ESCO Energy Solutions

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Call to Energy Services Companies (ESCOs)

The IDC intends to provide concessionary funding to Energy Services Companies (ESCOs) to enable them to provide financed energy solutions to Small and Medium-sized Enterprises (SMEs) to reduce or eliminate the impact of load shedding.

 

This funding will be aimed at supporting SMEs that prefer to have a financed energy solution rather than owning the asset and taking on the corresponding liability.

 

To apply, please download the relevant application and IDC NDA Return Document/Annexure C below.

If you have any queries or need more information, please email esco.applications@idc.co.za.

The sustained load shedding in 2022 and now continuing in 2023 has become a significant risk factor that threatens the survival of many SMEs. Besides losing customers, SMEs have to contend with increased fuel costs for backup generators, wastage, backlogs as well as plant and equipment damages.

 

The IDC intends to provide concessionary funding to Energy Services Companies (ESCOs) to enable them to provide financed energy solutions to Small and Medium-sized Enterprises (SMEs) to reduce or eliminate the impact of load shedding. The envisaged small-scale embedded generation solutions will typically include rooftop solar PV with or without batteries to enable energy storage for consumption during load shedding. The ESCOs will enter into medium to long-term (indicatively up to 10 years) Contracts such as Power Purchase Agreements (PPAs), Power Lease Agreements (PLAs), Instalment Sales Agreements (ISA), Lease-To-Own Arrangements and any other similar arrangements with qualifying SMEs.

 

This funding will be aimed at supporting SMEs that prefer to have a financed energy solution rather than owning the asset and taking on the corresponding liability. The energy solutions provided to the SMEs by ESCOs will be required to demonstrate a positive impact on the SMEs’ future cashflows and thus their ability to honour the terms of the Contracts for a specified tenure.

ELIGIBILITY CRITERIA FOR ESCOS

Applications should meet the following overarching criteria at a minimum:

  1. The ESCO must be a South African-owned and registered company.
  2. The ESCO should have a proven sustainable business model with a minimum of 2 years in operation. A sustainable model is demonstratable through; (1) The financial performance of executed projects and (2) The technical performance of these projects.
  3. The ESCO should have a track record of successfully executing embedded solar PV projects preferably to SMEs in the Commercial and Industrial (C&I) sector, having deployed at least 3 such projects.
  4. Proven track record of providing financed energy solutions through Contracts will be an added advantage.
  5. A demonstratable pipeline of Solar PV projects, preferably for SMEs in the C&I sector.

FUNDING TERMS

The following is a summary of key funding terms offered by the scheme:

 

Qualifying ESCOs Energy Services Companies that provide embedded generation solutions preferably through Contracts (PPAs, PLA, Lease-To-Own, Instalment Sales and other funded solutions).
Funding Instruments A combination of Senior Debt, Subordinated Debt and Mezzanine Debt to be structured on a case-by-case basis.
Repayment period Maximum of [10] years
Interest moratorium Maximum of [6] Months
Facility availability period 24 months
Loan Amount to ESCOs Minimum: [R25] million per ESCO

Maximum:  [R250] million per ESCO
Utilisation per project / SME Maximum: [R50] million

Cost of solutions to be restricted to what the SME can afford
Gearing Up to [95%] of the cost of components and direct labour (own or subcontracted) relating to an installation can be funded.
Pricing Minimum Interest rate: Sub-prime

Maximum Interest rate: Prime +3%

The risk profile of the ESCO will be taken into account when determining the interest rate.
Drawdown Drawdowns will be based on signed and committed projects.
End-user benefit The benefit of reduced cost of funding must be passed through to the SMEs through affordable tariffs.

Tariff escalations should be CPI/Prime-linked depending on the nature of the Contract.
Other requirements Applicants must be at least BBBEE Level 4 or undertake to reach that level within 24 months after approval.

Applicants with a BBBEE rating of Level 4 and better will be considered for further discounted funding for a portion of their loan facility.
Exclusions SMEs with an annual turnover of [>R100m].
Local Content ESCOs must demonstrate to have endeavoured to source and procure locally assembled and manufactured components.
Security Cession of Contracts and debtors book.
Reporting Requirements
  • ESCOs will be required to report on the following:
  • The technical performance of installations (monthly);
  • A metering solution with standardised data reporting the amount of generation, carbon offset, and other performance metrics at a portfolio level (monthly);
  • Audited financials (annually) and management accounts (quarterly);
  • Off-taker / Lessee payment performance, Non-performing Contracts, default rates (monthly); and
  • SME compliance matters including FICA (at the time of drawdown/as when required).

Detailed requirements will be provided to ESCOs that advance in the application process.

APPLICATION PROCESS

  • All documents submitted must be in English;
  • Applications are to be submitted to the following email address: esco.applications@idc.co.za
  • Only applications received through the prescribed processes will be accepted;
  • Applicants must complete an IDC NDA Return Document/Annexure C;
  • Incomplete submission will not be accepted; and

 

The IDC will review applications as and when they are received. Applicants are encouraged to submit their applications as soon as they are ready to do so.

 

Applicant should ensure that all documents required/requested in the application form are also submitted online.

CLARIFICATIONS AND QUERIES

  • It is preferable that ESCOs confirm their intent to submit applications for consideration. In doing so, ESCOs become eligible to submit written clarifications and queries.
  • Clarification questions and queries must be submitted to the following email address: esco.applications@idc.co.za.
  • Clarification questions and queries will be responded to by email and copied to all other interested ESCOs unless they are confidential.
  • IDC responses will be sent by email.

 

Should you experience any difficulty with the email address, please contact the IDC’s Call Centre on 0860 693 888 for assistance.

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