A $27m guarantee facility aims to boost renewable energy in Southern Africa and unlock up to $270m of private capital investment into independent power projects.
GuarantCo, owned by the Private Infrastructure Development Group (PIDG), has provided Zambian renewable energy buyer and seller Africa GreenCo with a $27m (€24.8m) guarantee facility to boost renewable energy in Southern Africa.
The guarantee is expected to unlock up to $270m of private capital investment into independent power projects (IPPs) which will sell energy to private off-takers and on the South Africa power pool market.
This will enable GuarantCo to issue guarantees directly to the IPPs from whom Africa GreenCo will buy power, whilst backing the company’s payment obligations to such IPPs.
Layth Al-Falaki, CEO at GuarantCo, said: “We are delighted to have closed our transaction with Africa GreenCo which aligns with the PIDG 2023 – 2030 strategy focus on climate action. We are very happy to provide a complimentary and innovative credit solution to support the company to further grow its business and provide financial support to solar photovoltaic projects in Southern Africa.”
Through the transaction, between 200MW and 300MW of renewable energy is expected to be brought online, providing improved electricity access to grid-tied businesses and end users whilst enabling renewable energy to avoid and reduce GHG emissions.
Power outages
The deal comes at a time when South Africa particularly is facing severe nationwide power cuts, with state-owned power utility Eskom Holdings SOC announcing in February 2024 it would need to implement so-called Stage 6 outages — taking 6,000 megawatts of demand off the grid.
This is PIDG’s second transaction with Africa GreenCo. Having leveraged a PIDG Technical Assistance grant in October 2020 to help operationalise GreenCo Power Services in Lusaka, InfraCo Africa invested $5.5m in May 2022 to scale GreenCo’s offering as Zambia’s first renewable energy buyer and services provider.
Pug Bennet, CIO at Africa GreenCo, said the deal would enhance GreenCo’s credibility in the market. “The guarantees that will be issued under this guarantee facility are a key requirement to enable GreenCo’s IPPs to reach financial close and to start construction of much needed power for the region.”
Just transition
The deal was welcomed by practitioners working in the area of the just transition – ensuring that the energy transition to net zero is fair and equitable and leaves no one behind. In 2022, at COP27, the UK announced its Just Energy Transition Partnerships model (JETP) which saw the country pledge to support South Africa in its decarbonisation goals. The UK has since been a majority funder of PIDG.
Speaking of the recent deal, Christopher Taylor, deputy director and UK JETP envoy at the Foreign, Commonwealth and Development Office said: ‘This is a great example of how innovative finance can mobilise private investment in sustainable and inclusive infrastructure. This guarantee facility can support deployment of more renewables in the Southern Africa region and will also help decarbonise industry and address load shedding in South Africa as part of the just energy transition.’
