Announcing the operationalisation of a new business model to scale up renewable energy in Zambia and subsequently other countries in Southern Africa

Africa GreenCo Group, together with its Lusaka-based operating company GreenCo Power Services (together GreenCo), is delighted to announce the investment of USD 1.5m by Denmark’s Investment Fund for Developing Countries (IFU) and Private Infrastructure Development Group’s InfraCo Africa (InfraCo). This investment completes GreenCo’s operational establishment in Lusaka as an intermediary renewable energy buyer/supplier and power services provider and is a precursor to the 2021 capitalisation of our credit support for IPPs.

GreenCo’s transformative role is to mobilise significant private sector investment for renewable energy, to strengthen the national and Southern African Power Pool (SAPP) electricity markets, and to facilitate a shift away from the current single buyer model. The region has great renewable energy potential and is in urgent need for more energy generation to support economic recovery and provide clean and affordable energy to its citizens. GreenCo’s model offers key innovations in the architecture of the electricity market and achieves better value – with more electricity generation and improved security of supply – in partnership (rather than in competition) with established industry players. GreenCo and its investors are focused on supporting the Government of Zambia, as well as the governments of other countries in the SADC region, in the opening of their electricity markets. The company’s operations will contribute towards the implementation of the Government of Zambia’s vision for the electricity sector as set out in the National Energy Policy 2019 and subsequent new energy sector legal and regulatory framework. This represents an important step in scaling-up renewable energy investment to help mitigate climate change, improve security of supply, and increase efficiency in the power sector.

Zambian Minister of Energy, Honourable Matthew Nkhuwa states, “The operationalisation of GreenCo is a great example of national action, and indeed international cooperation, as we strive to deliver affordable energy for all. Notwithstanding the current global economic uncertainty due to the COVID-19 pandemic, it is important that we plan for the future, one where renewable energy helps drive sustainable social and economic growth in Zambia.”

Honourable Alexander Chiteme, Minister of National Development Planning, said, “Today, we need true paradigm shifts toward low-emission and climate-resilient sustainable development in order to reduce the negative impacts of climate change on sustainable development and growth of Zambia and the Southern African region.  We are delighted to be working with GreenCo and a number of Zambia’s key cooperating partners to ensure that new business models, innovation and systemic change is delivered on the ground and felt by those most in need. Through this model we can attract the significant amount of funding required to harness Zambia’s abundant renewable energy resources.”

CEO of IFU, Torben Huss said, “GreenCo is an innovative business model providing a solution that can reduce the financial risk when investing in renewable energy and consequently pave the way for more private investors, which are highly needed if Africa is to succeed in delivering affordable and green energy for all.”

Gilles Vaes, InfraCo Africa’s CEO, added that, “GreenCo’s initiative of intermediary power off taker and power trading company is highly innovative and will help the Zambian electricity sector prepare for the future, working together with ZESCO and other key sector stakeholders. The challenges of developing new renewable electricity production in Zambia are great and will require the combined efforts of initiatives such as GreenCo. We look forward to working with GreenCo in helping it to become operational”.

Managing Director of ZESCO, Victor Mundende said, “Innovative solutions such as GreenCo could play an important part in providing alternative offtaker participation in the Zambian ESI, to make new generation projects more easily bankable whilst encouraging the maturation of electricity markets to encourage electricity trade. We look forward to working with GreenCo to deliver a mutually beneficial business model.”

CEO of GreenCo, Ana Hajduka added, “We would like to take this opportunity to thank the Government of Zambia, our industry partners and particularly IDC, for their leadership role to date. Our sincere gratitude goes to ZESCO, the Department of Energy, ERB, OPPPI, the Zambian NDA/MNDP and EAZ, and the funders who have supported GreenCo to this point. Their continued support, plus the investments made by IFU and InfraCo Africa are invaluable for the future success of GreenCo. We commend our investors’ continued support of a partnership that delivers clean and affordable electricity to Zambia and, on expansion of GreenCo’s activities, to the region.”

GreenCo’s innovative business model was incubated with grant funding and strategic input from The Rockefeller Foundation, Convergence and the P4G. GreenCo also benefits from the support of SADC PPDF via the Development Bank of Southern Africa and USAID’s Power Africa, of which Africa GreenCo is a private sector partner. Additionally, in December 2018, the Board of Agence Française de Developpement (AFD) approved the provision of a guarantee by AFD to GreenCo. This follows the approval of a guarantee by the European Commission in June 2018 through the European Fund for Sustainable Development (EFSD) under the EU External Investment Plan.

About IFU, InfraCo Africa (PIDG), and GreenCo

IFU, the Danish Investment Fund for Developing Countries, is an independent government-owned fund offering advisory services and risk capital to companies doing business in developing countries and emerging markets. Investments are made on commercial terms with the aim of creating economic and social progress as well as supporting the Sustainable Development Goals. For more information please see: https://www.ifu.dk/en/about-ifu/

The Private Infrastructure Development Group (PIDG) is an innovative infrastructure development and finance organisation which encourages and mobilises private investment in pioneering infrastructure in the frontier markets of sub-Saharan Africa and south and south-east Asia to promote economic development and combat poverty. PIDG delivers its ambition in line with its values of opportunity, accountability, safety, integrity and impact. Since 2002, PIDG has supported 157 infrastructure projects to financial close and provided 209 million people with access to new or improved infrastructure. PIDG is funded by six governments (the UK, the Netherlands, Switzerland, Australia, Sweden, Germany) and the IFC. PIDG TA can provide technical assistance and capital grants to the PIDG Companies to meet a range of needs associated with an infrastructure project’s lifecycle. PIDG TA can also provide up-front viability gap funding grants to support PIDG projects that require concessional funding to make a project with strong development impact financeable. For more information please see: www.pidg.org

InfraCo Africa is part of the Private Infrastructure Development Group (PIDG). InfraCo Africa seeks to alleviate poverty by mobilising private investment into high-quality infrastructure projects in sub-Saharan Africa’s poorest countries. It addresses the risks and costs of early-stage project development: funding teams of experienced developers and providing risk capital to those projects which need the financial commitment and leverage that InfraCo Africa can bring. InfraCo Africa is funded by the governments of the United Kingdom (through FCDO), the Netherlands (through DGIS) and Switzerland (through SECO). For more information please see: www.infracoafrica.com

Africa GreenCo Group via its operating entity GreenCo Power Services Limited acts as an intermediary offtaker and service provider, purchasing power from renewable IPPs and selling that electricity to utilities and private sector offtakers (i.e. commercial and industrial users) and markets of the SAPP. GreenCo will mitigate the risk of purchaser default through an ability to secure alternative buyers or through short-term trading on the SAPP electricity markets. Through its participation in competitive power markets, GreenCo will promote cross-border power transactions and a more dynamic and liquid short-term power market. Through its activities, GreenCo will increase the supply of, and demand for, finance for energy projects, and mobilise private sector capital more quickly towards critical and transformative capacity addition.