Pioneering a New Model for Financing Renewable Energy in Africa
Lusaka, 18 June 2025 – In a major step forward for renewable energy in Africa, Serengeti Energy and Kwama Energy, together with four impact lenders,
have partnered to develop the Ilute Solar Project (Ilute), located near Sesheke in Western Zambia. This 32MWp project 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 Ltd.
Innovative Financing Structure Mitigating SAPP Price Risk
The project’s financing structure marks a breakthrough in African project finance. Dutch development bank FMO acted as Mandated Lead Arranger for the US$26.5 million debt package, consisting of a senior and a subordinated tranche. The subordinated tranche, provided by FMO and ElectriFI, has a more flexible repayment schedule, thereby acting as a buffer for price fluctuations on the SAPP market. With this protection in place, the senior tranche is sufficiently derisked to attract a commercial lender, Triodos, alongside FMO. The senior tranche is completed by a concessional tranche from SEFA, the catalytic facility managed by the AfDB.
This innovative finance model weaves together commercial, development, and concessional capital to mitigate investment risks and unlock bankability.
Redefining Power Markets – With Zambia at the Centre
Ilute’s market-based PPA circumvents traditional models reliant on state utility offtake and sovereign guarantees. Instead, power will be sold under a private PPA to GreenCo, which will trade into the SAPP market. This represents a fundamental shift in how renewable energy projects are financed in Africa—anchored in competitive power trading, regional integration, and shared risk, all without burdening government balance sheets. Under the theme “Africa United”, the announcement of this landmark transaction at the Africa Energy Forum reflects how regional cooperation can accelerate national development. By supporting regional power flows, Ilute strengthens Zambia’s grid resilience and creates space for new investment, infrastructure upgrades, and cleaner energy inflows—critical to resolving current power shortages.
Stakeholders Enabling a Replicable Model
A diverse group of stakeholders has come together to enable this structure:
- The Government of Zambia provides regulatory certainty and legal protections;
- The local community, led by Senior Chief Anang’anga Imwiko and the Barotse Royal Establishment, provided land and ongoing stewardship;
- ZESCO, Zambia’s national utility, assumes grid-related operational responsibilities and receives wheeling revenues; and
- Investors and lenders take on electricity price volatility.
This structure mobilizes private capital at scale, supports Zambia’s energy transition, and offers a transparent, rules-based model for power trading—one
that can be adapted by other countries seeking to modernize their power sectors and attract investment.
Positive Environmental and Community Impact
Ilute is not only about delivering clean energy—it also prioritizes environmental sustainability and local empowerment. The project includes a biodiversity plan developed in collaboration with the World Wide Fund for Nature (WWF). It allocates 1% of its annual revenues to a community trust, governed by local representatives, to fund locally prioritized development initiatives.
A Scalable Model for Africa’s Energy Future
The four lenders, alongside Serengeti Energy, Kwama Energy, and GreenCo, aim to demonstrate a replicable model for renewable energy development in Africa—one that blends innovation, regional cooperation, and inclusive growth.
