Camusat’s ESCO Aktivco contracts 2,000 cell sites in one year – and targets 10,000 by 2022

Aktivco is Africa’s largest Energy Services Company (ESCO), with end-to-end management contracts for 2,000 cell sites across four African countries, inwhich Aktivco will be deploying their own capex to upgrade to hybrid power systems. Leveraging the reputation and operational capabilities of parent company Camusat, Aktivco has won contracts with Millicom in Chad and with Orange in Niger, Burkina Faso and Ivory Coast. In this exclusive interview, Camusat Chairman Richard Thomas explains how they won those contracts, and how they will execute them.

TowerXchange: Please re-introduce Camusat and Aktivco for any readers not already familiar with your vision and achievements.

There are now two big businesses within the Camusat Group; Camusat, which designs, builds, manages and powers cell sites with an operational footprint in 35 countries; and our new business with Aktivco, a dedicated long term investment vehicle in energy as a service.

When Camusat Group refinanced in 2016 we created an organisation and a balance sheet ready to help telecom clients that were asking us to help them develop a different operational model – they wanted to rid themselves of the challenges of managing power, and for us to take on the capital costs of investing in hybrid energy equipment. And so we created our ESCO Aktivco to meet the needs of our customers, and we commenced the first Aktivco venture at the beginning of 2017. We have now assembled a new dedicated financial team with the specific know-how required to define and refine our ESCO business model, while Camusat provides the necessary operational capabilities and footprint.

TowerXchange: Congratulations on Aktivco winning ESCO contracts in several countries in Sub-Saharan Africa! What can you tell us about this part of your business?

Aktivco is the largest ESCO in Africa. Today we have contracts to bring around 2,000 towers under ESCO management in SSA. With Millicom we have over 500 sites in Chad. With Orange we have over 500 sites in Niger, and we are taking over a contract in Burkina Faso where Orange is increasing the number of sites. Also, we have recently won another contract with Orange in the Ivory Coast.

TowerXchange: What are your growth objectives for Aktivco and how substantial do you think is the pipeline to secure future ESCO contracts?

We have already achieved our target for 2018, and are targeting 10,000 ESCO sites in the next four years.

Forecasting the pipeline of ESCO contracts is complicated as many MNOs are still studying the model, but we anticipate a huge volume of opportunities coming to market, particularly from markets with lots of off-grid or bad grid towers in Africa.

Fuel management and energy efficiency remains a huge issue, and MNOs are increasingly finding that when they outsource to towercos, those towercos don’t always invest substantially in the long-term payback energy management innovations that can most significantly reduce energy opex, particularly when fuel costs are a pass through. In contrast, an ESCO like Aktivco has an obligation to push further into energy efficiency, in particular renewable energy, to decrease diesel consumption, because our goal is also to reduce carbon footprints.

So we foresee MNOs increasingly externalising their energy systems to partner with companies like Aktivco not just for network maintenance, but where we invest the capex necessary to optimise energy efficiency.

TowerXchange: How have you differentiated Aktivco from competitive ESCOs in order to win these contracts?

Camusat’s managed services reputation for excellence and capacity on the ground are key – we have a footprint of over 1,500 direct employees in Africa.

All our energy systems are built by Camusat engineers – so we have huge backup and R&D resources such that we can control the complete system from day one and avoid any risk of uptime deterioration when transitioning to the ESCO model.

TowerXchange: What can you tell us about the timeline and the process of taking over existing sites, extracting value from the remaining lifecycle of existing energy equipment, and the process of upgrading?

Our capex deployment has to be thoroughly evaluated as we’re investing heavily into these sites. So we typically work over a transitional period of 12-18 months to undertake a complete audit, carefully checking every genset, every battery bank – all the power systems, and rethinking the entire network. After the audit we start to re-capex the first batch of sites, replacing legacy power systems with our new solar hybrid energy systems. We often find that the client wants to plug additional legacy sites into our portfolio that had been outside the original contract. And while we’re upgrading the legacy sites, we can also use our systems on any new rollout sites.

With regard to your question about extracting value from the remaining lifecycle of existing energy equipment, of course we use that legacy equipment during the transitional period, but we want to plug in a reliable system as quickly as possible, and the lifecycle for solar hybrids is very long.

TowerXchange: Where do you find is the optimum balance between standardisation and customisation of the equipment you deploy?

We start with a standard core control system and add modular extensions, such as the quantity of batteries and solar panels, according to variables such as grid availability, the power consumption of the site, and levels of solar irradiance. It varies by country, but we tend to end up with 10-20 different typologies.

TowerXchange: What equipment does Aktivco / Camusat supply directly, and what do you source from third parties?

We undertake our own system engineering, but we don’t make our own components.

Being an ESCO changes your procurement philosophy. We’re not just looking for suppliers, we’re looking for long term partners who share our vision. Of course price is a factor, but we measure total cost of ownership over a longer period now, and that means that maintaining long term relationships is of paramount importance.

Our procurement philosophy is also driven by on-the-ground realities in emerging markets; like everything else in the Camusat Group, success is delivered by finding the right balance of finance and operational considerations.

We trial third party components rigorously in our test centre in Romania, where we do all our design engineering – it’s also where we also have our global NOC. For example, we’re engaged in significant discussions regarding batteries at the moment.

TowerXchange: What is your current preference in terms of energy storage technologies?

There’s no easy answer to that question. We are examining the performance of many different kinds of battery, and the choice of what to deploy depends on several variables from lifecycle to load, target fuel consumption and capital cost of course. One constant is that we’re looking for long lifecycles from all our equipment as our contracts have a minimum ten year duration.

TowerXchange: What proportion of your 2,000 ESCO sites are on grid, unreliable grid or off-grid? And is the ESCO proposition largely limited to the ~300,000 off grid and unreliable grid sites worldwide, or can it be scaled to include the further 4.1mn on grid sites?

Around 40% of our sites are off grid, 30% on grid, 30% on unreliable grid connections.

As to the question of the addressable market for ESCOs, much depends on country’s grid price. If grid power is expensive then it can make sense to deploy hybrid systems. Another factor is whether it is economical to connect off grid sites to the grid, and whether that grid is being extended. Other factors include site loads – renewables are a more attractive option for sites with smaller loads

In the end, a unique business case must be built for every site, whether off grid, on grid or on an unreliable grid connection.

TowerXchange: Appreciating that the nuances of ESCO contract structure are confidential, should we categorise Aktivco’s contracts as more closely resembling a fixed energy or a per kWh consumption model? Or are they something totally unique?

Aktivco provides more than just an ESCO contract – we provide a full service including security, refuelling, O&M as well as power. We don’t sell energy by the kWh – we sell a full service inclusive of maintenance.

MNOs know the current operating costs of their network, and they are looking for partners who can deliver a better service for a lower price. We believe we can provide that through our full service, inclusive of relieving them of the headache of managing energy.

TowerXchange: What have you learned when negotiating these contracts that could be transferrable to other MNOs or towercos considering partnering with ESCOs?

The importance of contract duration is one transferrable lesson: a five to seven year contract is not bankable because the capex we need to deploy is so substantial.

To date we’ve found it easier to negotiate win-win contracts in countries with a significant number of bad grid and off grid sites: reducing the fuel consumption of cell sites running on dual diesel gensets tends to provide adequate margin for both MNO and ESCO.

TowerXchange: It seems like MNOs such as Orange and Millicom are pioneering ESCO partnerships in SSA, yet 60% of ESCO sites worldwide are owned by towercos rather than MNOs. Some emerging market towercos see provision of power-as-a-service as one of their core competencies, others are sceptical that ESCOs can access the same low cost capital towercos can. How can we overcome such objections?

Towercos started acquiring cell sites in Africa seven or eight years ago. Now the pace of their acquisitions have slowed as perhaps they have acquired most of the sites that meet their investment criteria.

Whether the African towercos consider us partners or competition remains to be seen, but ESCOs’ investment criteria are generally quite different from theirs.

The towercos are looking at the ESCO model and they are starting to talk to us. We believe that together MNOs, towercos and ESCOs could make a great team, with the towerco managing passive infrastructure and us managing energy.

Due to the operational complexities around energy, some of the North American towercos seem wary of entering the African market, preferring to focus on building and buying towers in North and South America where the grid is good. Perhaps those towercos should consider a partnership with an ESCO as an interesting option to enable an entry into Africa.

TowerXchange: TowerXchange research has identified 30,385 cell sites where the energy equipment is owned and operated by ESCOs – how long do you think it will take to achieve 50,000 ESCO cell sites? And what proportion of those would you hope to have in Aktivco’s portfolio?

We think there will be a big shift toward new business models for telecom infrastructure in the coming four to five years, and I’m optimistic that an increasing number of MNOs, and towercos, are going to push toward the ESCO partnership model. We’re looking beyond our current combined model of energy services, security, refuelling and maintenance of passive infrastructure – we think there will be opportunities for proven partners like the Camusat Group to manage active equipment as well.

The speed of growth of the ESCO market will depend a lot on the availability of capital. But we’ve contracted 2,000 African cell sites in a little over a year, and we see opportunities beyond Africa too. We’ve already hit our growth target for this year, and we’re on a good trajectory to achieve our target to operate 10,000 cell sites within four years, so perhaps that is also a good timeline to forecast the entire ESCO market reaching 50,000 sites by 2022.