Pre-Feasibility Study

(Household Solar Systems Distribution Business)

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel:(92 42)111 111 456, Fax:(92 42) 36304926-7
helpdesk@smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE

REGIONAL OFFICE REGIONAL OFFICE
PUNJAB SINDH KPK BALOCHISTAN

5TH Floor, Bahria Ground Floor Bungalow No. 15-A

3rdFloor, Building No. 3,
Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Aiwan-e-Iqbal Complex, Egerton
Karachi. The Mall, Peshawar. Airport Road, Quetta.
Road Lahore,
Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Tel: (042) 111-111-456
Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
Fax: (042) 36304926-7
helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
helpdesk.punjab@smeda.org.pk

(March 2017)
Pre-Feasibility Study Solar Systems Distribution

Table of Contents
1 DISCLAIMER .............................................................................................................................................. 1
2 EXECUTIVE SUMMARY ........................................................................................................................... 2
3 INTRODUCTION TO SMEDA ................................................................................................................. 3
4 PURPOSE OF THE DOCUMENT ............................................................................................................ 3
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT ............................................................................ 4
5.1 PRODUCTION PROCESS FLOW ........................................................................................................................ 6
5.2 INSTALLED AND OPERATIONAL CAPACITIES ............................................................................................... 6
6 CRITICAL FACTORS ................................................................................................................................. 7
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT .......................................................................... 7
8 POTENTIAL TARGET CUSTOMERS..................................................................................................... 8
9 PROJECT COST SUMMARY .................................................................................................................... 9
9.1 PROJECT ECONOMICS ....................................................................................................................................... 9
9.2 PROJECT FINANCING ........................................................................................................................................ 9
9.3 PROJECT COST................................................................................................................................................ 10
9.4 SPACE REQUIREMENT................................................................................................................................... 10
9.5 FURNITURE & FIXTURES REQUIREMENT .................................................................................................. 11
9.6 OFFICE EQUIPMENT REQUIREMENT .......................................................................................................... 11
9.7 HUMAN RESOURCE REQUIREMENT ............................................................................................................ 12
9.8 UTILITIES AND OTHER COSTS ...................................................................................................................... 12
9.9 REVENUE GENERATION................................................................................................................................ 13
10 CONTACT DETAILS ............................................................................................................................... 14
10.1 MACHINERY SUPPLIERS ............................................................................................................................... 14
11 USEFUL WEB LINKS.............................................................................................................................. 15
12 ANNEXURES ............................................................................................................................................ 16
12.1 INCOME STATEMENT .................................................................................................................................... 16
12.2 BALANCE SHEET ............................................................................................................................................ 18
12.3 CASH FLOW STATEMENT ............................................................................................................................. 19
13 KEY ASSUMPTIONS .............................................................................................................................. 20
13.1 OPERATING COST ASSUMPTIONS ............................................................................................................... 20
13.2 PRODUCT COST ASSUMPTIONS ................................................................................................................... 20
13.3 REVENUE ASSUMPTIONS .............................................................................................................................. 20
13.4 FINANCIAL ASSUMPTIONS ........................................................................................................................... 20

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1 DISCLAIMER

This information memorandum is to introduce the subject matter and provide a

general idea and information on the said matter. Although, the material included in
this document is based on data/information gathered from various reliable sources;
however, it is based upon certain assumptions, which may differ from case to case.
The information has been provided on as is where is basis without any warranties or
assertions as to the correctness or soundness thereof. Although, due care and
diligence has been taken to compile this document, the contained information may
vary due to any change in any of the concerned factors, and the actual results may
differ substantially from the presented information. SMEDA, its employees or agents
do not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. The contained information
does not preclude any further professional advice. The prospective user of this
memorandum is encouraged to carry out additional diligence and gather any
information which is necessary for making an informed decision, including taking
professional advice from a qualified consultant/technical expert before taking any
decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

Document Control

Document No. PREF-NO 140

Revision No. 01
Prepared by SMEDA-Sindh
Revision Date March, 2017

Provincial Chief (Sindh)

For information
mkumar@smeda.org.pk

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2 EXECUTIVE SUMMARY

Solar Systems distribution business is proposed to be located at any of the major

cities across Pakistan such as Lahore, Rawalpindi-Islamabad, Faisalabad, Multan,
Karachi etc.
The proposed product is Hybrid Photovoltaic System that would generate power
using solar panels. Considering Government’s recent policies for the promotion
of solar generated electricity and energy crisis in the country, solar system
distribution is viable business option, moreover the adoption of ‘Net Metering’
concept will provide a major boost in the demand for solar equipment in the
future.
The system will reduce the need for generators as the backup power would be
provided either by grid, in the presence of power provided by the grid, or by installed
batteries, in the absence of power provided by the grid. The Hybrid PV System will
include Solar Panels, Inverter, Charge Controller, Power Bank and Power Meter.
Total cost for the project is estimated to be Rs. 19,947,525 with fixed investment of
Rs. 3,084,000 and total working capital cost of Rs. 16,863,525.
Given the cost assumptions IRR and payback are 38% and 3.92 respectively.
The most critical considerations or factors for success of the project are:
 Most significant consideration(s)
 Financial position and credit standing of the distributor
 Owner and key employees must have technical expertise & experience.
 Correct orientation of panels increases total power output.
 Optimal output is attained when the space for installation of panels is not
shaded.

 Equally important factors,

 Effective marketing plan for the business so that the potential customers could
be reached.
 Good customer care is vital for creating positive image for business growth.
 Services after sale is also crucial in creating good personal relationships with
customers.

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3 INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was

established in October 1998 with an objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number,
scale and competitiveness of SMEs", SMEDA has carried out ‘sectoral research’ to
identify policy, access to finance, business development services, strategic initiatives
and institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment
has been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include
identification of experts and consultants and delivery of need based capacity building
programs of different types in addition to business guidance through help desk
services.

4 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential

entrepreneurs in project identification for investment. The project pre-feasibility may
form the basis of an important investment decision and in order to serve this
objective, the document/study covers various aspects of project concept
development, start-up, and production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in PV Systems
distribution business by providing them with a general understanding of the business
with the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises
by trial and error, and certain industrial norms that become a guiding source
regarding various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form basis of any Investment Decision.

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5 BRIEF DESCRIPTION OF PROJECT & PRODUCT

Pakistan has always being in the grip of sustainable energy scarcity. There is an
ever increase in energy demand that cannot be fulfilled using the current resources.
Around the world, solar energy, particularly, is positioned to become a new source of
sustainable energy. The increased awareness towards environmental issues has
prompted a new shift towards low-carbon energy alternatives that has enabled new
investment in the alternate energy. Commercial manufacturing of the PV Systems
has served to decrease the cost of its components.
Pakistan, predominantly, requires alternate sources of energy to both deal with the
environmental challenges and the energy shortage. This pre-feasibility study
explores the opportunity that exists in the distribution business of Hybrid Photovoltaic
Systems, combination of both off-grid and grid-tied PV Systems, in Pakistan. Hybrid
Systems are more appealing to the Pakistani market because majority of the
households are connected to the grid but there is frequent load shedding. The Hybrid
System will enable the consumers to utilize both the solar energy as well as the
energy from the solar panels giving the consumers a 24-hour energy availability.
There is immense potential for the generation of solar energy in Pakistan that can be
utilized to deal with the energy crisis. The Photovoltaic systems will provide
consumers a clean and sustainable source of energy that will benefit them in both
the short and long term.
Following are the key parameters for the proposed distribution unit,

 Technology:
Hybrid Photovoltaic System consists of two types of PV Systems combined
together. The first type is the Grid Tied PV System that is connected to the utility
power grid. There is no storage of energy and the electricity generated is spent in
real time. Grid-Tied System will only work in the presence of sunlight but it gives
the consumers a backup power from the utility grid. The System consists of Solar
Panels, Inverter, and Power Meter. The Power Meter is connected to the grid and
it measures the amount of electrical energy that is received from the grid and the
amount of excessive energy that is fed into the grid. Consumers can save money
with net metering which is the difference between the energy received from the
grid and the energy fed into the grid. In advanced countries, excessive energy is
sold to the company to whose grid the PV System is connected. This practice is
not yet feasible in Pakistan. The second type is the Off-Grid PV System which is
also called a stand-alone PV System. This type of PV System is not connected to
the grid and it requires a battery bank. The battery bank ensures the availability
of electricity even in the absence of sunlight. The life of a battery is typically 10
years. Off-Grid PV System consists of Solar Panels, Charge Controller, Power
Bank, Inverter and an optional backup Generator. The Hybrid Photovoltaic

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System is a combination of both Grid-Tied and Off-Grid PV Systems. It consists

of Solar Panels, Inverter, Charge Controller, Power Bank and Power Meter.
Hybrid PV System removes the need for a generator because the backup
electricity is derived from the grid.

 Location:
The Hybrid PV Systems distribution business is proposed to be located in an
area after taking into account three important factors: affordability, amount of
sunlight and electricity blackouts. PV Systems are expensive to begin with, and a
common consumer cannot afford to buy one. Therefore, it is important to setup
the business in an area where the consumers can afford to buy PV Systems. The
intensity of sunlight is also a crucial factor. Areas like Lahore and Multan receive
a lot more sunlight because of their geographical location. However, other
locations including Karachi also receive a good amount of sunlight. Electricity
blackouts, in many cases, are more common in one place than in another. For
example, electricity blackouts in Rawalpindi and Lahore are more frequent than in
Karachi and therefore Rawalpindi and Lahore can be more suitable locations for
the distribution setup based on the frequency of electricity blackouts. However,
based on the proposed target market for the distribution unit, affordability is the
biggest factor that needs to be taken into account. Therefore, big cities like
Karachi, Lahore, Islamabad, etc. are good locations for the PV Systems
distribution business.

 Product:
The distribution unit would buy the Hybrid PV Systems from the importers which
would be distributed to the end consumers. Installation services would also be
provided by the proposed business unit.

 Target Market:
The target market for the proposed business consists of three segments. The
proposed segments are household consumers, small to medium sized
businesses and organizations, and educational institutions located in urban
centres such as Karachi.

 Employment Generation:
The distribution unit would generate both direct and indirect employment. Direct
employment would be provided to 14 people. These would include one person
who would look after the accounts and answer calls, two people who would deal
with purchasing and selling, one driver, and two people with technical skills who
would install the PV Systems for the consumers. The proposed distribution unit

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would also generate indirect employment to importers as the business would

expand.

5.1 Production Process Flow

Purchase from
distributors/Importers

Reorder Inventory Order From Clients

Delivery To Client and

Installation

 Stage 1: Minimum inventory is maintained to fulfil the demand on time

 Stage 2: Demand from clients analyzed
 Stage 3: Delivery and Installation at the premises of clients takes place
 Stage 4: Reorder of inventory according to demand

5.2 Installed and Operational Capacities

The operational/trading capacity of this pre-feasibility is 36 kW per month. The

assumed operational capacity during the first year of operations is 90%.

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6 CRITICAL FACTORS

The main critical success factors that affect the decision to invest in the proposed
business setup are:
 Size of a PV system is determined by the available space for installation.
 Correct orientation of panels increases total power output.
 Optimal output is attained when the space for installation of panels is
unshaded.
 For efficiency and durability, it is advised, the battery should not be used
below 50%.
Equally important factors,
 Effective marketing plan for the business so that the potential customers could
be reached.
 Good customer care is vital for creating positive image for business growth.
 Services after sale is also crucial in creating good personal relationships with
customers.

7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

Pakistan’s geography is most favorable to exploitation of solar energy as it is sixth

most fortunate country in the world in terms of solar irradiance and where sunshine
availability is 8-10 hours per day over much of the plans of Sindh, Baluchistan and
Southern Punjab.
Pakistan has tremendous potential to meet its power demand needs from renewable
energy sources and, in particular, solar. Solar irradiance levels in parts of Pakistan,
particularly in the southwest, are on par with the best in the world with global
horizontal irradiance (GHI) values over 1500 kWh/m² in over 90% of the country’s
land area1. Solar energy intensity in Sun Belt of Pakistan is approximately 1,800-
2,200 Kwh per square meter per day which is most favorable for exploitation of solar
energy. Potential capacity for installation of solar photovoltaic power by some
estimates is 1,600 GW, which is 40 times greater than present consumption. Based
on range of currently possible conversion efficiencies in area of one sq. km has
potential to produce 40-55MW power and can generate revenue conservatively
estimated at Rs. 1 billion per month at current average tariffs of Rs. 10 per Kw per
hour.
Since solar power is available only during times of sunshine, it can at most meet up
to 30% of daily consumption without need for energy storage such as in underground
salt deposits. Wasteland and desert of Thar, lower Sindh & Baluchistan are prime

1 IFC Report, A Solar Developer’s Guide to Pakistan

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contenders to establish large solar farms with capacities of generating more than
250 Gigawatts electric power to meet energy shortfall over coming decades.

8 POTENTIAL TARGET CUSTOMERS

The PV system consumers are increasing in Pakistan as more people are shifting
from fuel generators to solar power for power needs. The potential customers are
segmented into following groups: Small Businesses and Organizations: Small
businesses operating in areas with disrupted electricity supply opt for solar power
systems for their electricity needs. Organizations including health facilities,
government offices and NGOs operating in remote rural areas with no grid power
access also install PV systems to meet their electricity needs. Such customers are
found both in rural as well as urban areas of Pakistan. Households: Household
consumers with adequate buying power prefer PV systems over power generators.
People from urban centers of Punjab and Sindh are especial target with huge
potential as these areas get maximum amount of sunlight. The affordability of such
consumers is also high as the PV systems cost quite high. However, individual
households may order PV systems from across the country. Educational Institutions:
Schools and colleges operating in rural areas with no grid power supply install PV
systems to meet their requirements.

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9 PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of
this project. Various costs and revenue related assumptions along with results of the
analysis are outlined in this section.

9.1 Project Economics

All the figures in this financial model have been calculated for estimated sales of Rs.
89,214,372 in the year one. The revenue will increase in two ways: Number of
customers growth rate is projected to increase by 10% per year, while per customer
charges are expected to increase by 10% every year.
The following table shows internal rate of return, payback period and net present
value of the proposed venture:

Table 9.1: Project Economics

Description Details

Internal Rate of Return (IRR) 38%

Payback Period (yrs.) 3.92

Net Present Value (Rs.) 17,789,028

9.2 Project Financing

Following table provides details of the equity required and variables related to bank
loan:

Table 9.2: Project Financing

Description Details
Total Equity (100%) Rs.19,947,525

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9.3 Project Cost

Following fixed and working capital requirements have been identified for operations
of the proposed business. Working capital is estimated to be Rs. 16,863,525 to meet
the initial requirements of operating the business. The requirement is based on the
cost for four months of the items shown in the table below for working capital.

Table 9.3: Project Cost

Description Cost(Rs.)
Capital Cost
Furniture &Fixture 425,000
Office Equipment 240,000
Vehicle 1,800,000
Tools & Equipment 207,000
Pre-operating cost 412,000
Total Capital Cost 3,084,000
Working Capital (2.5 months)
Raw Material Inventory 14,297,175
PV Modules
Inverter
Batteries
Stands and Wires
Up-front Building Rent 1,404,000
Up-front Insurance Payment 100,350
Cash 1,062,000
Total Working Capital 16,863,525
Total Project Cost 19,947,525

9.4 Space Requirement

The space requirement for the proposed PV Systems distribution business is

estimated considering two facilities including a management office and a store.
Details of space requirement and cost related to building are given below:

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Table 9.4: Space Requirement

Description Estimated Area Unit Cost Total Rental
(Sq. ft.) (Rs.) Cost (Rs.)
Management Office 300 267 80,000
Store – Finished Goods 1000 37 37,000
Total 117,000

9.5 Furniture & Fixtures Requirement

Details of the furniture and fixture required for the project are given below:

Table 9.5: Furniture & Fixture

Description Quantity Unit Cost Total Cost
(Rs.) (Rs.)

Table & Chairs 03 35,000 105,000

Workshop Stores & Tables 06 20,000 120,000

Chairs & Stool 10 10,000 100,000

Air Conditioners 02 50,000 100,000

Total 425,000

9.6 Office Equipment Requirement

Following office equipment will be required for PV Systems distribution business,

Table 9.6: Office Equipment

Description Quantity Unit Cost Total Cost
(Rs.) (Rs.)

Laptop 02 70,000 140,000

Printer 01 30,000 30,000

Tablet 02 20,000 40,000

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Telephone Set 02 2,500 5,000

Fax Machine 01 25,000 25,000

Total 240,000

9.7 Human Resource Requirement

In order to run operations of PV Systems distribution business smoothly, details of

human resources required along with number of employees and monthly salary are
recommended as under:

Table 9.7: Human Resource Requirement

Description No. of Salary per Monthly
Employees month per Salary per
Person (Rs.) person (Rs.)
CEO / Owner / Manager 01 70,000 70,000
Operation Manager 01 50,000 50000
Marketing Manager 01 50,000 50000
Sales Representative 03 25,000 75000
Installers 03 25,000 75000
Support Service 02 18,000 36,000
Admin & Accounts 01 20,000 20,000
Driver 01 18,000 18,000
Security Guard 01 18,000 18,000
Total 412,000

9.8 Utilities and other costs

An essential cost to be borne by the project is the cost of electricity, Communication

and promotional. The electricity expenses are estimated to be around Rs. 19,992 per
month, telephone & internet expenses are estimated to be around Rs 15,720 per
month, whereas, promotional expenses are estimated to be Rs. 223,035 per month.
For the first year total utility cost is estimated to be around Rs. 239,904.
Furthermore, promotional expense being essential for marketing of PV Systems
distribution business is estimated as 3% of sales.

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9.9 Revenue Generation

Based on the projections for the first year, PV Systems of 36 kW ranging from 01 to
05 kW of household system are expected to be sold every month with a 10 %
increase in the number of customers each year. Sales revenue during the first year
of operations is estimated as under:

Table 9.9: Revenue Generation – Year 1

Description Total Units Sale Price per unit Sales revenue per year (Rs.)
(kW) (Rs.)

PV System 387.7 230,100 89,214,372

01 – 05 Kw

Total 89,214,372

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10 CONTACT DETAILS

In order to facilitate potential investors, contact details of private sector Service

Providers relevant to the proposed project be given.

10.1 Machinery Suppliers

Machinery Supplier -1

Name of Supplier Nizam Energy Pvt LTD.

Address G-30/4 KDA Scheme No. 5, Block 8, Clifton, Karachi

Phone 021-35360583 Fax +92-21-3536-0584

E-mail sales@nizamenergy.com

Website www.nizamsolar.com

Machinery Supplier -2

Name of Supplier Pakistan Solar Power

Address 202 Raza Block, Allama Iqbal Town, Lahore

E-mail ali@solarpower.pk

Website www.paksolarpower.com

Machinery Supplier -3

Name of Supplier Pantera Energy

Address 10-Z, Commercial Area, Phase 3 DHA, Lahore

Phone 042-35894171-4 Fax N/A

E-mail contact@panteraenergy.pk

Website www.panteraenergy.pk

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11 USEFUL WEB LINKS

Small & Medium Enterprises Development Authority (SMEDA) www.smeda.org.pk

Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Ministry of Education, Training & Standards in Higher http://moptt.gov.pk
Education
Government of Punjab www.punjab.gov.pk
Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security Commission of Pakistan (SECP) www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry www.fpcci.com.pk
(FPCCI)
State Bank of Pakistan (SBP) www.sbp.org.pk
Punjab Small Industries Corporation
www.psic.gop.pk
Sindh Small Industries Corporation
www.ssic.gos.pk
Pakistan Horticulture Development and Export Company
www.phdec.org.pk
(PHDEC)
Punjab Vocational Training Council (PVTC)
www.pvtc.gop.pk
Technical Education and Vocational Training Authority
www.tevta.org
(TEVTA)
Pakistan Readymade Garment Technical Training Institute
www.prgmea.org/prgtti/
Livestock & Dairy Development Department, Government of
www.livestockpunjab.gov.pk
Punjab.
Punjab Industrial Estates (PIE)
www.pie.com.pk
Faisalabad Industrial Estate Development and Management
www.fiedmc.com.pk
Company (FIEDMC)

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12 ANNEXURES

12.1 Income Statement

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Calculations SMEDA
Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 89,214,372 109,313,147 120,277,872 132,305,659 145,536,225 160,089,848 176,098,832 193,708,716 213,079,587 234,387,546

Cost of sales
Cost of goods sold 1 68,626,440 82,558,181 89,187,610 96,322,618 104,028,428 112,350,702 121,338,758 131,045,859 141,529,528 152,851,890
Operation costs 1 (direct labor) 1,795,000 1,974,702 2,167,564 2,378,601 2,610,185 2,864,316 3,143,190 3,449,215 3,785,036 4,153,552
Total cost of sales 70,421,440 84,532,883 91,355,173 98,701,219 106,638,613 115,215,018 124,481,948 134,495,074 145,314,563 157,005,442
Gross Profit 18,792,932 24,780,264 28,922,699 33,604,440 38,897,613 44,874,830 51,616,884 59,213,641 67,765,024 77,382,104
Gross Profit Margin 21% 23% 24% 25% 27% 28% 29% 31% 32% 33%
General administration & selling expenses
Administration expense 3,144,000 3,450,104 3,786,011 4,154,623 4,559,123 5,003,005 5,490,105 6,024,629 6,611,196 7,254,871
Administration benefits expense 157,200 172,505 189,301 207,731 227,956 250,150 274,505 301,231 330,560 362,744
Building rental expense 1,404,000 1,544,400 1,698,840 1,868,724 2,055,596 2,261,156 2,487,272 2,735,999 3,009,599 3,310,559
Electricity expense 239,904 263,894 290,284 319,312 351,243 386,368 425,005 467,505 514,256 565,681
Travelling expense 251,520 276,008 302,881 332,370 364,730 400,240 439,208 481,970 528,896 580,390
Communications expense (phone, fax, mail, internet, etc.) 188,640 207,006 227,161 249,277 273,547 300,180 329,406 361,478 396,672 435,292
Office vehicles running expense 630,000 693,000 762,300 838,530 922,383 1,014,621 1,116,083 1,227,692 1,350,461 1,485,507
Office expenses (stationary, entertainment, janitorial services, etc.) 125,760 138,004 151,440 166,185 182,365 200,120 219,604 240,985 264,448 290,195
Promotional expense 2,676,431 3,279,394 3,608,336 3,969,170 4,366,087 4,802,695 5,282,965 5,811,261 6,392,388 7,031,626
Insurance expense 100,350 90,315 80,280 70,245 60,210 50,175 40,140 30,105 20,070 10,035
Professional fees (legal, audit, consultants, etc.) 446,072 546,566 601,389 661,528 727,681 800,449 880,494 968,544 1,065,398 1,171,938
Depreciation expense 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200
Amortization of pre-operating costs 82,400 82,400 82,400 82,400 82,400 - - - - -
Bad debt expense 2,676,431 3,279,394 3,608,336 3,969,170 4,366,087 4,802,695 5,282,965 5,811,261 6,392,388 7,031,626
Miscellaneous expense 1 1,000,000 1,100,000 1,210,000 1,331,000 1,464,100 1,610,510 1,771,561 1,948,717 2,143,589 2,357,948
Subtotal 13,389,908 15,390,192 16,866,159 18,487,465 20,270,708 22,149,567 24,306,514 26,678,578 29,287,118 32,155,611
Operating Income 5,403,024 9,390,072 12,056,539 15,116,975 18,626,904 22,725,263 27,310,370 32,535,063 38,477,906 45,226,493

Earnings Before Interest & Taxes 5,403,024 9,390,072 12,056,539 15,116,975 18,626,904 22,725,263 27,310,370 32,535,063 38,477,906 45,226,493

Earnings Before Tax 5,403,024 9,390,072 12,056,539 15,116,975 18,626,904 22,725,263 27,310,370 32,535,063 38,477,906 45,226,493

Tax 1,080,605 1,878,014 2,411,308 3,023,395 3,725,381 4,545,053 5,462,074 6,507,013 7,695,581 9,045,299
NET PROFIT/(LOSS) AFTER TAX 4,322,419 7,512,058 9,645,231 12,093,580 14,901,523 18,180,210 21,848,296 26,028,051 30,782,325 36,181,194
5% 7% 8% 9% 10% 11% 12% 13% 14% 15%
Balance brought forward 4,322,419 11,834,477 21,479,708 33,573,288 48,474,811 66,655,022 88,503,318 114,531,369 145,313,693
Total profit available for appropriation 4,322,419 11,834,477 21,479,708 33,573,288 48,474,811 66,655,022 88,503,318 114,531,369 145,313,693 181,494,887
Dividend - - - - - - - - - -
Balance carried forward 4,322,419 11,834,477 21,479,708 33,573,288 48,474,811 66,655,022 88,503,318 114,531,369 145,313,693 181,494,887

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Pre-Feasibility Study Solar Systems Distribution

12.2 Balance Sheet

Calculations SMEDA
Balance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 2,349,000 1,644,002 6,926,516 13,917,127 23,065,102 34,581,678 48,720,658 65,964,172 86,749,344 111,566,260 197,134,278
Accounts receivable 1,710,961 1,903,689 2,201,558 2,422,034 2,664,237 2,930,661 3,223,727 3,546,100 3,900,710 4,290,781
Finished goods inventory 196,160 234,879 253,764 274,170 296,218 320,042 345,783 373,597 403,652 436,126
Raw material inventory 14,297,175 18,059,602 20,485,279 23,230,306 26,343,168 29,873,152 33,876,154 38,415,559 43,563,244 49,400,719 -
Pre-paid building rent 117,000 128,700 141,570 155,727 171,300 188,430 207,273 228,000 250,800 275,880 -
Pre-paid insurance 100,350 90,315 80,280 70,245 60,210 50,175 40,140 30,105 20,070 10,035 -
Total Current Assets 16,863,525 21,829,740 29,772,212 39,828,727 52,335,984 67,653,890 86,094,928 108,207,346 134,503,155 165,557,255 201,861,185

Fixed assets
Machinery & equipment 207,000 186,300 165,600 144,900 124,200 103,500 82,800 62,100 41,400 20,700 -
Furniture & fixtures 425,000 382,500 340,000 297,500 255,000 212,500 170,000 127,500 85,000 42,500 -
Office vehicles 1,800,000 1,620,000 1,440,000 1,260,000 1,080,000 900,000 720,000 540,000 360,000 180,000 -
Office equipment 240,000 216,000 192,000 168,000 144,000 120,000 96,000 72,000 48,000 24,000 -
Total Fixed Assets 2,672,000 2,404,800 2,137,600 1,870,400 1,603,200 1,336,000 1,068,800 801,600 534,400 267,200 -

Intangible assets
Pre-operation costs 412,000 329,600 247,200 164,800 82,400 - - - - - -
Total Intangible Assets 412,000 329,600 247,200 164,800 82,400 - - - - - -
TOTAL ASSETS 19,947,525 24,564,140 32,157,012 41,863,927 54,021,584 68,989,890 87,163,728 109,008,946 135,037,555 165,824,455 201,861,185

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 237,496 282,311 307,994 336,071 366,854 400,622 437,683 478,381 523,097 418,772
Other liabilities
Total Current Liabilities - 237,496 282,311 307,994 336,071 366,854 400,622 437,683 478,381 523,097 418,772

Other liabilities
Deferred tax 56,700 92,700 128,700 164,700 200,700 160,560 120,420 80,280 40,140 0
Total Long Term Liabilities - 56,700 92,700 128,700 164,700 200,700 160,560 120,420 80,280 40,140 0

Shareholders' equity
Paid-up capital 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525 19,947,525
Retained earnings 4,322,419 11,834,477 21,479,708 33,573,288 48,474,811 66,655,022 88,503,318 114,531,369 145,313,693 181,494,887
Total Equity 19,947,525 24,269,944 31,782,002 41,427,233 53,520,813 68,422,336 86,602,547 108,450,843 134,478,894 165,261,218 201,442,412
TOTAL CAPITAL AND LIABILITIES 19,947,525 24,564,140 32,157,012 41,863,927 54,021,584 68,989,890 87,163,728 109,008,946 135,037,555 165,824,455 201,861,185

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Pre-Feasibility Study Solar Systems Distribution

12.3 Cash Flow Statement

Calculations SMEDA
Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 4,322,419 7,512,058 9,645,231 12,093,580 14,901,523 18,180,210 21,848,296 26,028,051 30,782,325 36,181,194
Add: depreciation expense 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200
amortization of pre-operating costs 82,400 82,400 82,400 82,400 82,400 - - - - -
Deferred income tax 56,700 36,000 36,000 36,000 36,000 (40,140) (40,140) (40,140) (40,140) (40,140)
Accounts receivable (1,710,961) (192,728) (297,869) (220,476) (242,203) (266,424) (293,066) (322,373) (354,610) (390,071)
Finished goods inventory (196,160) (38,719) (18,886) (20,406) (22,048) (23,823) (25,741) (27,814) (30,054) (32,475)
Raw material inventory (14,297,175) (3,762,427) (2,425,677) (2,745,027) (3,112,861) (3,529,984) (4,003,002) (4,539,405) (5,147,685) (5,837,475) 49,400,719
Pre-paid building rent (117,000) (11,700) (12,870) (14,157) (15,573) (17,130) (18,843) (20,727) (22,800) (25,080) 275,880
Advance insurance premium (100,350) 10,035 10,035 10,035 10,035 10,035 10,035 10,035 10,035 10,035 10,035
Accounts payable 237,496 44,815 25,683 28,076 30,783 33,768 37,062 40,698 44,715 (104,324)
Other liabilities - - - - - - - - - -
Cash provided by operations (14,514,525) (704,998) 5,282,514 6,990,611 9,147,976 11,516,575 14,138,981 17,243,513 20,785,172 24,816,916 85,568,018

Financing activities
Issuance of shares 19,947,525 - - - - - - - - - -
Cash provided by / (used for) financing activities 19,947,525 - - - - - - - - - -

Investing activities
Capital expenditure (3,084,000) - - - - - - - - - -
Acquisitions
Cash (used for) / provided by investing activities (3,084,000) - - - - - - - - - -

NET CASH 2,349,000 (704,998) 5,282,514 6,990,611 9,147,976 11,516,575 14,138,981 17,243,513 20,785,172 24,816,916 85,568,018

Cash balance brought forward 2,349,000 1,644,002 6,926,516 13,917,127 23,065,102 34,581,678 48,720,658 65,964,172 86,749,344 111,566,260
Cash available for appropriation 2,349,000 1,644,002 6,926,516 13,917,127 23,065,102 34,581,678 48,720,658 65,964,172 86,749,344 111,566,260 197,134,278
Dividend - - - - - - - - - -
Cash balance 2,349,000 1,644,002 6,926,516 13,917,127 23,065,102 34,581,678 48,720,658 65,964,172 86,749,344 111,566,260 197,134,278
Cash carried forward 2,349,000 1,644,002 6,926,516 13,917,127 23,065,102 34,581,678 48,720,658 65,964,172 86,749,344 111,566,260 197,134,278

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Pre-Feasibility Study Solar Systems Distribution

13 KEY ASSUMPTIONS

13.1 Operating Cost Assumptions

Description Details
Shift Length 12 hours
Number of shifts 2
Days operational per year 330 days

13.2 Product Cost Assumptions

Description Details

Increase in cost of each component of PV System 10% per year

Promotional Expense 3% of sales

Duty rates and other charges on PV Panels,

5.5%
Inverters and Batteries (Europe)

13.3 Revenue Assumptions

Description Details

Increase in price of PV System 10% per year

Number of kilowatts 389 kW per year

Increase in number of kilowatts 10% per year

13.4 Financial Assumptions

Description Details
Project Life 10 years

Debt Equity Ratio 100 : 00

March 2017 20