Venture capital companies Broadreach Capital and 670 Venture Capital, together with energy company Energyworx, have concluded a transaction that will result in the companies collaborating to fund and implement energy efficiency projects for retail, commercial and industrial clients.

The collaboration comes on the back of the latest round of load-shedding and electricity tariff increases that add to uncertainty in the energy sector.

“Cost and security of supply concerns have given rise to many alternative energy solutions entering the marketplace, particularly in the embedded generation sector,” the companies said in a statement on Tuesday.

Energyworx, an energy services company (ESCo) and energy project developer, has for some years been developing energy projects for various clients using the energy performance contracting principle.

Such contracts allow for energy-saving projects to be financed out of monetary savings on clients’ energy costs.

Under such an arrangement, an ESCo pays for and implements a project to deliver energy efficiency for a client and, in turn, receives a share of the cost savings. 

Essentially, the ESCo does not receive payment unless the project delivers the expected energy savings, ensuring that all parties’ interests are aligned.

This form of contracting addresses both the performance, as well as the financial risks of energy efficiency projects. Both risks are carried by the ESCo, which provides the capital required for the project and only receives a return when savings are achieved. 

This means the ESCo is focused on performance and will only install best-in-class equipment that lasts the length of the contract.

“Many companies do not have the capital budget to pay for energy efficiency projects, especially in the current challenging economic climate and with the considerable electricity price increases. 

Under an energy performance contract, however, the client not only incurs no capital expenditure, but in fact receives a share of the savings during the term of the contract, without any of the risk,” Energyworx explained.

This is where Broadreach and 670 Venture Capital enter, providing the capital required for Energyworx to roll out energy performance contracting projects.