Odyssey Energy Solutions, a platform dedicated to financing and procuring solar equipment and operating distributed solar assets, has launched a credit facility aimed at easing working capital constraints for solar companies in South Africa, Kenya and Nigeria.

The construction credit provides solar companies with working capital for solar equipment that aligns with their project payment milestones, says Maxime Eon, Vice President of Revenue at Odyssey Energy Solutions, who presented the product at a webinar hosted by the Africa Solar Industry Association on July 9.

“Engineering, procurement and construction (EPC) companies involved in developing and building solar projects face ongoing challenges in securing working capital. Additionally, they often experience a mismatch between available credit lines and project cash flows, which forces them to continually seek alternative sources of cash,” he said.

Credit lines available to companies are generally insufficient to fully cover the costs of building solar assets, Eon added. EPCs also face challenges related to the timing of receivables and the obligation to repay credit lines. “If you receive a 30-day payment term from a supplier, regardless of the project stage or collected payment milestones, you are still liable for that credit line,” he said.

As EPCs are service companies and typically do not own substantial assets unless they are very large, borrowing from traditional lenders is difficult. “Applying for a working capital facility from a bank is a lengthy process that doesn’t align with the transactional nature of our industry. You need to be on site soon after being appointed, which means you’re always racing against time,” said Eon.

Odyssey’s credit product allows EPCs the flexibility to repay loans at any time during the construction phase, regardless of whether or not this is in line with the payment milestone, or as a bullet payment upon achieving cash-on-delivery on site.

“The product is designed to match the transactional nature of the industry,” Eon said. “Typically short-term, these facilities provide bridge financing for projects with terms extending up to 12 months and settlement schedules that align with when the EPC is paid by its customers.”

Key features of construction credit:

• Amount: Up to US$5m
• Credit period: Up to 12 months
• Deposit: 15-50% (non-refundable)
• Cost of credit: 1,5-2% processing fee + 1,5-2% per month (indicative pricing)
• Security: Escrow of milestone payments from client and additional collateral if determined
• Repayment: Monthly or at increments that match the project payment schedule
• Approval time: 7-10 days