Gerald Hamuyayi (FMVA)®, Lusaka, Thursday, 19 September 2024 – Startling The World Bank Group statistics reveal that 365 million people lack access to electricity, while a staggering 558 million people are without clean cooking access in Eastern and Southern Africa. Even more jaw-dropping is that the region hosts over half of the world’s unelectrified population of approximately 675 million and about a quarter of the global population without access to clean cooking, totalling 2.4 billion.
The region poses a hurdle to achieving the Sustainable Development Goals by 2030, as set by the United Nations members. The energy woes in the African zone have had an adverse impact on the attainment of SDG No. 7, “Ensure access to affordable, reliable, sustainable, and modern energy for all.”
An emerging leader plugging the energy deficit in Southern Africa is Africa GreenCo, a power intermediary with presence in Zambia, Namibia, South Africa, and Zimbabwe. Over the last half-decade, Africa GreenCo has been playing a crucial role – contributing towards the energy transition and growth of renewable energy markets in Africa. The impact of GreenCo’s business model in Africa was honoured with the Krutham Africa Impact Investment Award for 2024. The bestowed accolade of “Best Impact Intermediary” validates the firm’s notable contribution to renewable energy markets’ development through its dynamic role.
The energy dealer operates a muti-party model – comprising many buyers and sellers of power. This model allows GreenCo to pull power from many sellers for sale to diverse customers for commercial, industrial and residential use. The firm’s spot market trading capabilities on the Southern African Power Pool (SAPP), augmented with robust risk management has significantly enhanced its resilience and flexibility in optimising value for independent power producers (IPPs) who struggle to find reliable market for the produced power and creditworthy off-takers. GreenCo’s solid reputation and holistic risk management capacities of their operating model spurs investors’ confidence in energy projects which would otherwise be considered too risky without the intermediatory role of the versatile energy trader.
The business model materially shrinks idiosyncratic (e.g., policy, project, regional, business specific) risks inherent in bilateral power purchase agreement, providing an essential hedge against existential default risk, especially for small, developing and inadequately capitalised power producers. While the African off-taking business is dominated by poorly credit-rated state utilities headlining defaults and late payments to IPPs, GreenCo credit standing is fortified by GuarantCo; an AA- Fitch rated guarantees provider, facilitating infrastructure investments in emerging markets, enhancing creditworthiness and attracting funding. At end of 2023, the GuarantCo had over US$300.5 million in total assets, US$4.1 million in net profit, and US$157.2 million in cash and cash equivalents.
Africa GreenCo boasts of a $27 million credit line guarantee secured from GuarantCo, with expandable potential to $50 million. This collateral buffer ensures IPPs’ revenue in the event of customer default. GreenCo’s multi-buyer model allows the diversion of power from a defaulting customer to other clients or directly selling on the spot market via the SAPP. As an aggregator, GreenCo stimulates both demand and supply of financing for renewable energy projects, enhancing power generators’ financial security and bankability.
This innovative approach has attracted significant interest in IPP energy deals on GreenCo’s online portal, with a quantum circa 7,000 MW in pipeline. The African aggregator plays a vital role in Southern Africa’s energy market, addressing off-taker creditworthiness while mitigating bilateral power transaction risks. The firm’s credit guarantees ensure payment security for its power suppliers, catalysing private sector investment in IPPs and diversifying risk across Southern African market
Renewable energy projects on the African continent are often associated with high credit risk and significant generation costs. This poses a major constraint for private sector finance in the sector, compelling governments to assume considerable contingent liabilities to secure individual energy projects. As an active SAPP member, GreenCo promotes competition in regional energy trading, mitigates this risk while offering additional services to IPPs, utilities, and customers. This stimulates investment risk appetite, attracting global capital and regional growth through enhanced energy security across the entire energy value chain, from supply to demand.
Led by the dynamic Founder and CEO Ms. Ana Hajduka Shields, GreenCo’s remarkable journey is only just beginning. Founded on grant support, the company has rapidly evolved into a leading energy broker, securing $1.5 million in initial equity from InfraCo Africa and the Danish government’s Investment Fund for Developing Countries (IFU). GreenCo’s growth from strength to strength has further blossomed its enormous potential, prompting the initial investors to firm up their dollar exposure to the dynamic aggregator with an additional $10 million investment. GreenCo’s non-asset owning model is the fundamental to its low-cost business approach, optimising return for its investors. As the company scales into its ballooning potential, its impact on the Continent will surge, launching an exciting new chapter for the Southern African versatile energy trader.
