One of the primary motivators for MNOs and towercos to explore partnerships with ESCOs is to avoid escalating problems of battery and diesel theft. And the problem of diesel theft is particularly acute in Nigeria. LPG is often suggested as an alternate fuel, and Biswal Managing Director Adebisi Adebutu has a solution to concerns about the reliability of the LPG supply chain.
TowerXchange: Please introduce yourself and Biswal.
Adebisi Adebutu, Managing Director, Biswal:
For over 15 years, Biswal has provided bespoke and innovative solutions to support the telecommunications industry. Today our solutions span from equipment supply, installation and managed services, to energy as a service.
We started out selling mobile phones, but the margins weren’t very good. Almost by accident we got into the business of cell site acquisition, and from there we branched into site building and maintenance. At the time, if you could deliver high quality sites quickly and reliably, you were awarded with more - and we were!
But our search for continued growth and greater turnover continued, so we got into the business of providing, refuelling and servicing generators. So when towercos acquired more than half the towers in Nigeria through various sale and leaseback transactions in 2014-16, and one of those towercos came looking for proven, end to end service provider partners, Biswal signed up and became an energy service provider.
In Nigeria, revenue assurance is key. For us, revenue assurance means we leverage data to drive process excellence which in turn improves margins, revenues and cash flow.
TowerXchange: What is the current status of Biswal’s relationship with towercos?
Adebisi Adebutu, Managing Director, Biswal:
Biswal is proud to be working with Africa’s leading towerco in both Nigeria and Côte d’Ivoire.
Biswal provides just under 2,000 hybrid sites in Nigeria under the the LPM (Litres Per Month) model (editor: this is similar to what IPT PowerTech calls the “guaranteed savings model"). Under this model, the towerco deploys the capex, and their sites are categorised by load and configuration, and a target level of diesel consumption is set in litres per month – you can run the sites using less litres per month, you keep the saving, if you exceed the figure, you do less well.
More recently we have taken over a further 800 conventional sites running on diesel gensets. We had approached the towerco with a proposition to upgrade the power infrastructure on those sites, this time at no cost to the towerco – Biswal takes all the risk, and if our we make our solution work, we retain the margin, under a conventional ESCO model.
TowerXchange: What are the main drivers for towercos to explore partnering with ESCOs in Nigeria?
Adebisi Adebutu, Managing Director, Biswal:
The number one driver is fuel and battery theft. Theft from cell sites is widespread and organised in Nigeria, and the situation is deteriorating. Diesel doesn’t lose value if it’s stolen - it’s literally a liquid asset. A remote unmanned cell site might have over a thousand litres of diesel and US$1,000 worth of batteries in the compound. The batteries have a similar re-use value to the diesel. Of course that represents more than a year’s average salary to many people, so it is inevitably a target for thieves.
Theft amplifies the already high cost of energy opex. I estimate that Nigeria’s towercos and MNOs are spending $25-30mn per month on diesel. I’m too respectful of my customers to share what proportion of those millions of dollars worth of diesel is actually burned by a cell site genset, but I will say that that a significant double digit percentage is stolen.
Our solution is simple: remove the diesel, remove the problem. Let’s be honest, many of the thieves work within the supply chain and, if they have nothing to steal, they’ll leave the job, leaving just the good workers behind, which in turn enables an improved focus on operational excellence.
TowerXchange: So how do you propose to remove the diesel?
Adebisi Adebutu, Managing Director, Biswal:
I’ve personally made a multi-million dollar commitment to liquefied petroleum gas (LPG). Our towerco partner has been supportive both of LPG and the ESCO model, so we have started the process to convert the aforementioned 800 sites to LPG. And this is Biswal’s capex now, not the towerco’s.
The problem with the ESCO model is that it transfers most of the operational risk from MNO or towerco to the ESCO, and the margin on the terms offered doesn’t always justify taking that risk. Using LPG doesn’t just mean transferring the risk, it materially reduces risk, stabilising energy opex at a significantly lower level that diesel, while dramatically reducing theft
Biswal manages 88 site clusters, but we’re rolling out LPG in phases and learning as we go. So far we have gas generators on just under 50 sites in five clusters, but we have a substantial inventory of equipment standing ready to deploy.
LPG is a relatively new solution for cell site energy, but it will revolutionise the market. I would prefer not to disclose the margin, but LPG represents a significant cost saving compared to diesel.
The problem with the ESCO model is that it transfers most of the operational risk from MNO or towerco to the ESCO, and the margin on the terms offered doesn’t always justify taking that risk. Using LPG doesn’t just mean transferring the risk, it materially reduces risk, stabilising energy opex at a significantly lower level that diesel, while dramatically reducing theft.
TowerXchange: Floorspace is money as far as towercos, and increasingly MNOs, are concerned. Not only does the footprint of equipment on a site affect the cost of leasing the land, it also affects potential co-location revenue. How does the footprint of LPG compare with diesel?
Adebisi Adebutu, Managing Director, Biswal:
LPG has a smaller footprint than diesel. We install only the gas generator, gas tank, battery bank and the client DB. The LPG footprint is so small that we’ve been able to leave the diesel genset onsite at all sites converted to LPG to date. This provides peace of mind to our clients that we’ll leave the diesel genset there until we’ve proved that LPG works.
TowerXchange: LPG is often discussed at TowerXchange Meetups, but reservations are often voiced about how to control the supply chain. How do you overcome such challenges?
Adebisi Adebutu, Managing Director, Biswal:
The LPG supply chain doesn’t represent a challenge if you’re prepared to do the hard work and invest in making it work. Biswal currently supplies 3.5mn litres of diesel using 52 trucks - we have experience of managing complex supply chains.
This is Africa, and the only way to protect your margins and minimise leakage is to control as much of the supply chain as you can.
Biswal have ordered ten Bobtails, and we collect the LPG directly from local sources in Nigeria. I’m buying in volume, and at times Nigeria is flaring LPG, so it’s not an expensive resource.
Biswal’s sister company Tranos manufactures our LPG gensets, so we’re capturing margin throughout the supply chain.
Achieving a 99.8% uptime Service Level Agreement is expensive, especially in the context of Nigeria’s unreliable grid, and what we have learned is that you need to control the supply chain to retain margin. It is notable that the only two of the five original LPM Nigerian towerco partners that are still active, ourselves and IPT PowerTech, both do our own manufacturing.
Given the margins on offer in ESCO contracts, that end to end control of the supply chain may be necessary. The ten year revenue stream guarantee that ESCO contracts represent should enable you to do your own manufacturing – high quality infrastructure will last through the term of the contract, only the batteries and engine need replacing – so you must have the ability to refurbish or rebuild to capture the margin there.
With the upfront capex, LPG is expensive at the outset and for the first couple of years. But once we have recouped the upfront capex, LPG is highly investible over the ten year term of a typical ESCO contract. And if telecom revenues recover in the Nigerian market, we may outperform our models. Our contracts even afford a degree of protection against FX exposure to the Naira as fees are tied to the dollar.
We have a local financier who is keen that we accelerate our rollout in Nigeria, but I’m interested in international capital to expand beyond Nigeria.
Biswal has proved that the ESCO model, enabled by LPG, generates sustainable cash flow at an investible margin. Biswal are keen to take our learnings, and to take the risk and burden of developing and executing that end to end LPG supply chain, to all bad grid markets, which is why we’re attending the ESCO Roundtable.
