Toyota Kenya acquires 35% stake in solar installation company
Toyota Kenya has acquired a 35% stake in solar installation company Ofgen for an undisclosed value, deepening the car company’s interest in the growing clean energy market and providing a way to offset its production of carbon.
The Competition Authority of Kenya (CAK) on Tuesday approved the deal which will help the automotive company, now known as CFAO Kenya, to further diversify its revenue.
The Toyota Tsusho Group is increasingly investing in green energy, including solar power projects, to earn carbon credits. The Japanese multinational will use the credits to reduce its carbon output in businesses such as car manufacturing and boost the company’s environmental credentials.
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Ofgen has installed more than 30 power stations for companies like Serena Hotels, Strathmore University and BAT as part of the companies’ efforts to reduce Kenya Power’s reliance on electricity.
“The Competition Authority of Kenya has unconditionally approved the acquisition of a 35% stake in OFGEN Limited by CFAO Kenya Limited, thereby bolstering renewable energy investment in the country,” CAK said without providing the value of the deal.
Toyota Tsusho stepped up its diversification plan with the purchase of French retail company CFAO in 2012, giving it access to businesses, ranging from retail to healthcare, across Africa.
These activities have now been integrated into Toyota Tshusho’s own operations, which were primarily involved in the sale of vehicles.
CFAO’s automotive business, which includes the distribution of Toyota and Mercedes Benz cars in Kenya, contributed more than half of revenue while healthcare, including pharmaceutical distribution, accounted for a third.
The rest comes from technology and energy, which includes renewable energy generation plants.
The company said earlier that it wants to achieve a balance in which all companies contribute a nearly equal share of revenue, which it will do through increased investments and buyouts.
Ofgen is offering Toyota a chance to capitalize on the millions of solar kits installed on the roofs of homes and commercial premises across the country.
Over the past five years, large consumer households and industrialists in Kenya have turned to solar power, seeking reliable and cheaper supply alternatives to Kenya Power, which has also expressed interest in getting started. in the solar installation.
The purchase will open up a new revenue stream for the company targeting the country’s estimated solar potential of around 15,000 megawatts (MW). At present, the installed capacity is over 100MW, led by off-grid power stations of the rural electrification program, Malindi Solar Group and Garissa Solar.
Toyota targeted Ofgen after hiring the company three years ago to install a 490-panel rooftop solar power station at its headquarters on Mombasa Road in Nairobi with a power capacity of 180 kW and an annual energy output of 230,000 kWh. The plant could save Toyota nearly 17 million shillings on its electricity bills over a 20-year period and reduce its carbon footprint by 45 metric tons per year.
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Toyota has expanded its engagement with Ofgen, building more solar power systems on office rooftops in Uganda, converting around a third of its power consumption to renewable energy. The company then decided to venture into the engineering, supply and construction of solar energy for commercial and industrial businesses through Ofgen.
Founded in 2014, Ofgen has built and financed over 30 on-grid and off-grid solar power plants in the markets of Kenya, Uganda, Rwanda and South Sudan.
Besides Toyota, some of its major customers include Williamson Tea, Fairmont Hotels, Grain Bulk, Kenya Airways, Serena, Strathmore, Kenya Ports Authority, Glaxosmithkline and BAT.
Several companies, universities and factories have turned to grid-tied solar photovoltaic (PV) systems to provide power for internal use to ensure reliable supply and lower operating costs.
Major energy consumers such as Africa Logistics Properties (ALP), Mombasa International Airport and the International Center of Insect Physiology and Ecology (Icipe) have recently commissioned solar power units on their properties .
The growing switch to solar power systems by large-consuming industrialists looking for a reliable and cheaper supply has rattled electricity distributor Kenya Power amid falling revenues.
The utility company said some of its industrial customers – which account for more than half of its revenue – are gradually shifting to self-generated solar power, dealing a further blow to its already struggling finances. decrease.
Multinationals like Toyota are embracing clean energy in a global push towards carbon neutrality that has also attracted investment in clean energy products across the continent.
Africa produces few greenhouse gases linked to rapid climate change, but the continent is widely considered the most vulnerable to climate change because much of its population is poor, rural and often dependent on rain-fed agriculture.
The continent is, however, attracting capital flows for carbon offset projects. Estonian ridesharing company Bolt, for example, has partnered with Seedballs Kenya to plant one million seeds as part of its strategy to achieve net zero emissions.
Kenya hopes to tap into this new market by setting up an emissions trading system that will allow companies and other organizations to buy emission allowances.
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The Nairobi International Financial Center has signed a Memorandum of Understanding with the Singapore-based global carbon exchange, AirCarbon Exchange (ACX), to set up the carbon exchange in Kenya.
This will support the growth of climate finance in Kenya by establishing a locally accessible market for carbon offsets.
The carbon exchange will be an important part of Kenya’s sustainable finance ecosystem and will be instrumental in channeling global capital flows to the country’s high-impact environmental projects such as reforestation, land restoration and new technologies.