Zambia's Copperbelt to invest $500m in energy

From the newsletter

Copperbelt Energy Corporation (CEC), a Zambia-based power infrastructure solutions provider, plans to invest $500 million by 2026 in solar power and expansion of its DRC transmission line capacity from 250 MW to 550 MW. CEC commissioned a 60 MW solar plant in 2024 and is expanding it to 200 MW by 2025.

• The drought that severely affected hydropower generation in Zambia has been a great lesson for the country. It is now moving quickly to strike deals in generation and cross-border electricity trades to guarantee a steady supply for its population.

• The country is key to the World Bank's mission to provide electricity to 300 million people by 2030. In January, it received a $292 million grant from the Bank for its Tanzania power interconnector.

More details

• CEC's chief financial officer, Mutale Mukuka, stated the company aims to attract external investors to fund these projects as Zambia recovers from a four-year sovereign debt default. He emphasised the company's focus on transmission projects to ensure power from new developments reaches consumers.

• An additional 136 MW expansion of the Itimpi solar PV project was approved and is expected to increase CEC Renewables' total capacity to 230 MW. This expansion is being financed partly by a $97m Green Bond issuance. The company has so far raised $150 million from green bonds in total.

• Zambia joins other countries in Africa that have utilised this new financing mechanism to secure renewable energy funding for projects. The sector has grown globally to reach over $2.2 trillion, but Africa's participation remains relatively low, accounting for less than 1%. However, there is a discernible upward trend in green bond issuances across the continent. By 2023, over 20 green bonds had been issued by various African countries, including Tanzania, Rwanda, Gabon, Seychelles, Nigeria, South Africa, Kenya, Morocco, Mozambique, Namibia, Mauritius, and Zambia.

• The African Development Bank (AfDB) has been a pioneering force in the development of Africa's green bond market, issuing bonds worth $10 billion since its inception in 2013. National governments were the initial issuers, but now the corporate sector is actively getting involved. They are primarily driven by financial institutions, particularly in South Africa, with banks like Nedbank and Standard Bank actively issuing green bonds. Non-financial corporations, such as Copperbelt Energy Corporation in Zambia and OneWattSolar in Nigeria, are also increasingly utilising green bonds to finance their sustainable projects.

• OneWattSolar, a Nigerian startup focused on clean energy solutions, issued a $24.33 million Green Bond in 2021 to deploy 14,000 MW of clean energy solutions by 2030. It was the first Corporate Green Bond for an off-grid renewable energy project.

• The African green bond market is projected to grow at a faster rate. However, key challenges remain in policy. Few countries have made the necessary supporting policies. South Africa took a significant step in this direction by introducing the first Green Finance Taxonomy in Africa in 2022. Nigeria has also been proactive in market development through its Green Bond Development Programme.

Our take

• Renewable energy companies should capitalise on the funding opportunities presented by green bonds. National utility companies, particularly those facing difficulties in raising capital, should consider innovative funding approaches beyond traditional methods.

• There are gaps, especially in policy supporting the sector, with only a few African countries having a clear structure for the sector. This is a big limitation, especially for those energy companies that would like to pursue this funding mechanism. Countries need to be proactive in terms of policy formulation to keep up to date with current funding trends.

• The example of Zambia's Copperbelt demonstrates the viability of this approach. There is considerable potential demand, particularly from environmentally conscious investors and those seeking returns. Banks in other African countries could benefit from studying the best practices of South African banks in this area.