SNV Cambodia localises trading platform for clean cookstoves
On 3 October 2016, SNV and C-Quest Capital Cambodia, a subsidiary of US-based company C-Quest Capital LLC, signed an agreement for the administration of the Stove Auction trading platform in Cambodia.
“C-Quest Capital LLC is very pleased to be managing the Stove Auction trading platform. The concept is a first of its kind in the clean cookstove sector and is an extremely innovative way to accelerate market penetration for the cleanest burning most efficient biomass stoves using results-based financing. The business model is highly replicable and scalable in other developing country markets stuck in a rut of unhealthy, environmentally destructive cooking practices”, said Ken Newcombe, CEO of CQC LLC.
According to the World Health Organisation, almost 12,000 people die each year in Cambodia as a consequence of inhaling smoke from cooking, which is almost as much as diarrhea, malaria, HIV AIDS and tuberculosis combined. This health hazard can be drastically reduced by advanced biomass stoves that are cleaner, more energy efficient and safer than traditional biomass stoves currently used by the majority of Cambodian households.
Funded by GIZ/Energising Development (EnDev) Results-based Financing (RBF) Programme, the Stove Auction focuses on facilitating the vital connection between international suppliers of these high performance stoves, and local distributors and retailers through the establishment of a trading platform. The trading platform aggregates a number of distributors and retailers to buy stoves, replacing the initial need and costs for stove suppliers to make these relationships with local partners themselves, thereby reducing their market entry risk.
The Stove Auction stimulates interest from local distributors and retailers by giving them the opportunity to bid on small volumes of stoves at competitive prices in an auction format, and providing them a results-based cash incentive for each stove they sell to a consumer that can be verified. Without such a scheme, the majority of local distributors and retailers would not be able to afford purchasing directly from international stove producers due to their lack of working capital as well as perceived high risk to invest large sums of money when the market for advanced biomass cookstoves is still quite new and uncertain to them.
For the Stove Auction, the market hypothesis is that local demand for these new products will increase over time leading to increased willingness of local distributors to pay higher prices at the auctions. Less and less results-based financing incentives will then be required to eventually reach a situation where the market is operating at full commercial prices.
Since March 2016, SNV has piloted the Stove Auction in Cambodia. Early indications are that market factors will lead to significant volumes of stoves to be distributed also after the results-based financing incentive scheme is phased out towards the end of the project period. The goal of the project is that the structure for market aggregation and transparent marketplaces as provided by the Stove Auction remain after the project period.
“The overall exit strategy for the project is for a third party to maintain these functions after the project period and be financially self-sustained from fees collected from stove suppliers and distributors using the structure already piloted and other additional revenue streams. In preparation of this exit strategy, we have selected CQC through a competitive bidding process to administer the Stove Auction. We wanted to find a third party whose intention is to stay in the clean cookstove sector in Cambodia for the long-term. That aspect is very important to us, and we feel that CQC has the capability to do this”, said Dennis Barbian, SNV Regional Programme Manager of the Stove Auction.
“Our investments across the globe, ranging from clean cookstoves, biomass fuel supply and energy efficient lighting are all long-term engagements. Our interest in Cambodia is also long-term. Our intention is to establish ourselves as a market aggregator in Cambodia and potentially other countries in SE Asia, such as Laos, through the Stove Auction project and continue this role after the EnDev RBF phase is completed”, said Jason Steele, COO of CQC LLC.
“Our goal and aspiration in Cambodia is strategically focused to assist the sustainable growth of SMEs operating in sectors that provide socio-economic and environmental impact toward the broader communities. Being the market coordinator under the Stove Auction, advanced biomass cookstoves is a perfect place for us to start considering the market potential for these types of products and most importantly their positive impact to the environment and women’s and children’s health and well-being”, said Reaksmey Long, Managing Director of CQC Cambodia.
“EnDev is interested in testing new innovative ways, like the Stove Auction concept, to provide results-based financing to the private sector such as international cookstove suppliers and local cookstove distributors and retailers. We are pleased to further attract private sector participation and investment from CQC in this market aggregator role. Together, EnDev, SNV and CQC are demonstrating a new way of implementing results-based financing to overcome market failures that constrain private sector delivery of distributed renewable energy systems in developing countries that increase modern energy access”, said Dr. Christoph Messinger, GIZ/EnDev Programme Officer.
For further information on the Stove Auction, please visit www.thestoveauction.org.
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Contact information:
Dennis Barbian, SNV Regional Programme Manager
Mobile: +855 12 617 438
dbarbian@snv.org
Jason Steele, C-Quest Capital Chief Operating Officer
Phone: +1 202 416 2400
jsteele@cquestcapital.com
Christoph Messinger, GIZ/Energising Development (EnDev) Programme Officer
Phone: + 49 6196 79 1294
christoph.messinger@giz.de