KUALA LUMPUR (Aug 16): The government has launched a RM200 million fund today to help energy service companies (ESCOs) implement energy-efficient projects in the building sector.

The Energy Performance Contracting (EPC) Fund is provided by Malaysian Debt Ventures (MDV), a corporation under the Minister of Finance Inc.

It will be supported by a credit guarantee fund of RM15.8 million from the Ministry of Energy, Green Technology and Water, along with a RM2 million contribution from the JKR Building Sector Energy Efficiency Project, funded by the United Nations Development Programme-Global Environment Facility.

This will be used to reduce the facility financing rate on the loans from 8% per annum to 7% per annum, to enhance the financing package's attractiveness.

"The fund is aimed at enhancing the credibility and financial rating of the ESCOs, through the implementation of rigorous EPC for energy efficient projects, and to increase the confidence of financial institutions to provide funding for ECSOs," said Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Johnity Ongkili at the launch in Kuala Lumpur. 

Under the ESCO business model, building owners are allowed to engage ESCOs to reduce energy consumption, through the application energy efficient equipment and operations, for example retrofitting of building systems such as chillers and lighting systems, Ongkili said.

"Because the ESCO market is still in its infancy, the financial strength of ESCO companies is inadequate to bear the cost of investments, resulting in slow execution of the EPC projects, despite the benefits obtained from the EPC business model,” he added.

Ongkili said 50 energy efficient projects are expected to be carried out through the EPC, with an estimated savings of RM399 million worth of electricity, by the fifth year of the financing programme, equivalent to 1,050 gigawatt hours.