Colombian Energy Efficiency Trust (CEET) – Due Diligence of Three ESCOs

There are significant barriers to developing energy efficiency (EE) among small and medium enterprises (SMEs) in Colombia, including the lack of appropriate financing to promote EE investments. The proposed solution to address the problem of limited availability of financing for EE for SMEs is to create a dedicated financial vehicle, the Colombia EE Trust (CEET), to be co-financed by the Multilateral Investment Fund (MIF), the Inter-American Development Bank (IDB), and the Clean Technology Fund (CTF) (collectively called “the Sponsors”). The purpose of the CEET is to support investments in EE projects in Colombia.   In February 2015, after a competitive bidding process, Econoler was selected as the CEET’s trust manager. At this stage of project preparation, the Sponsors needed to perform a due diligence in order to evaluate three ESCOs that had been identified as actively working in the Colombian market. A commercial and legal due diligence needed to be performed on the participating ESCOs.       The objective of Econoler’s assignment was to assist IDB and MIF project team during the due diligence process performed on the three participating ESCOs (Garper Energy Solutions, E2 Energia Eficiente and Azimut Consultores) to review the ESCOs’ history, track record, project identification and project cycle, and legal contracts used, among other things.

Econoler provided the following services:

1. Assist and accompany IDB and MIF project team during the due diligence projects to three ESCOs (respectively based in Bogota, Medellin and Barranquilla) and provide a due diligence report for each of the three ESCOs covering the following elements:

• Background of the ESCO: owners, history and track record;
• Project cycle analysis (i.e., origination, approval, monitoring and recovery);
• Credit risk evaluation process;
• Types of contracts utilized;
• Environmental issues;
•    GHG emission and energy savings calculation methodology;
• Pipeline analysis;
• Review of the documentation of a recent project financed and structured by the ESCO.

2. As a result of the due diligence process, Econoler updated the following existing documents related to the transaction.

• Scope of energy efficiency audits performed by ESCOs
• Eligibility criteria for energy efficiency projects
• Eligibility criteria for the selection of additional ESCOs
• Methodology for the calculation of GHG emission reductions and energy savings
• Financial model of the CEET.

  Econoler provided a due diligence report on each ESCO highlighting the ESCO capacities to participate in the CEET and recommendations for improvement prior to such participation. The CEET was later abandoned due to internal IDB procedural reasons.