Repayment risk

The solar partner ability to repay the loan with interest depends on a wide range of factors. In this section we put extra emphasis on the factors specific for companies in the off-grid solar sector. 

The ability to generate revenues

The key factor of a successful and sustainable company is its ability to generate revenues. Successful solar partners maintain a competitive offer to their clients, they have a well functioning sales organisation and trained technicians to install systems.

The ability to collect revenues

  • Infrastructure
    Most customers of our solar partners live in rural areas and their possibility to pay is affected by the financial infrastructure in the region. As an example, we see that companies with presence in countries with a higher uptake of mobile payments often have a reduced risk of delayed payments.  
  • Customer income stream
    The solar customer’s ability to pay for the solar system depends on their income stream, e.g. revenues from farming, and the price development on other goods and services they purchase, for example food or school fees. A sudden change in cost or income could cause the customer to delay or end their payments to the solar partner.
  • Lack of reliable credit scoring
    Solar partners rely on their clients to pay on a regular basis. A proper credit scoring is therefore essential for the solar partner to maintain a high portfolio quality. In most markets there is a lack of a well developed system for credit information. This means that the solar partners have to rely on internal processes to pick the right clients to avoid delays and defaults.

Early stage companies

The off-grid solar industry is still in an early stage, which makes the majority of our solar partners early stage companies. An efficient organisation that can sustain growth is a crucial success factor. Early stage companies could be more affected by internal challenges than more established organisations, like being more dependent on a few key employees.

Long business cycles

A lot of our solar partner’s customers pay for the solar systems incrementally, meaning that the products won’t be fully paid off for a long period of time. During this time the solar partner still has to fund their operations (e.g. pay salaries) and buy new systems for continued expansion. Some of our solar partners are not yet profitable and are relying on capital injections to sustain growth. 

External risks

  • Currency fluctuations
    Our solar partners are generally paid in local currency by their customers, but often need to pay manufacturers and creditors in Dollars or Euros. This means that currency fluctuations will have an impact on the solar partner’s financial performance and could eventually impact their ability to repay their loans. Depending on the solar partner’s geographical presence and business model, the size of the currency exposure varies.
  • Regulatory changes
    Some regulatory changes can have a negative impact on the sector and the active companies. The risk of regulatory changes impacting the business decreases if the solar partner has big geographical reach. 

Currency exposure

If you invest in an asset (loan notes) in a currency that is different to that of your home currency, your investment will be subject to currency fluctuations. 

An example of how you are exposed to currency fluctuations by investing through Trine:

If you are investing 100 Euros to an exchange rate of EUR/SEK 10.00, the initial investment value would be 1000 SEK. Excluding interest paid for simplicity, once the loan is successfully repaid, the total value of your principal repayments is still 100 Euros. But at that time, the value of the Swedish Krona against the Euro might have changed, so the value in Swedish Krona could be higher or lower than the initial value of 1000 SEK. If the Swedish krona has depreciated and stands at 11.00 against the EUR, the value of your principal repayments in Swedish krona would then be 1100 SEK. In the opposite direction, if the SEK has appreciated to 9.00 against the EUR, the value of your principal investment would be 900 SEK. While you can calculate the value of your Trine Portfolio in your home currency at any time, the actual profit/loss (if any) from currency fluctuations occurs once your funds are withdrawn and converted back to your home currency. 

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