Toyota Kenya has acquired a 35% stake in solar installation company Ofgen for an undisclosed value, deepening the auto firm’s interest in the growing clean energy market and offering an avenue to offset its carbon production.
The Competition Authority of Kenya (CAK) in August approved the deal that will help the auto firm, now known as CFAO Kenya, to diversify its earnings further.
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 cut its carbon production from ventures like car manufacturing and increase the firm’s environment-friendly credentials.
Ofgen has installed over 30 power plants for firms like Serena Hotels, Strathmore University and BAT in the companies’ efforts to cut reliance on electricity from Kenya Power.
“The Competition Authority of Kenya has approved the acquisition of a 35% equity stake in OFGEN Limited by CFAO Kenya Limited unconditionally, thereby enhancing investments in renewable energy in the country,” said CAK without providing the value of the deal.
Toyota Tsusho stepped up its diversification plan with the purchase of French distribution company CFAO in 2012, giving it access to businesses, ranging from retail to healthcare, across Africa.
These businesses have now been integrated with Toyota Tshusho’s own operations, which were mainly involved with vehicle sales.
CFAO’s automotive business, which includes distribution of Toyota and Mercedes Benz cars in Kenya, used to contribute more than half of revenue while healthcare, including pharmaceutical distribution, makes up a 3rd.
The rest comes from technology and energy, which includes renewable energy generation plants.
The company said earlier it wanted to achieve a balance where all the businesses contribute close to an equal share of revenue, which it would do through increased investments and buyouts.
Ofgen offers Toyota a chance to cash in on the millions of solar kits being mounted on the roofs of homes and business premises around the country.
Households and heavy-consuming industrialists in Kenya have over the past 5 years turned to solar, seeking reliable and cheaper supply alternatives to Kenya Power, which has also expressed interest in going into solar installation.
The purchase will open a new revenue source for the company targeting the country’s estimated solar potential of approximately 15,000 megawatts (MW). At the moment, the installed capacity is over 100MW led by the rural electrification programme’s off-grid power stations, Malindi Solar Group and Garissa Solar.
Toyota targeted Ofgen after it hired the company 3 years ago to install a 490- panel roof-top solar plant at its headquarters on Mombasa Road in Nairobi with a power capacity of 180kW and an annual energy production of 230,000 kWh. The plant could save Toyota nearly Sh17 million in electricity bills over a period of 20 years and reduce their carbon footprint by 45 metric tonnes per year.
Toyota expanded the engagement with Ofgen, building more solar power systems on the roofs of offices in Uganda, converting approximately 1/3 of its power use to renewable energy. The firm then decided to get into the business of solar power engineering, procurement, and construction for commercial and industrial firms through Ofgen.
Founded in 2014, Ofgen has built and financed over 30 on-grid and off-grid solar plants across Kenya, Uganda, Rwanda, and South Sudan markets.
Besides Toyota, some of its leading clients 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 solar photovoltaic (PV) grid-tied systems to supply power for internal use to ensure reliable supply and reduced operational costs.
Big power consumers such as Africa Logistics Properties (ALP), Mombasa International Airport, and the International Centre of Insect Physiology and Ecology (Icipe) have recently commissioned solar power units on their properties.
Multinationals like Toyota are adopting clean energy in a global push for carbon neutrality that has also drawn investment in clean energy products across the continent.
Kenya hopes to tap into this new market by setting up an emissions trading system that will allow companies and other bodies to buy emission allowances.
The Nairobi International Financial Centre signed a MoU with 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 marketplace for carbon offsets.
The Carbon Exchange will be an important element in Kenya’s sustainable finance ecosystem and will be instrumental in channelling global capital flows into the country’s high-impact environmental projects such as reforestation, land restoration and new technologies.