ESCO Development Programme Strategic Approach 26 May 2011 Monkwe Mpye

1. ESCO Development Programme Strategic Approach 26 May 2011 Monkwe Mpye

2. Document Context • Programme Objectives • ESCo Registration Process • Profile of Registered ESCos & BEE Stratification • ESCo Industry Revenue per Sector • ESCo Engagement Processes • Proposed ESCo Development Approach • Programme Timelines • Conclusion 2014-09-14 2

3. Programme Objective Aggressive planning has been considered to expand the ESCo industry to encompass a full suite of both supply and demand management solutions through training, technical and behavioural measures. The programme can therefore be summarised as follows: To enhance the positioning of ESCo’s To create a new perception of EE & RE services to be a reflection of the status and responsibility of both Eskom & the country as contribution towards the energy crisis in the country To build solid and credible EE & RE expertise for IDM initiatives To ensure more positive and pro-active sourcing of opportunities and projects by ESCo’s To track and analyse all service offerings by ESCO’s 3

4. ESCO Registration Process Required Basic Vendor Supply Info Documents • Comprehensive Vendor Background Information i.e.: • Trading Name, • Address, • Banking Details, • Business Location, • Professional Registration • Manufacturing Capacity & • Capability Survey Supplier Management • Cancelled Cheque • Business Registration, • Tax Clearance, • B-BBEE Certificate • Shareholder Certificate • CIDB Certificate • Signoff By: • Supplier Management • Manager • Financial Manager • Category Manager Registered ESCO

5. Profile of Registered ESCos 400 Top 10% (R 903,934,269) Active ESCOs Bottom 10% 200 (R 15,768,214) In-active ESCOs Ideal ESCO Spread 0

6. ESCo Business Stratification Total of Registered ESCOs Approx’) 400 ESCO Status: Number • Large ESCOs (Revenues > 35 million)…………. • Black Economic Empowerment………………..... • Black Women Owned……………………………… • Small & Medium Enterprises…………………….. • None BEE Classified………………………………. • Other………………………………………………….. 5 25 58 136 41 86

7. ESCo Industry Revenue per Sector 2014-09-14

8. ESCo Engagement Processes 2014-09-14 8

9. High-level ESCo Development Route

10. Planned ESCo Development Programme Implementation Process Flow Develop Technical Audit & M&V Process Identify Clients per Sector, per Region, per Technology Setup Governance Structures; Commercial, Finance Legal & M&V Appoint Super ESCo’s for Skills Transfer Develop Terms of Reference for ESCo Development Nominate SME’s for ESETA for Unit Standard Development 1 4 5 6 7 8 Perform ESCo Screening for Participation Target for ESCo Development per Region per Technology Commit Key Stakeholders to Project Obligations 2 9 3 Awareness & on IDM Opportunities to ESCo’s & Client 10 Commit to Project Obligations 11 Commit to Project Obligations 12

11. Process Flow….cont. Appoint Accredited Training Service Providers 16 Develop Skills Programme for Emerging ESCo Service Provider Accreditation from ESETA 13 15 Perform Energy Audit (Skills transfer by Super ESCO) 18 Develop Training Material for Accreditation by ESETA 3-pronged based Training (Theory, Practical & Simulation) 14 17

12. Process Flow…cont. Investment Committee (IC) Procurement (PTC) (NEC Negotiations & Signoff) Project Evaluation & Authorization Project Registration (PEC & M&V Request) 22 17 23 21 20 Legal IDM Agreement Proposal Submission 24 19

13. Process Flow cont.. Report Progress to MANCOM Management of Overall Progress 31 30 Submit Audit Report Submit M&V Report Project Launch Manage ESCo Targets, Monitor & Report Progress Time, Cost & Quality Management Perform Installation Audit Assign M&V Team (Where necessary) 25 27 26 28 29 Perform Installations / Retrofits Deliver Replaced Fittings to Disposal Company Submit Installation Report & Disposal Certificate 27 28 26

14. Process Flow cont.. Authorize Invoice Consolidate ESCo Target Achievement Pay Invoice Re-Strategise for 2nd Year ESCO Dev. Programme 33 34 39 38 Obtain Final M&V Report & Signoff Produce Lessons Learnt Report Develop & Submit Close Out Report 37 36 35 Submit Invoice Schedule & All Installation Supporting Documents 32 12 12

15. High-level Programme Deliverables Managing the development of ESCos is dependent on various functional roles such as: Governance; Mandates; Objectives; Deliverables & Critical Success Factors. Regional implementation of the ESCO development strategy will require the active participation of Regional Energy Services Management, w.r.t 15

16. Contracting with Emerging ESCO’s • “Guaranteed Energy Savings Performance Contract” • Specifically invoke a language that obligates the contractor (a qualified ESCO) • ESCo: develop, install, and if necessary, help arrange financing for projects designed to improve the energy efficiency and maintenance costs of a facility or facilities over a period of time. • ESCo assume the technical and performance risk associated with the project, and will make a contractual commitment to pay the difference if the savings attained fall short of the ‘guaranteed’ energy savings target. • May be financed in one of three ways: • By the business itself; • Performance contractor (ESCo) • A loan from a financial institution or special fund i.e. Eskom’s DSM 2014-09-14 16

17. Programme Timelines

18. Conclusion • For the ESCO industry to realise its full potential and attain meaningful growth and development certain conditions or key policy directives have to be outlined. These constitute the following: • ESCo development should form an integral part of IDM programme delivery occurs in tandem with actual IDM programme delivery • Optimised regulatory environment for EE and Demand Reduction projects • Developing reliable funding sources for ESCo’s i.e. through Private Banking Groups, Lending Institutions, Multi-lateral Funders, or Donor Agencies • Creating access to market, funding and technology • Ensuring credible and solid expertise by ESCos

19. Thank you