Annual Report 2015

PIDG FACILITIES

 

PIDG Facilities > Debt & Guarentees

Lending just ahead of financial close to secure private sector participation

The Emerging Africa Infrastructure Fund (EAIF) and GuarantCo provide elements of the financing needed to secure private sector participation in commercially viable infrastructure projects in ‘higher risk’ frontier markets

Infrastructure Crisis Facility – Debt Pool (ICF-DP), a time limited Facility, has successfully completed its life-cycle and has begun repaying its funds

Although there is now greater availablity of debt financing, EAIF’s continued primary purpose remains the long-term nature of its support. While its loans to private sector-sponsored projects are made at commercial interest rates, it offers tenors of up to 20 years, unlike commercial lenders (especially domestic banks) which lend for shorter terms.

GuarantCo provides local currency guarantees to banks and bond investors, mostly local or regional. GuarantCo’s guarantees help infrastructure projects – which normally generate their revenues in local currency – to avoid relying on foreign currency debt. In countries with weak or volatile currencies, a sudden devaluation can seriously damage the commercial viability of an infrastructure project because diminished local currency revenues are insufficient to meet foreign currency repayment obligations.

GuarantCo’s secondary mission is to support the development of local capital markets that can, in the future, finance a greater proportion of local infrastructure (and other) needs themselves.

A time-limited lending Facility ICF-DP was set up in 2009 in the wake of the global financial crisis and closed to new loan applications at the end of 2015, having fulfilled its mandate.

ICF-DP is the first of PIDG’s Facilities to complete its market-facing life-cycle, on time and to plan, and has begun repaying funds to its principal donor, the Federal Republic of Germany’s development bank KfW.