Mauritius ESCO Guarantee

The UNEP Copenhagen Climate Centre has been engaged in providing support to Mauritius through a variety of initiatives. Through the GEF funded Nationally Appropriate Mitigation Actions for Low Carbon Island Development Strategy project in partnership with the Ministry of Environment, Solid Waste Management and Climate Change, the project sleeked to reduce greenhouse gas emissions, by promoting investments in low carbon technologies while building the institutional capacities to plan, implement, monitor and report on NDC mitigation policies and measures. One of the outcomes of this project has been the development of a concept for a risk-alleviation facility for Energy Services Companies’ (ESCOs) to drive private sector investments and implementation of energy efficiency (EE) projects through Energy Performance Contracting in Mauritius, the Mauritius ESCO Guarantee (MEG). The MEG concept was developed in collaboration with the Energy Efficiency Management Office (EEMO) of the Ministry of Energy and Public Utilities.

The MEG will promote EE measures in industry, and public and commercial facilities by facilitating ESCOs access to loans for upfront investments in EE measures on behalf of the clients while getting remunerated through energy savings. Due to the limited capital, investments in the Private Sector are primarily for their core business at the expense of investments in EE. As for the Public Sector, no specific funds are allocated in the national budget for investments in EE. In addition, the Energy Efficiency Regulations (2017) mandates large energy consumers in the public and private sectors, when notified by the EEMO, to commission energy audits which identify profitable EE investments. However, EEMO lacks the resources to enforce the implementation of identified solutions. Finally, Banks do not lend to ESCOs because the assets to be procured with the loan capital are installed at the premises of the ESCOs’ clients and therefore not accepted by the banks as collateral. The ESCOs’ financial reach is therefore constrained only to their own equity, which covers only a small fraction of the EE investments required through mandatory energy audits. The MEG will provide guarantees to banks, allowing them to finance ESCO projects, and implement energy audit recommendations and other EE measures on clients behalf.

The MEG Concept was submitted to the Mitigation Action Facility (MAF) requesting funding to capitalize the MEG, to be administered by the State Investment Corporation, through its subsidiary Capital Asset Management, which has prior experience in administering guarantee frameworks with the banking sector. The initial request was successful and the MAF has approved funding for a Detailed Preparation Phase, aimed at making the MEG ready for investments. The initiative will also develop a framework, an ‘ESCO ecosystem’, for implementing energy performance contracting based on international best practices, and address capacity building needs for local professionals. If successful, the detailed preparation will lead to the first capitalization of the MEG and mobilize unprecedented amounts of private capital for investments in EE measures in Mauritius. The EE gains achieved will be instrumental toward achieving the country’s ambitious NDC target of 10% EE improvement by 2030.