Renewable energy buyer and trader Africa GreenCo has signed a $27-million guarantee facility with GuarantCo – part of the Private Infrastructure Development Group (PIDG) – to boost renewable energy in Southern Africa.

GuarantCo will issue guarantees in favour of the independent power projects (IPPs) from whom GreenCo will buy power, backing GreenCo’s payment obligations to such IPPs.

GreenCo says GuarantCo’s strong credit rating provides significant comfort to such IPPs, and their lenders, increasing bankability and helping to attract investment in new renewable energy generation in Southern Africa. The facility may be increased to $50-million to support the further growth of the business.

“GuarantCo’s backing enhances GreenCo’s credibility in the market. The due diligence work by the GuarantCo team has been extensive and they are to be commended on both their thoroughness and support in developing a bespoke guarantee facility.

“The guarantees that will be issued under 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. The work done by GreenCo as the leading energy trader in the region is only possible with the support of our investors, IFU and InfraCo Africa, and we are grateful to GuarantCo for adding to this support through this guarantee facility,” said GreenCo chief investment officer Pug Bennet at the signing ceremony.

“We are delighted to have closed our transaction with Africa GreenCo which aligns with the PIDG 2023 – 2030 Strategy focus on climate action. Our sister PIDG company, InfraCo Africa, has supported the development and growth of Africa GreenCo’s pioneering offering since 2020.

“It is a good example of our strategic focus to replicate deals, executing transactions more efficiently in order to deliver the impact to local people faster. 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,” adds GuarantCo CEO Layth Al-Falaki.

The lack of creditworthy offtakers to long-term power purchase agreements has been a significant impediment to effectively harnessing the enormous renewable energy potential of Southern Africa, says GreenCo.

The collaboration between GreenCo and GuarantCo will help unblock this bottleneck and support the region in meeting the increasing power demands of its growing industries and achieving its sustainable development goals, it adds.