Innovative Renewable Energy Finance Model Unlocks Bankability in Africa

Strategic Insights -

A landmark transaction has been announced in Western Zambia, bringing together Serengeti Energy, Kwama Energy, and four impact lenders to develop the Ilute Solar Project, a major step forward for renewable energy in Africa. This $26.5 million debt package is the first project financed power venture to supply electricity via the Southern African Power Pool (SAPP), under a market-based power purchase agreement (PPA) with GreenCo Power Services Limited. The innovative finance model weaves together commercial, development, and concessional capital to mitigate investment risks and unlock bankability, aiming to replicate this model across Africa.

Key Takeaways:

  • The Ilute Solar Project is a 32MWp project located near Sesheke in Western Zambia, developed by Serengeti Energy and Kwama Energy in partnership with four impact lenders.
  • The project's innovative finance model combines commercial, development, and concessional capital to mitigate investment risks and unlock bankability.
  • The $26.5 million debt package includes a senior and a subordinated tranche, with the subordinated tranche having a more flexible repayment schedule to protect against price fluctuations on the SAPP market.
  • The project's market-based PPA circumvents traditional models reliant on state utility offtake and sovereign guarantees, selling power to GreenCo under a private PPA.
  • The structure mobilises private capital at scale, supports Zambia's energy transition, and offers a transparent, rules-based model for power trading.
  • The project includes a biodiversity plan developed in collaboration with the World Wide Fund for Nature (WWF) and allocates 1 percent of its annual revenues to a community trust to fund locally prioritised development initiatives.

Statistics:

  • $26.5 million: The total debt package for the Ilute Solar Project.
  • 32MWp: The project's total installed capacity.
  • 124: The number of renewable energy projects financed by EDFI Management Company (EDFI MC) across Africa.
  • 18: The number of countries where EDFI MC has invested in renewable energy projects.

Sources:

  • FMO (n.d.).
  • AfDB (n.d.).
  • "Serengeti Energy and Kwama Energy Partner to Develop 32MWp Ilute Solar Project in Zambia" (2023).
  • "Dutch development bank FMO acted as Mandated Lead Arranger for the $26.5 million debt package" (2023).