Annual Report 2015

PIDG FACILITIES

 

PIDG Facilities > Equity & mezzanine

Investing equity at financial close to boost development impact

In the countries where PIDG works there is major unmet need for equity and mezzanine finance for ‘greenfield’ infrastructure investments at financial close

Private equity funds do not show appetite for ‘greenfield’ investments in PIDG countries at least until projects have completed construction and been operational for a period. DFI appetite is similarly limited, although DFIs are much more willing than previously to offer senior debt. Evidence suggests that major (corporate) private sponsors tend to prioritise larger investments in middle-income countries.

Conversely smaller, domestic sponsors often have the appetite and some equity capital to invest but are unable to raise the balance of the equity needed to reach financial close.

Because the necessary equity cannot be secured many, greenfield infrastructure projects currently go unbuilt. However, a proportion of these may be suitable for investment by PIDG because they have sufficient potential to create high development impact and to be commercially sustainable.

Green Africa Power (GAP), PIDG’s newest Facility, currently developing its pipeline, can invest quasi-equity (intermediate capital/mezzanine) in renewable energy projects in sub-Saharan Africa.

Separately, InfraCo Africa1 and InfraCo Asia2 each have limited, specific equity investment capabilities, InfraCo Asia's via InfraCo Asia Investments.

In 2016 it is expected that PIDG will consolidate its existing equity capabilities and funds into a new equity and mezzanine Facility for sub-Saharan Africa and south and south-east Asia. This Facility will be empowered to invest beyond PIDG’s immediate early stage development pipeline where investments can be shown to be sufficiently additional.

 

1  InfraCo Africa To support innovative or pioneering projects, InfraCo Africa can provide the capital required to fund the first ‘demonstration’ or pilot phase. Under exceptional circumstances, InfraCo Africa can also retain its interest in a project through financial close where that project requires ongoing support to become operational, demonstrate commercial viability and so attract further investment.

2 InfraCo Asia Investments This takes the form of equity and mezzanine financing mandated to address market failures in the supply of capital to early stage infrastructure projects. If an absence of capital is likely to delay or even prevent financial close, construction and completion of viable infrastructure projects, InfraCo Asia Investment's funds can be invested to bridge the gap.