American Chamber of Commerce in Zambia


Overview of Zambia
Zambia is grappling with a significant energy crisis threatening its economic stability and development prospects. Despite being endowed with substantial natural resources, including vast potential for hydroelectric power, Zambia faces chronic power shortages and frequent blackouts. This crisis is rooted in a combination of factors, including outdated infrastructure, insufficient investment in new energy projects, and the impacts of climate change, which have affected the water levels of the Zambezi River and other key sources of hydroelectric power generation.

Additional power supply is needed at scale to alleviate the current load-shedding in the country and underpin the objective to increase the country’s GDP by boosting copper production from approximately 800,000 metric tons to 3 million metric tons by 2031. Mining will account for 56% of Zambia’s total generation demand growth over the next ten years. Therefore, attracting investment in
energy generation is critical for driving investments in the mining sector and increasing the country’s GDP growth. The energy shortfall has far-reaching consequences for Zambia’s economy, affecting industries, businesses, and households. The manufacturing and mining sectors, which are pivotal to the country’s economic growth, have experienced reduced productivity due to unreliable power supply. For households, frequent blackouts have disrupted daily life, affecting everything from cooking to education.

GreenCO as a Key A Player in Zambia’s Energy Sector

GreenCo Power Services, a part of AfricaGreenCo Group, is a beacon of hope and a key partner in addressing the energy crisis and is a front runner of the recently embraced open access regime in the country. On June 10, 2024, His Excellency the President convened the 11th (Special) Cabinet Meeting where the Cabinet approved the Open Access to the Electricity Transmission and Distribution lines. This landmark decision is set to revolutionize the energy sector and catalyze economic growth and sustainable development in Zambia. The Open Access regime enables private sector entities, such as GreenCo, to transmit electricity to their customers, fostering competition and dismantling barriers that previously impeded private sector involvement. In the absence of comprehensive electricity market reforms and the introduction of the Open Access regime, Zambia and ZESCO would be compelled to allocate billions to support power purchase agreements with private developers. GreenCo’s business model offers a viable alternative to the conventional contract structure, which relies on sovereign guarantees.

GreenCo’s innovative approach, the first of its kind in sub-Saharan Africa, adopts a holistic perspective on market risk, addressing the real challenges faced in procuring independent power producers (IPPs), where traditional guarantees and fiscal interventions have been inadequate. To ensure GreenCo’s credibility and its ability to fulfill its commitments to generators and their lenders, payment allocations by GreenCo are secured by an AA-rated guarantee provider, GuarantCo. GreenCo was established to address the creditworthiness and bankability challenges faced by project
developers in the continent and to promote the open access regime for better bankability of new energy sector investments. GreenCo acts as a buyer and trader of renewable energy supply produced by
Independent Power Producers (IPPs) and then sells this electricity to industrial and commercial users and/or ZESCO. In effect, GreenCo mitigates the risk of default by the purchaser by acting as a
creditworthy buyer of power and through its access to the regional = Southern African Power Pool (SAPP) market and a portfolio of buyers. GreenCo’s operations are headquartered in Lusaka, Zambia and the entity has enjoyed a successful strategic partnership with ZESCO, Zambia’s utility. GreenCo and the Government of Zambia’s relevant stakeholders, including ZESCO, co-developed the GreenCo business model ensuring responsiveness to the unique needs of the Zambian and SADC-wide energy sector. Zambia was chosen as the
headquarters for its central geographical location within the region and the vast endowment of hydroelectric power, considered a clean source of electricity and a tool through which to absorb intermittent renewable energy supply with fewer system stability challenges.

Increasing Energy Access
Before GreenCo’s establishment, ZESCO was the sole buyer of the electricity produced by IPPs which increased the liabilities of the already strained national utility. This arrangement was fraught with
significant bureaucracy as IPPs required sovereign guarantees to secure payment for the power sold to ZESCO. GreenCo, serving as an alternative buyer of this excess power, eliminates this bureaucracy and strain on ZESCO, effectively freeing up the utility to focus on distribution and transmission requirements. ZESCO also gets new revenue streams from the use of its infrastructure to distribute
electricity. GreenCo’s presence in the marketplace has increased Zambia’s much-needed generation capacity in the face of the energy deficit. The entity has been importing power from the region to help alleviate the current energy sector crisis in collaboration with ZESCO. In May 2024, GreenCo announced an electricity supply agreement with First Quantum Minerals (FQM) to source imported power on behalf of the mine to meet the deficit faced after ZESCO invoked a force majeure clause in its contracts with the mines due to the effect of the El Nino on the hydro production in the country. GreenCo is leveraging its regional trading capability and relationship with international power producers to meet a portion of the 54,000MWh required by FQM monthly. Leveraging the Power of the SAPP
GreenCo is also an active player in the Southern African Power Pool (SAPP) and leverages the stability of the pool to expand its business operations. The SAPP was established in 1995 to be a fully integrated, competitive energy market and a provider of sustainable energy solutions for the SADC region and beyond. There are no credit risks with trading in the pool which has increased energy access for the members of the pool including ZESCO. ZESCO’s Managing Director was until recently appointed the Chairperson of the executive committee, a signal of Zambia’s significance as a formidable partner in solving the region’s energy challenges.

Looking Ahead

GreenCo is poised for growth as it seeks new opportunities in Zambia and the region. The entity signed its first Power Purchase Agreement (PPA) at COP 28 with Ilute Solar, a partnership between Serengeti Energy Africa and Western Power Company. A leading financial institution, the Dutch FMO, is the mandated lender to Ilute Solar showcasing immense confidence in the bankability of the GreenCo model. GreenCo is also exploring business interests in Zimbabwe, Namibia, and South Africa.

The article was written following an interview with GreenCo Power Services CEO, Ana Hajduka Shields. GreenCo Power Services is a member of the American Chamber of Commerce in Zambia

Leave a comment

Your email address will not be published. Required fields are marked *