Keep Cool Deep Dive #0001: Mandulis Energy

3797 words, ~ 12 min read

Welcome to the first ever Keep Cool Deep Dive! In this new Deep Dive series, we will focus each issue on one great climate tech business and the climate challenges they serve, all while working to develop our own climate tech investment theses. For now, we’re immersing ourselves in conversations with founders, taking the opportunity to study and profile what it takes to build a business utilizing one of the climate solutions explored in our reports. In the future? We’ll connect some of you to great job opportunities within the organizations highlighted. We’ll illuminate stellar opportunities to invest. Who knows, we may even invest ourselves 💭.

For this inaugural Deep Dive, we had the pleasure of sitting down with Peter Nyeko, CEO of Mandulis Energy

Want to get up to speed on how companies like Mandulis generate clean electricity and biochar through processing biomass? Check out our associated report on Biochar and pyrolysis here

If you read nothing else...

Mandulis Energy is building a network of pyrolysis and gasification facilities that turn surplus biomass (e.g. otherwise unusable rice husks & ground nut shells) into electricity and biochar. Throughout rural Uganda, where Mandulis operates, there’s plenty of available biomass (needed for these operations) as well as farmers in need of more economic opportunity. 

While the roots of the business are in energy-generation, longer term, Mandulis is focused on supporting more robust farming communities. Farmers in the Mandulis ecosystem receive electricity, technology to scale their own operations, and income from selling their biomass. When these farmers produce more, they become increasingly productive parts of the Mandulis supply-chain; as they provide more biomass, Mandulis can generate more electricity, processed biochar, and carbon offsets. Further, the farmers can become customers of Mandulis’ zero-carbon-footprint briquettes, one of the many outputs of processed biochar produced through biomass gasification & pyrolysis, that can be used as cleaner cooking fuels.  

“The real money is not in lighting and phone charging… let the money come from carbon offsets… [Rather than] rely on direct sales to someone living below the poverty line [we’d prefer] they be part of our supply chain.” - Peter Nyeko

Mandulis is not just an innovative business model. In terms of climate impact, at scale, it’s operations targets greenhouse-gas (“GHG”) emissions-reductions of up to 60,000 tons of C02 annually (source here), comparable to taking 15,000 cars off the road. Further, their clean cooking fuels could “(save) 1M trees every year, which is equivalent to saving a forest half the size of Rome."

Mandulis will achieve this level of impact In the following ways:

  • Biomass gasification & pyrolysis facilities providing GHG-free electricity in areas where diesel or coal is otherwise used to generate electricity. 
  • Replacing coal in production: Biochar outputs from its operations can be used to replace coal in the creation of materials like cement, the production of which is typically highly GHG-intensive. 
  • Sequestering carbon: Biochar outputs also sequester carbon that would otherwise be released into the atmosphere if the input biomass was burned or decomposed rather than processed by gasification & pyrolysis. 
  • Reducing dependence on GHG intensive cooking fuel: Further, processed biochar outputs like Mandulis’ zero-carbon footprint briquettes, reduce rural citizens’ dependence on charcoal and wood as a cooking fuel. When burnt, wood releases GHGs into the atmosphere and its collection drives deforestation. 

The opportunity: Calling all investors! At present, Mandulis is raising a meaningful equity round to build and operationalize its facilities. Mandulis has won numerous grants, achieved proof of concept, built partnerships with some of the most bankable companies in the world like Coca Cola, and started selling carbon offsets. To take the business to the next level, Mandulis is seeking $80M in equity funding across four projects (described in The Business section). The funding would be supplemented by low-cost debt from governments and other grant-making organizations (which is already committed). 

More of an audio/visual learner? Here’s a video from when an EU delegation visited Mandulis’ project site in January, 2020, as well as one from the USAID Mission Director’s visit to Mandulis in August, 2020.

Below we’ll get into much more detail on Mandulis Energy, analyzing its business model, climate impact challenges and opportunities. To outline the piece, we’ll cover the following sections: 

  • The Inspiration: How it all began for Peter and team.
  • The Business: The four distinct SPVs that Mandulis operates 
  • Earth Energy Deep Dive: A closer look at one of the SPVs and it’s unit economics
  • The Grand Vision: Electricity as the enabler for a larger flywheel 
  • Challenges and opportunities: Investor risks and rewards 
  • The Impact: A look at Mandulis’ climate implications  

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The Inspiration

Nyeko tells us that at its core, Mandulis Energy is just that, an energy company. But it’s not just about creating electricity. As Nyeko notes:  

“Reliable, affordable and sustainable energy – energy is the word... [But] energy is not just electrons, it’s not just kilojoules. It’s also calories. We’re an energy company [across] fuel, food, EV charging stations, and electricity… it’s all energy.” ⚡⚡⚡

Nyeko founded Mandulis Energy to provide cheaper, renewable energy to Ugandan farmers and refugees. Trained as an aerospace engineer, Nyeko went to the Ugandan Ministry of Energy in 2010 with visions of setting up solar-powered gas turbines:

“They told me they don’t have a legal framework in place to monitor that [type of operation]. But … [they did] have massive capacity for biomass and no one wants to do that because it’s complicated… I said don’t tell an engineer that something’s complicated… that just eggs me on.”

In a largely rural country like Uganda where 80% of the population lives in rural farming communities (see here), there’s significant agricultural waste waiting to be transformed into energy (and other valuable outputs). In fact, Nyeko notes that there’s enough excess biomass from agriculture alone in Uganda to triple the country's energy capacity: 

“We have well over 1 ton of ag waste for everyone Ugandan… just rotting away… that’s massive, that’s up to 50GW of electricity generation, which could serve all the energy needs of Uganda and more”

Rice Husk Dryer and Store Mandulis Energy

Mandulis’ rice husk dryer and storage

Identifying this opportunity, a distinct lack of competition, an existing regulatory framework and hints of strong government demand, Nyeko and his sister, a savvy financier and lawyer, set out to tackle this biomass → electricity challenge. In the decade since, Mandulis Energy has developed into much more than just a renewable energy project. 

While Nyeko’s training and Mandulis’ roots lie in renewable energy, over the course of the past decade, the company has set its sights on community incubation and economic development, too. Mandulis aims to not just create cleaner electricity and to expand access to it. Rather, by building more economically prosperous and technologically advanced farming communities across the country (and ideally, all of Africa), Nyeko believes Mandulis can ultimately make more money and impact by producing biochar, clean cooking fuels, and selling carbon offsets, than by selling their electricity. 

“I buy [farmer’s] waste so they can make money. The more they grow, the more I grow… and the economy is kicked off. That was the first thing that made me shift to biomass from solar even though I’m a solar engineer... Where there’s no economy, why not create an economy?

Starting to see why we’re so excited about Mandulis? Let’s explore the specifics of the business in greater detail 👇


The Business

There are four distinct projects, each of which is organized as its own special-purpose vehicle (“SPV”), that ladder up under the Mandulis Energy umbrella. Mandulis Energy is a UK-based company that owns a substantial stake in the first project described below, Earth Energy, and owns all other projects in full: 

1. Earth Energy: Biomass gasification & pyrolysis facility that could generate up to 20 MW / hour on-grid (i.e. connected with power grids). For more on pyrolysis, see our Biochar report here. Nyeko estimates that the biochar output of Earth Energy alone can meet 100% of the company LaFarge-Holcim’s heating fuel needs in Uganda, and replace up to 50% of Uganda’s coal imports.

2. REPARLE: Off-grid (i.e. not connected to larger power grid) processing facilities for rural farmers to turn their agricultural waste into production-ready inputs used in plants like Earth Energy. This will create electricity and produce other valuable outputs like clean cooking fuel.Each individual site is capable of generating up to 2 MW / hour, utilizing the waste of up to 4,000 farming families and 20,000 acres of productive farmland Farming families are compensated ~ $20 per ton of biomass and receive electricity for contributing to the supply-chainREPARLE targets setting up 16 fully-functioning sites within the next 1-2 years (contingent on funding), with a stated income target of $5M per site. 

3. SEPARLE: Off-grid micro-sites comparable to REPARLE (above) that are set up specifically in refugee farming communities, and are powered by a combination of biomass and solar.Mandulis has secured partnerships with companies like Accenture and Mastercard, and with both the UNHCR and the FAO, to develop these sites.

4. BEPEARL: Processing wet agricultural waste (as opposed to dry waste) to generate electricity and produce biogas (see more here). Mandulis has secured partnerships with companies like Coca Cola and Diageo who will purchase products created by these sites, including organic fertilizers and captured carbon dioxide which can be cleaned and bottled (e.g. for sparkling beverages)Mandulis targets another 16 fully-functioning BEPARLE sites in their near-term roadmap.

Briquette Production line Mandulis

Zero-carbon-footprint briquettes production line

In sum, Mandulis targets 48 total off-grid sites, as well as the 20 MW on-grid Earth Energy plant. Each of the different projects in the ecosystem will generate revenue from multiple sources (e.g. by generating electricity, biochar outputs, and carbon offsets), and contribute to the development of local economies and communities

The off-grid sites are also highly scalable because unlike the 20 MW on-grid plant, they are designed to operate below energy generation thresholds that require permits. 

Mandulis’ competition in these types of ‘mini-grid’ sites are typically smaller operations based on solar and battery storage, which is expensive and only generates electricity. These types of sites also sell directly to customers who often live in poverty, which doesn’t necessarily make for the most resilient or impactful business model.

To date, Mandulis has launched five off-grid and grant-funded sites as pilot projects, which are essentially “micro-versions” of each of the SPVs outlined above. Feasibility studies, financed through a combination of grants and forward sales of carbon offsets, have also been completed for Earth Energy. In sum, Mandulis has received north of $200,000 in grants from the Ugandan and German governments plus another ~$1M in grants from the African Development Bank (source here). The company has also raised $300,000 in pre-seed equity financing, $100,000 of which was in convertible notes and $200,000 of which was in agreement with an incubator for future equity. Otherwise, limited equity sales were made in “friends and family” type rounds to get the Earth Energy project off the ground. 

In terms of its roadmap to achieve scale, Mandulis is looking for financing, which we explore further in the Opportunities and Challenges section. With proper funding, Nyeko estimates each of the four key components of the Mandulis ecosystem could be fully operational within a year. 

The longer-term vision, once Mandulis’ thesis in Uganda has been borne out, is to replicate the entire model of combined on-grid and off-grid sites. This will be done in no-electricity areas with substantial farming that also have a nearby-metro area that could support a plant like Earth Energy. Nyeko laid out what Mandulis looks for in these target markets as follows:

“Every government has a map of where they cannot afford to expand electricity to. That’s what we target”

Now, before we can fully appreciate Nyeko’s Grand Vision for Mandulis, let’s take a deep dive into the economics of the on-grid, Earth Energy project. 


Earth Energy Deep Dive

Economics: The plant would have at least three revenue sources: Electricity, biochar (output of electricity production), and carbon offsets. 

  • Electricity: Each Megawatt hour sells for ~$110. The plant would target an uptime of 8,760 hours annually. At 20mW / hour, this yields ~$20M / year in revenue. The anticipated Net Income (“NI”) margin on this $20M in revenue is 15%
  • Biochar: 300,000 tons of input biomass to create energy is sourced from farmers (and processed by REPARLE) at $40 per ton. This yields 45,000 tons of output biochar which can be sold to cement plants (e.g. LafargeHolcim) at ~$100 ton = 4.5M in profit. We might conservatively estimate a ~50-60% sell-through rate here, as opposed to assuming all biochar is sold. E.g., some may be returned to farmers as a soil enhancer, nutrient store, moisture sink and microorganism nurturing ecosystem (to blend with organic fertilizers from BEPEARL).
  • Carbon Offsets: 5 tons of C02 are sequestered in every ton of biochar, which can be sold as carbon offsets for ~$16/ton conservatively (e.g. via existing partnerships like Mandulis’ work with Project Wren). 45,000 tons of biochar * 5 = 225,000 tons of C02 sequestered and $3.6M of net income from carbon offset sales. 
  • Total Forecast Net Income = ~$8.85M / year: Electricity = $3M (34% NI contribution). Biochar sales = $2.25M (conservative 50% sell-through rate - 25% NI contribution). Carbon offsets = $3.6M (40% NI contribution)

Status of current operations: 

  • Development agreement with the Ugandan Ministry of Energy’s Electricity Regulatory Authority ERA, and power to be purchased by the Ministry of Finance-backed Uganda Electricity Transmission Company UETCL.
  • Feasibility studies have been completed, conducted by leading global engineering consulting firm COWI, funded by the African Development Bank’s Sustainable Energy Fund for Africa SEFA, in concert with UK, Danish, and Italian foreign ministries as well as the US Agency of International Development.
  • Target fundraising: $80M in total; 25% equity, 75% debt. 

The Grand Vision

Having explored the details of the Earth Energy business, we see an attractive dynamic at the on-grid electrical plant level in addition to the entire Mandulis ecosystem. Nyeko illuminates it succinctly: 

“The electricity revenues are just the enabler for everything else.” 

With only 35% of net income stemming from electricity, and the rest contributed from sales of biochar and carbon offsets, Earth Energy has diversified revenue streams that provide a margin of safety and reduce the impact of fluctuations in energy prices or on any one client. By reducing reliance on profit from the sale of electricity, Mandulis can subsidize electricity in service of building local communities, creating a broader network of farmers, and maintaining goodwill with grant-makers and governments. 

Here’s where the centrality of community development comes to the fore. Peter explained it for us as follows: 

“The more [electricity] we give away to the community, the more they use our products... the more they use our products, the more we can sell our carbon offsets...We build the social, the physical, and the economic infrastructure … you could say we’re a community incubator more than anything else…That’s why we’ve received so many grants from governments who see our initiative...”

The key question here is whether subsidized or perhaps even free electricity can act as an efficient method of customer acquisition for Mandulis. Nyeko notes that a single additional farmer in the Mandulis ecosystem could represent up to 5 tons of carbon offsets annually. Even at the baseline $16/ton price we quoted earlier, that’s $80 per annum of income to Mandulis (and that’s of course only one of the many ways Mandulis benefits from having said farmer in the network). If the electricity revenue foregone to attract said farmers is fundamentally lower than that $80, you have a potential attractive flywheel that’s starting to spin.

That’s ultimately why Mandulis isn’t just building the Earth Energy on-grid electric plant. Nyeko believes the other three projects planned for the ecosystem could ultimately prove even more exciting and profitable than the on-grid plant, and could be scaled anywhere across the continent where biomass is readily available and security risk isn’t too high.


Every Challenge, an Opportunity

As with most funding for energy projects, return on invested capital is only realized as the projects become fully operational. The riskiest phase of these projects is the development phase. Of course, with risk come significant opportunities to generate return. In Mandulis’ case, it has proven the viability of the technology and is at an inflection point where it is transitioning to the construction phase, where future capital raised will be deployed to build up its actual facilities.

earth energy capital cost funding

A “proper” equity round is what’s needed to carry Mandulis through this construction phase. To date, the team has focused on winning grants. However, to reach escape velocity, each of the four core components of the business would require a total of $320M in financing to achieve 100% capacity. Having said that, Mandulis’ grant-makers have already expressed willingness to support a capital structure with ~75% in low-cost debt, which they would provide once equity funding is secured. Hence, across four projects, financed with 25% equity in the capital structure, Mandulis is looking for approximately $80M in cash raised from equity to fund all four projects. 

An investor across all of Mandulis’ projects is exactly what Nyeko and team are looking for, considering the significant synergies across the ecosystem, e.g. in the sales of processed waste from REPARLE to Earth Energy.

“We are looking for an [investor(s)] to plug into Mandulis energy...Having an [enterprise-wide investor] who could look at the whole ecosystem - that’s the ideal scenario” as you can make decisions across the whole ecosystem, not at the SPV level”

Of course, the level of investment Mandulis is looking for is challenging to find. As discussed previously, existing grant-makers to Mandulis have indicated willingness to match equity investment with low-cost debt to fund Mandulis’ operations, which could reduce Mandulis’ overall cost of capital, reducing risk to investors. Still, competition for capital is stiff, and there’s far fewer investors willing to take on infrastructure investment versus, say, investing in software companies with minimal fixed costs.   

As such, Mandulis is also open to investment at the SPV level. If this becomes the path forward, Mandulis will look for strategic investors to support each of the four components of the business listed at the outset of this section. 

Ultimately, these are the critical questions Nyeko finds himself wrestling with most often: 

“What would it take to find the right private sector players...” to provide the funding needed to scale the entire Mandulis ecosystem and / or the individual SPV projects? 

To answer Nyeko’s question, we suspect the ideal private sector investors for Mandulis will be ones focused on impact as well as robust financial returns. There is considerable climate and community impact that Mandulis is tapping into; let’s explore it further. 🔎


The Impact

Considering Nyeko’s ambition for Mandulis, there’s a considerable amount of climate impact that the company could have if it secures proper funding and executes against its roadmap. Its biomass gasification and pyrolysis-based energy production systems, whether on-grid or off, can significantly reduce the market-share that cheap coal or diesel-based electricity commands, especially in rural areas and in developing economies: 

“Competition more than anything else is diesel in rural, small-holder farmers areas…” 

Further, the outputs of Mandulis’ operations can cut GHG-emissions, too. As noted earlier, biochar produced by the biomass gasification and pyrolysis process can be used by cement companies, whereas traditional cement production generates significant GHG emissions. In fact, cement production accounts for as much as ~10% of  GHG emissions globally each year (see here).  

Another output from Mandulis’ operations with high-impact are clean cooking fuels and biochar briquettes:  

“Every year, over 4 million people die due to poor indoor air quality. Clean cookstoves dramatically improve air quality, leading to healthier lungs as well as less deforestation.”

Considering Mandulis’ focus on empowering rural citizens and farmers, the company’s potential impact extends beyond climate, too. 👇👇👇

Biogas cookstoves don't just improve air quality, they save a serious amount of labour too. In a firewood-burning refugee household, women spend several hours per day gathering firewood, and more time tending to the fire as they cook. With a biogas stove, the need to forage for firewood can be eliminated. Households with biogas stoves spent 70 minutes less time gathering firewood, and 40 minutes less time cooking daily. Biogas stoves can save almost 10 hours of labour per week.” (Source)

These impacts feed the flywheel of community incubation that’s core to Mandulis’ ambitions. By improving lives, Mandulis can create a vibrant supply chain of farmers who are incentivized and have more time and capital to expand their own operations and to provide Mandulis with more biomass. This establishes a strong roadmap for Mandulis itself to expand, scale, and to offer an attractive return to its own stakeholders in the process. 


Mandulis Energy Director celebrating project launch with farmers

Peter Nyeko (center left), celebrating project launch with farmers 


In closing, we were compelled by Nyeko’s vision for Mandulis as much more than an electricity business. If his thesis is borne out, Mandulis will become the centrepiece of more developed, sustainable, and equitable communities for African farmers. It will also continue to curry significant favor from government organizations, grant-makers, and the impact arms of multinational corporations like Accenture (who are already providing Mandulis with pro-bono consulting). 

As we hope to do with any Keep Cool Deep Dive, we believe Mandulis’ model tells a larger story capable of inspiring a rising generation of climate entrepreneurs to think about an ecosystem and revenue backed model that also advances critical climate impact. 

The leap from pre-seed equity investments to a Series A round of $80M is a big one, but for the right mission-aligned investors, we see the makings of an attractive investment that delivers return as well as economic development and climate impact. For interested investors, please get in touch with us at team@keepcool.co, we’ll be happy to facilitate introductions.  

We extend many heartfelt thanks to Peter Nyeko, who afforded us with considerable time and resources to better understand Mandulis and his climate tech journey. Additional thanks go to Mehrad Yaghmai, who provided considerable input and feedback as we developed this report.

We hope you enjoyed the inaugural Keep Cool Companies Deep Dive. We look forward to hearing your feedback,

Nick + Gabe at Keep Cool


Disclaimer: Keep Cool did not independently verify any of the quantitative information outlined in this piece. Mandulis Energy generously provided significant third-party documentation which we have reviewed in conjunction with our conversations with Nyeko. To explore these resources, please reach out team@keepcool.co and we’ll make an introduction to Peter Nyeko and his team.  

None of the information or analysis included should be interpreted as financial advice. All images were provided courtesy of Mandulis Energy. All financial figures quoted are in USDs except where otherwise stated.

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