GCPF Provides Seed Capital for South African ESCO

The Global Climate Partnership Fund (GCPF) has disbursed the first tranches of funding for Hidoplex Ltd, a South African based company which is in the process to build up an energy savings- and supply business for the telecommunication sector. Hidoplex is a business initiative driven by the observation that the energy consumption of base transmission stations operated by local mobile operators could be reduced by as much as 40% – 60%

South Africa and many of its surrounding markets are growing markets for local as well as international mobile operators. Building up additional network capacities and ensuring a reliable supply ranks high on the agenda respectively. At the same time, reliable electricity supply becomes an increasing challenge for the local grid operator and prices are expected to rise as public subsidies on energy supply are gradually decreased.

In this context, energy-efficient technologies reducing the electricity consumption of communication infrastructure offer a new market which is yet in its infancy. Substantial energy is either wasted due to inefficient settings within the mobile network’s technical components or is produced by diesel generators that need to supply off-grid stations or in case the public electricity grid is down.

Hidoplex, together with its partnering institution GreenX Ltd., has developed technical solutions that meet the high standards required by local operators. This not only includes energy and technical considerations but also elementary aspects like protection of capital intensive appliance against theft and demolition.

Energy production in South Africa is highly dependent on carbon as a primary energy source. About 93% of electricity is generated from coal. The IEA estimates a 927 grams CO2 emission per produced kWh for 2008 – 2010, which is more than two times higher than for all European OECD countries.

SKOM, the nation’s parastatal power supplier, encounters serious problems with aging plants and is under pressure to cope with the rising demand for electricity. Load shedding cuts already impacted residents and businesses. Supply quotas given to energy intensive industries limit the economic development as there is almost no reserve capacity available.

The South African financial sector is well developed and offers a range of products for its customers. At the same time, new business models like that of Hidoplex, need capital very early in its economic lifetime – capital which is scarce and generally not made available by the local banking industry which prefers collateralized positions or granting financing to companies that are in business for a long time and in areas bank’s are familiar with. As such the GCPF did successfully fill the gap between what innovative structures like Energy Service Companies (ESCOs) need to develop and what is available in the market at this stage.

The business of Hidoplex further foresees that the local financial market will be approached for the debt financing of technical appliances to be acquired by Hidoplex. This increases the leverage of GCPF’s capital by a multiple of up to three times – which is outstanding compared to the traditional on-lending concept GCPF also pursues in less advanced economies.

For more information on the GreenX, Hidoplex’s technical solutions provider, please visit http://www.greenx.co
For more information on the Global Climate Partnership Fund, please visit http://www.gcpf.lu