How a 10MT LPG plant pays for itself in 24 months — and what comes next
Investors who look at rural African energy ask the same three questions: is the capex realistic, does the unit pay back, and can the model compound? This piece walks through the unit economics of a single FahmanEnergy 10MT NMDPRA-licensed LPG plant — the bedrock asset on which everything else compounds — and the use of funds for our Series A. Numbers are rounded, the spreadsheet is available on request to qualified investors.
The plant, by the numbers
Capex
An NMDPRA-licensed 10MT bulk LPG plant — including bulk storage tank, two dispensers, compressor, weigh-scales, fire-suppression system, perimeter fencing, control room, solar array sized for plant power, plus statutory NMDPRA, NESREA and SON compliance — comes in at roughly ₦180–₦220 million in 2026 naira (depending on land cost, soil conditions, and FX at the point of equipment import). The Ilorin plant landed in the lower half of that range because we secured a long-lease site instead of buying.
Throughput at steady state
A well-utilised 10MT plant in our model dispenses ~6,500 cylinder refills per month at steady state — a mix of 12.5 kg, 6 kg and 3 kg cylinders, plus modest bulk dispatches to small commercial customers (restaurants, hostels, agro-processing). That's about 78,000 refills per year.
Per-refill contribution margin
From the cost-stack analysis we published separately, the average contribution margin per refill (after wholesale gas, transport, plant ops and last-mile cost) sits at roughly ₦950. At 78,000 refills/year that is ₦74 million in contribution margin annually at the plant level.
Fixed overhead
Plant fixed costs (manager, two operators, security, insurance, statutory fees, maintenance reserves, depreciation) come to about ₦18 million/year in steady state.
Plant EBITDA → payback
That leaves roughly ₦56 million/year in plant-level EBITDA. Against a ₦200 million capex, that's a ~42-month gross payback at full utilisation — but two adjustments improve it materially:
- Ramp profile: the plant doesn't hit 6,500 refills/month on day 1 — it ramps over 9–12 months. So the realised payback is longer.
- Working-capital recovery: cylinders deposited with customers represent a recoverable asset, not a sunk cost — they net back into the payback calculation.
Net of both, our internal model lands at ~24 months to payback on plant-only capex under conservative assumptions, and ~18 months under our central case. 7-year unleveraged IRR comes in at 18–22%.
Why this works in rural Nigeria when so much else doesn't
- Cash-on-delivery economics. No receivables, no collection risk, no working-capital trap. Money in, gas out, daily.
- Solar-powered ops. The compressor and pumps run off solar — no diesel exposure, no grid downtime, ~₦180/refill structural cost advantage versus diesel-powered competitors.
- Demand far exceeds plant capacity. The Ilorin plant could serve 4× its current Kwara catchment population if distribution kept pace. Our growth bottleneck is channel, not customers.
- NMDPRA licence is a moat. The licensing process is non-trivial; we hold one and most prospective competitors do not.
The Series A — use of funds
We are raising a Series A to compound this model across the next three Kwara LGAs and seed the 2028 solar pilot. Indicative use of funds:
- ~55%: Three additional 10MT plants in Patigi, Babanla and Kishi LGAs, each replicating the Ilorin model with 9–12 month ramp.
- ~20%: Last-mile fleet — 30+ motorcycle delivery riders, kiosk build-outs in 12 new towns, cylinder pool expansion (3 kg, 6 kg and 12.5 kg formats).
- ~12%: Working capital — primarily wholesale LPG inventory and the cylinder deposit pool that grows with active customers.
- ~8%: Solar-electricity pilot — 200 home-system installations and 1 community mini-grid, designed to generate the operating data that de-risks the larger 2029–2030 solar rollout.
- ~5%: Team — operations leads for each new plant, customer-trust officers, finance and reporting infrastructure for institutional reporting cadence.
What investors get
A combination of three things rural-energy capital usually has to choose between:
- Predictable cash flows from cash-on-delivery LPG operations, with a regulated licence and a hard moat against new entrants.
- Compounding optionality as the channel built for cylinders becomes the channel for panels — the upside scenarios materially exceed the base case.
- Verified impact aligned to eight SDGs — measured in households moved off firewood, hours of women's labour returned, indoor-air-quality improvements, and direct rural jobs created.
If the model fits your portfolio, write to us at Fahmanltd@gmail.com. We share a quarterly investor update with anyone who wants visibility on how the unit economics are tracking against this plan.