Africa GreenCo

• Lack of creditworthy counterparties for generation projects scale up
• Rehabilitation of utilities is key but sustainable and material improvements can only occur in the medium to long term
• The current project-by-project approach to electrification of the continent is unsustainable
• The main issues created by the current funding model are that:
• Support through existing instruments is not sufficient to address funding gap
• Credit enhancement of projects on a one-off basis adds cost and delays
• No single project is able to shift the attitude of commercial investors to bankability; a systemic and structural change is required
• Putting the burden on governments to provide explicit and implicit guarantees or counter-guarantees shifts the creditworthiness issue to the sovereign level

African countries cannot continue to add contingent liabilities against these commitments given their current fiscal position and the medium term macro-economic environment

The envisioned entity is an ambitious attempt to help increase the liquidity and scale of regional power trade and develop the power pools in sub-Saharan Africa by providing them with the first ever government co-owned, independently managed and financially sustainable electricity service provider capable of developing a fair and standardised electricity market.

Africa GreenCo would act as intermediary offtaker only and would not manage the physical transmission and distribution of energy. It would not own any of the grid infrastructure or seek to replace existing utilities. Rather than replacing existing structures, it complements them, and can further act as a bridge to any future energy regional market liberalization and energy trade integration. Africa GreenCo would help liquify and expand energy power markets by acting as a credit risk-mitigating intermediary for privately financed power projects through long-term power purchase agreements (PPAs) and back-to-back power sale agreements (PSAs) to various offtakers including state utilities.

Africa GreenCo aims to learn from, and where possible replicate, the dynamics of more advanced power markets, in particular building on the experience of the Power Trading Corporation of India (PTC India). PTC India was also set up in order to act as a credit risk mitigating intermediary offtaker for privately-financed regional power generators. In the process, it catalysed the entire Indian regional power sector trading market.