June 2021

Partnering to unlock domestic capital for infrastructure in Kenya

Posted on 30 June 2021 | by Elle Leontiev | 3 Comments

30^th June 2021

Nairobi, Kenya: InfraCo Africa, part of the Private Infrastructure Development Group (PIDG), has signed a Joint Development Agreement (JDA) with Cardano Development (CD), committing up to US$1 million to the development of a credit enhancement facility in Kenya. The investment is being made through InfraCo Africa’s dedicated investment vehicle which is backed by the UK Government’s Foreign Commonwealth and Development Office (FCDO). The credit enhancement facility initiative is also supported by KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). The facility will be designed to unlock local currency investment from institutional investors and once established, is expected to support infrastructure development across a range of sectors.

“InfraCo Africa are excited to bring our expertise and investment capital to the table, working with colleagues at Cardano Development to develop and establish a tailored credit enhancement solution to strengthen Kenya’s capital markets,” said InfraCo Africa CIO, Claire Jarratt. “Strong local capital markets serve to protect infrastructure projects from external shocks and currency volatility, giving investors’ confidence. That confidence, nurtured by credit enhancement facilities such as the one we are seeking to establish here in Kenya, has the potential to transform the infrastructure sector, driving economic development and unlocking new sources of long-term finance for the future.”

Kenya holds significant wealth in pension, life insurance and private wealth funds. However, Kenyan infrastructure projects are largely reliant on US dollar-denominated bank loans, loans which seldom offer the length of tenor required for successful infrastructure developments and which expose borrowers to currency exchange risk.

“Since 2018, Cardano Development has collaborated with PIDG to undertake feasibility assessments for a financially viable, locally based and capitalised credit enhancement facility to promote the participation of long-term capital providers in Kenya’s debt capital markets, specifically around infrastructure.” saidCardano Development CEO, Joost Zuidberg. Now, we are delighted to have signed an agreement with InfraCo Africa to bring this credit enhancement facility from concept to reality. The facility will serve to unlock local currency investment from domestic private and institutional investors in support of long-term infrastructure development in the country. We at Cardano Development have a strong track record in establishing similar initiatives, notably InfraZamin Pakistan where we undertook the initial groundwork in 2018-2019. That institution is now ready to issue credit guarantees for infrastructure-related debt, thereby attracting private capital that would otherwise not participate in lending. Based on this success, I believe we can bring our expertise and investment to work diligently with our partners PIDG and InfraCo Africa to structure and develop this potentially catalytic facility for East Africa”

InfraCo Africa has demonstrated its commitment to Kenya’s capital markets through its recent investment in the Acorn REITs designed to support affordable student accommodation in Nairobi. The company has also invested in the growth of InfraCredit Nigeria, a credit enhancement facility established in 2017 by its sister PIDG company GuarantCo – fund managed by Cardano Development – and the Nigerian Sovereign Investment Authority, to support Nigeria’s infrastructure sector. InfraCredit Nigeria has a similar mandate to the proposed Kenyan facility.

Please contact [email protected] for enquiries.

Frontclear releases 2020 Impact Report

Posted on 24 June 2021 | by Elle Leontiev

On the 10th of June, Cardano Developement company Frontclear released its 2020 Impact Report. It was a watershed year for Frontclear. As the Impact Report demonstrates, they were able to continue to bring real impact on the ground in the countries they operate. Much of their FTAP activities went online, including capacity building through the launch of the Frontclear Academy and regulator support through the Money Market Diagnostic Portal.

The Report details case studies on Costa Rica, Mongolia and Uganda, with a special feature on legal & regulatory review and reform. The Report is highly interactive, offering the reader/viewer access to key policy documents, webinars, evaluations and a course on Money Markets on the Frontclear Academy.

Read the full report

Fitch and Moody’s re-affirm GuarantCo’s credit rating of A1 and AA- respectively

Posted on 12 June 2021 | by Elle Leontiev

International rating agencies, Fitch and Moody’s, have affirmed GuarantCo’s ratings of A1 and AA- respectively, both with negative outlook.

June 2021

Fitch confirmed that the affirmation reflects the maintained financial soundness of GuarantCo’s funders, the company’s exceptionally strong risk-adjusted capitalisation and low risk investment portfolio. As in previous years, Fitch has given GuarantCo, a Private Infrastructure Development Group (PIDG) company, a stand-alone credit rating of A which was uplifted to A1 due to GuarantCo’s strong shareholder support including the governments of the United Kingdom, Switzerland, Australia and Sweden, through the PIDG Trust and the Netherlands, through FMO and the PIDG Trust. Fitch continues to assess GuarantCo’s liquidity and capitalisation as ‘very strong’, with the addition of new funding from Agence Française de Développement (AFD), in the form of a stand-by facility, having positively impacted the net par to capital ratio which Fitch use to assess capitalisation.

In December 2020, AFD provided GuarantCo with a EUR 100 million callable funding facility with a tenor of 15 years and in May 2021 Global Affairs Canada (GAC) committed CAD 40 million (c. USD 31.8 million) through a repayable facility providing further funder diversification whilst strengthening GuarantCo’s liquidity buffers.

Moody’s referred to GuarantCo as an “innovative business with high development impact” in their report. Their assessment of GuarantCo’s capital position has been balanced by continued recognition of strong liquidity buffers, including Moody’s opinion that GuarantCo is “establishing a track record of pro-actively managing its stressed exposures and recovering impaired assets” and high shareholder support which was bolstered by the addition of AFD and GAC.

Emily Bushby, Interim CEO of GuarantCo, said: “We are proud that both Fitch and Moody’s have re-affirmed our credit ratings. The diversification of our funding base through the investment of Agence Française de Développement to be spent on climate adaptation and mitigation infrastructure projects and the funding by Global Affairs Canada to be invested in projects that support gender advocacy will further strengthen shareholder confidence and help grow GuarantCo’s portfolio. This will enable us to achieve our strategic and development objectives with the associated positive impact to our external stakeholders and people in lower income countries across Africa and Asia who will benefit from the essential infrastructure projects that we finance.”

Notes to editors

About GuarantCo

GuarantCo mobilises private sector local currency investment for infrastructure projects and supports the development of financial markets in lower income countries across Africa and Asia. GuarantCo is part of the Private Infrastructure Development Group (PIDG) and is funded by the governments of the United Kingdom, Switzerland, Australia and Sweden, through the PIDG Trust, the Netherlands, through FMO and the PIDG Trust, France through a stand-by facility and Global Affairs Canada through a repayable facility. GuarantCo is rated AA- by Fitch and A1 by Moody’s. GuarantCo’s activities are managed by GuarantCo Management Company which is part of Cardano Development. www.guarantco.com

About PIDG

The Private Infrastructure Development Group (PIDG) is an innovative infrastructure project developer and investor which mobilises private investment in sustainable and inclusive infrastructure in sub-Saharan Africa and south and south-east Asia. PIDG investments promote socio-economic development within a just transition to net zero emissions, combat poverty and contribute to the Sustainable Development Goals (SDGs). PIDG delivers its ambition in line with its values of opportunity, accountability, safety, integrity and impact. Since 2002, PIDG has supported 171 infrastructure projects to financial close which provided an estimated 217 million people with access to new or improved infrastructure. PIDG is funded by the governments of the United Kingdom, the Netherlands, Switzerland, Australia, Sweden, Germany and the IFC. www.pidg.org

FCDO provides GuarantCo, through PIDG, with an additional GBP 90 million funding to invest in essential infrastructure across Africa and Asia

Posted on 12 June 2021 | by Elle Leontiev

The Foreign, Commonwealth & Development Office (FCDO) has provided GuarantCo, a Private Infrastructure Development Group (PIDG) company, with an additional GBP 90 million callable capital facility to increase GuarantCo’s efforts to close the infrastructure financing gap in Africa and Asia through blended finance, local currency credit solutions and building local capital markets.

June 2021

The further GBP 90 million investment is in addition to the GBP 40 million callable capital facility that FCDO provided in 2016 and is part of the GBP 500 million which FCDO committed to PIDG in 2018 as a result of the British Prime Minister announcement to commit GBP 4 billion public sector investment in Africa over four years.

By leveraging the investment up to three times, GuarantCo will be able to mobilise a portfolio of up to GBP 270 million of guarantees, creating enhanced public sector investment impact. The local currency financing and the local capital market capability building that GuarantCo provides is crucial to sustainably support infrastructure development in lower income countries across Africa and Asia as they mainly rely on long-term revenues in local currency. GuarantCo’s work will therefore significantly support essential local infrastructure and economies to the benefit of the population.

The further FCDO investment, in addition to the EUR 100 million funding as provided by Agence Française de Développement (AFD) in December 2020 and the CAD 40 million by Global Affairs Canada in April 2021, will provide increased capacity to grow and leverage GuarantCo’s portfolio. This will enable the company to achieve its strategic and development impact objectives including developing local capital markets, growing economies and improving local people’s lives through essential infrastructure.

PIDG and its companies, including GuarantCo, are committed to focus their work on projects that are aligned with the Paris Agreement on climate change and the PIDG Gender Equity Action Plan.

James Duddridge, FCDO Minister for Economic Development, said: “We are excited to build on our long partnership with GuarantCo as a leader in local currency solutions, unlocking the finance for critical infrastructure to be developed in frontier markets across Africa and Asia in a sustainable and inclusive way. This support demonstrates the UK’s continued commitment to finding innovative solutions to mobilise finance towards the Sustainable Development Goals, partnering with the private sector to enable improved livelihoods in some of the world’s poorest countries.”

Emily Bushby, Interim CEO of GuarantCo, said: “We are delighted with FCDO’s additional funding which will make a significant impact to further our efforts to develop local capital markets and provide long-term, local currency credit solutions to finance life changing infrastructure projects to the benefit of local people. Since 2005, GuarantCo’s innovative approach has made a significant contribution to lower income countries and fragile states across Africa and Asia which to date has resulted in the investment enablement of USD 5.6 million, improved access to infrastructure for 43 million people and job creation for 235,000 people.

Philippe Valahu, CEO of PIDG, said: “This latest funding commitment from one of our founding and largest public sector funders reinforces the confidence that FCDO has in PIDG and GuarantCo. FCDO has played a crucial role in the development of PIDG from its initial establishment through to the transformation of the group since 2002. We highly value our partnership with FCDO to further deliver the much needed impact to people in Africa and Asia through financing of essential infrastructure.”