Lamp 20%
Capacity Utilization
Year Capacity Utilization
2010 80%
2011 90%
2012 and there after 100%
3 Sales
Selling Price in Birr ( with out VAT) Birr/unit

solar powered portable lamp 500
Electric Powered portable Lamp 375
Sales forecast as per capacity. The selling price of the product is assumed to
increase by 5% from year two onwards.
Types of Products
Annual Sales Forecast (Birr)
solar powered portable lamp 31,200,000.00
32
Electric Powered potable Lamp 5,600,000.00

Total Sales 36,800,000.00
Annual sales By capacity

Year utilization
2010 29,440,000
2011 33,120,000
2012 and there after 36,800,000
4 Operating Costs
4.1 Parts & Materials Cost

1 Major parts
parts and materials used to manufacture both solar and electric
powered lamps are presented bellow
Solar powered Lamp parts & Materials
a) Imported Materials
No Parts/materilas FOB(RMB) FOB (USD)
1 Led & Assembly Unit 43 6.30
2 Charging Controller 5 0.73
3 Solar Panel(6V/4W) 100 14.64
4 Battery(6V/2Ahx2) 38 5.56
Total 186 27.23
Freight Cost (3%FOB) 0.82
Insurance (1.5%FOB) 0.41
Port Handling & Inland
Transportation(2%FOB) 0.54
Bank Charges(1%FOB) 0.27
Tax(15% Fob
cost+Frieght+Insurance) 4.27
Total Cost(USD) 33.54
Total Cost(Birr) 368.99
Local Availlable Material

Item Cost (birr)
33
plastic holder 20.00
Total Cost (imported + local), Birr 388.99
Electric Powered Lamp parts & Materials

a)
Imported
No Parts/materials Cost(RMB) Cost(USD)
1 Led & Assembly Unit 43 6.30
2 Battery(6V/2Ahx2) 38 5.56
Total 81 11.86
Freight Cost (3%FOB) 0.36
Insurance (1.5%FOB) 0.18
Port Handling & Inland
Transportation(2%FOB) 0.24
Bank Charges(1%FOB) 0.12
Tax(15% Fob
cost+Frieght+Insurance) 1.86
Total Cost(USD) 14.61
Total Cost(Birr) 160.69
b) Locally available parts & Materials

No Parts/materials Cost(Birr)
3 plastic holder 20
4 Transformers 40
5 Rectifiers 10
Total 70
Total Cost(imported + Local) 230.69
2 other Materials & Parts
34
Item Cost ( Birr/unit)

Reel solder 1
socket 1
Summary of parts & Raw Materials

costs
Total cost at
Product Total Cost Per unit of Lamp full capacity
solar powered portable lamp 390.99 31,279,149.62
Electric Powered portable Lamp 232.69 4,653,778.39
Total 35,932,928.01
Total Raw Material & Parts Cost at capacity

Utilization
Annual Raw material
cost By capacity
Year utilization
2010 28,746,342
2011 32,339,635
2012 and there after 35,932,928
4.2 Wages and salaries:- Birr 426,600 and increase by 5% from the
second year of projection onwards
4.3 Utilities
Annual cost of electricity is estimated to be birr 50,000
Annual cost of water is estimated to be Birr 5,000
Total cost of utilities becomes Birr 55,000 and assumed to increase by 3% from
the second year of projection onwards
4.4 Repair and Maintenance
From past trend, annual cost of repair and maintenance is estimated to be Birr 20,000 a
increase by 3% from
35
the second year of projection .
4.5 Fuel & Lubricants

Total Fuel Unit
Total
S.No Description KM,Hr/Year Lt / Km,Hr Requirements Cost per
Cost
( Liters) liter
1 Pick up single cabin 87,360 0.17 14,560 8.23 119,829
Sub-Total 119,829
Oil and Lubricant (10% of fuel cost) 11,983
Total Cost 131,812
4.6 Packing materials

No of cartoon required 100,000
Unit Price 2
Total Annual cost 200,000
Project years Capacity Utilization Total Packing M. cost
2010 80% 160,000
2011 90% 180,000
2012 100% 200,000
4.7 Selling & Administration expenses

The administrative expense include salaries, postage & telecommunications, advertising, etc.
to be 5% of the revenue
4.8 Rent Expense
Annual Rent expense for manufacturing (Birr 20,000 /month) & show room ( Birr
5,000/month) is Birr 25,000.
4.90 Depreciation and
36
Amortization
Annual Depreciation
S.No Description cost (Birr) Depreciation Rate
Expense
1 Injection tools (molds) 284,038 33% 94,679
Equipments( work
2 300,000 10% 30,000
benches+Tools)
3 Vehicles 500,000 20% 100,000
Office Equipment and
4 75,000 20% 15,000
Furniture
Total 239,679
Exchange Rate
1 USD 11 Birr
1 USD 6.8299 RMB
Interest Rate: 10%, Loan repayment years: 5
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Business Plan

Berhan Energy PLC

Berhan Energy in collaboration with Navcom Energy has been exploring

power plants. Hence, it is imperative to harness solar energy resources for

Owing to the lucrative business of supplying alternative lighting products,

Berhan Energy’s proposed manufacturing unit will be structured to have a

The total investment cost of the project is estimated to be Birr 9,572,447 of

The project’s investment cost is planned to be covered from owner’s equity

Berhan Energy Private Limited Company was established as per the

Berhan energy is affiliated with Navcom Antillen NV, of Curacao, Nederlandse

In the US it has worked for the Department of Public works under a

Berhan Plc is established by three shareholders with a total paid-up capital of

Table The Company-1share distribution of shareholding members

No. of shares Par-value per Total Value in Birr

2.3 Vision & Objectives of the Company

 To contribute to the socio-economic development of the nation at

2.4 Key Success & Risk Factors

a) Success Factors at Macro Level

It is paramount that improved physical, as well as institutional infrastructures exist

2.4.1 Risk Factors

 Competition that comes from companies importing similar products.

3.1 The product

Required service characteristics:

3.2 Product Design & Presentation

Figure Product Description-1 Solar powered lamp with plastic cover

Figure Product Description-2 Size features of solar powered lamp

 The portable lamps provide a 360 degree spread of light

3.3 Benefits & weaknesses of the product

environment and human health. There are no fumes, smokes and

On account of the above mentioned benefits, rural households using solar

4.2 The energy sector & Lighting in Ethiopia

Presently the Ethiopian Electric Power Corporation maintains two different

Figure Market Study-3 electrified towns,

With in regards to EEPCO’s customers, which indicates the connectivity level

EEPCO is exerting effort to electrify more households, currently it’s customer

4.3 Solar powered Market

Table Market Study-2 Import of portable lamps, parts etc

4.3.2 Demand for solar powered lamp

1. Electrification Status: Electricity is essential both as an input into the

to provide the basis for businesses and production in small to medium-sized

2. Population: The percentage share of Ethiopia's population out of total

Currently, the official population number is about 73 million (with rural to

altogether 66 new commercial banks started operation; The proportion of non-

4.3.3 Demand Projection

Table Market Study-3: Electrified houses

Table Market Study-4 Demand projection

4.3.4 Target Market

Price should be another issue that needed to be tackled by our marketing

So to be successful in our marketing effort, the company have to keep the

and outputs except withholding tax in our entire production and

Generally, the price of the product should be kept as minimum and

Hence, to startup, the company will selling price is indicated bellow.

Selling Price in Birr ( with out VAT) Birr/unit

solar powered portable lamp 500

4.3.7 Product Distribution

It is indispensable to use different means for the distribution of solar powered

functionality. We must establish a strong bond with them by providing

The company may use different promotional approaches among which

Product demonstrations will be made at pilot areas of rural market

5.2 Product Technology

Small Solar Panel

2x6 volt Rechargeable

Super White Leds

Figure Technical Study-4: Solar powered lamp system