Energy trader GreenCo woos Sanlam with $10m stake

Pug Bennet, one of the founders of African renewable energy trading company GreenCo, believes that, within five years, “everyone will be far more comfortable with traders in an open market”, given how rapidly this system has taken off.

GreenCo, which was launched in Zambia a week before Covid struck the continent, is the only regional buyer and trader of renewable energy in Southern Africa. Operating in Zambia, Namibia, South Africa and Zimbabwe, it buys energy under power purchase agreements from independent producers and from the competitive markets, which it then sells to corporate customers.

“There are a number of quality renewable projects under development, with the main constraint being a lack of a track record for people to get used to this new trading model,” Bennet tells Currency. In particular, it has taken the banks, as lenders to renewable projects, a while to get their heads around this. 

But, Bennet says, “if they can get more comfortable then there is huge potential”.

Evidently, South Africa’s finance institutions are getting their heads around this opportunity pretty smartly, because Sanlam Alternative Investments this week announced that it has taken a stake in GreenCo – the first institution to do so. 

Sanlam will hold nearly 10% of GreenCo, understood to have cost $10m. Its alternative investments division has about R200bn in assets across Africa, which it has invested as part of a mission to be the premier sustainability-led impact investor on the continent.

Mark Moorhouse, the executive head for infrastructure financing at Sanlam Alternative Investments, describes this as a natural extension of its infrastructure investment; Sanlam has deployed R17bn into 40 sustainable infrastructure projects in emerging markets over the past decade.

Sanlam, Moorhouse says, has been “backing the market architecture that allows Africa to finance its own energy transition on commercial terms, while supporting the reliable, increasingly low-carbon power that economic growth depends on.” 

A barometer of sentiment

Bennet says the GreenCo investment is a big deal because, up to this point, it has largely been development finance institutions that have supported the company. 

“Sanlam liked what we did, but even they wouldn’t have been interested in this business even a year ago. But the extent of our growth, the maturity in the market, has allowed us to do this deal,” he says. 

If private investment is the next step in the company’s evolution, it has got to this stage pretty rapidly. Despite only being around for six years, it has traded more than 2TWh of electricity, with the largest purchase-side market share in the markets covered by the Southern African Power Pool. It has a team of more than 80 professionals in its existing four countries, but plans to open soon in the Democratic Republic of Congo.

As a barometer of sentiment, the Sanlam investment underscores not only that renewable energy trading markets are viable and thriving, but also that Africa is building its own creditworthy, commercially-bankable infrastructure projects. And that investors are biting.

Bennet explains that the financial boost will give GreenCo additional trading firepower. “This investment will help support our trading operations, particularly through the Southern African Power Pool, and additionally back our payment obligations to the independent power producers,” he says.  

Besides financial muscle, the backing of a pan-African institution like Sanlam will be a boost for GreenCo’s growing reputation, and quest for an international rating. 

“It’s a strong partnership that we believe will lead to joint investments in the energy sector in future, including in other areas like battery storage. GreenCo fits neatly with other similar investments they’ve made in this sector,” says Bennet.

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