GuarantCo Enabling long-term infrastructure finance in local currency - Quarter 4 2020
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GuarantCo Enabling long-term infrastructure finance in local currency Quarter 4 2020
Who we are
Our funders
GuarantCo 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, and France through a stand-by facility.
3
Our credit ratings
AA- A1
AAA AAA
4
Our fund manager
Cardano Development
Cardano Development, through its subsidiary
GuarantCo Management Company, took over
management of GuarantCo in May 2016. ILX is an emerging market credit fund to provide BIX Capital stimulates the use of impact
investors with cost-effective access to syndicated DFI- certificates for essential household
Cardano Development is committed to helping loans and support DFIs in mobilising private capital. products in developing countries.
frontier economies develop and prosper, by
introducing innovative financial risk management
products and services to make people and
businesses in local economies more resilient and
protected against risk.
The Water Finance Facility mobilises large-scale TCX contributes to reducing
With around €5 billion assets under management private investment financing for water and currency risks by hedging these
and €1.2 billion capital under management, sanitation services in developing countries. risks in frontier markets.
predominantly sourced from international
development finance institutions, the company
supports five funds with ongoing management
services and corporate governance oversight.
In addition to GuarantCo, Cardano Development has
incubated and grown the following funds: Frontclear provides guarantees to
enhance inter-banking collateralised
trading in frontier economies.
5
Where GuarantCo fits in the Private Infrastructure Development Group
Financial close Commercial operation
Concept Early stage development Construction Operation
Technical Assistance
DevCo
InfraCo Africa
Able to hold equity stakes during construction and operation
InfraCo Asia
The Emerging Africa Infrastructure Fund (EAIF)
GuarantCo
Technical assistance Project preparation Debt, guarantees and mezzanine
PIDG Technical Assistance grants support PIDG InfraCo Africa and InfraCo Asia originate, develop, EAIF provides long-term foreign currency loans in sub-
companies at any stage of the project lifecycle. structure, invest and manage projects. They can Saharan Africa.
make equity investments in innovative and
DevCo helps fund PPP advisory services to governments, GuarantCo provides local currency guarantees to banks
pioneering projects, or to remedy the absence of
delivered through the World Bank Group’s IFC. and bond investors to develop capital markets.
capital.
6
Our vision
To become a centre of excellence for local currency
credit solutions for infrastructure finance in lower
income countries thereby assisting with the
alleviation of poverty.
7
Our mission
To become a market-based, recognised provider of
contingent credit solutions aimed at enhancing the
availability and role of local currency finance for
infrastructure projects and developing local capital markets.
8
Our philosophy
Build capacity Develop partnerships Deliver impact
9
Significant developmental impact on people’s lives
Since we were established in
2005, GuarantCo has made a
55 *
transactions in
43
million people with improved
significant impact on the lives 22 countries access to infrastructure
of people through the
transactions for which we have
provided local currency credit
solutions.
235
thousand jobs
5.6 **
USD billion investments
created enabled
In 2019 PIDG harmonised the basis for calculating metrics across the group. For GuarantCo this meant recognising
impact from financial close rather than recourse agreement. Cumulative totals have been restated to reflect this
change.
* 49 financially closed and 6 recourse agreements ** 5.6 billion = Total Investment Commitments and 4.7 billion = Private Sector Investments
Source: PIDG Annual Review 2019
10Our mandate
Mobilise private sector funding into infrastructure in Africa and Asia
The guarantee size available from GuarantCo can provide a variety of
GuarantCo for a single transaction is credit solutions as required for a
between USD 5 million - USD 50 million particular project including:
equivalent in local currency. The maximum
• Partial credit guarantees
tenor is 20 years.
• Tenor extension guarantees
• Liquidity extension guarantees
• EPC contractor guarantees
• Portfolio guarantees
In addition, GuarantCo can provide
other solutions depending on individual
project requirements.
11We use blended finance
GuarantCo has closed 52 guarantees totalling USD 1.2 billion, which has mobilised USD 4.8 billion
of private sector investment as at the end of 2019*
We can leverage our capital up to 3 times and as older guarantees mature we can write new guarantees, so
our impact per public sector investment will continue to grow over time
$372 $152
MILLION MILLION $1.6
BILLION
Public sector investors Guarantee capacity Current guarantee
Equity including leverage facilities enabled by leverage capacity of USD 1.6
( Owners / FMO (USD 30m) + AFD (USD 122m))** of 3x capital billion
*Source: PIDG Annual Review 2019
**Per draft 2020 Financial Statements
12We have established a track record of innovation and growth
Total run-rate portfolio size (USD)
2005 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Nairobi Singapore
GuarantCo incorporated as 1st Local currency 1st Local currency 1st Local currency 1st Local currency 1st local currency office opens office opens 1st local currency 1st dual-currency 1st NSE and LSE
a Mauritian company and securitisation corporate bond bond in Sri Lanka & project financing project financing Corporate bond in guarantee in green Kenyan
tender launched for a new in India in Nigeria sukuk in Pakistan in Nepal in Cameroon Vietnam and Ghana Bangladesh bond listing for
fund manager Acorn
1st Leverage facility applied 1st Leverage facility cancelled
increases guarantee beneficiaries rely solely on
1st guarantees 1st guarantee 1st guarantee
capacity to USD 146m GuarantCo’s standalone
of synthetic local in Jordan in Madagascar
credit ratings
currency green bond and Tanzania
AAA AAA 1st transaction in India
1st Local currency Provides 1st co-guarantee RATED RATED of InfraCredit Nigeria as
bond issue by with US AID in Uganda operations commence
Celtel Kenya PACRA Change in Fund Manager 1st co-financing
Bloomfield
Provides 1st
guarantee Pakistan to GMC Limited, with Asian
West Africa
for Standard Chartered Bank part of Cardano Development
Co guarantee platform Bank
Development
A1 MoU signed with African
RATED Strategic Development Bank
partnership signed
1st one PIDG project GuarantCo, Moody’s with LSE to support
EAIF and InfraCo Africa combine developing markets’
on Kalangala project in Uganda local currency bond 1st LSE bond listings
AA- issuance for Quantum Terminals
RATED
and Sindicatum
Fitch Ratings
13Global partnerships
With leading lenders, investors and project developers
Lenders / investors Sponsors / issuers / borrowers Strategic partners
14How guarantees work
How our guarantees work
16Investment policy
Key guarantee terms
Criteria Description
Guarantee size USD 5-50 million in local currency equivalent.
Currency Local currency focus.
Hard currency guarantees possible in fragile and conflict affected areas.
Tenor Up to 20 years.
Guarantee types Partial credit guarantees
Tenor extension guarantees
Liquidity extension guarantees
EPC contractor guarantees
Portfolio guarantees
Beneficiaries Private sector infrastructure debt providers – project finance, corporate debt, mezz debt, bonds etc.
Clients Borrowers must be private sector entities although in certain cases also municipalities / sub-nationals and parastatals can be supported.
Security Typically pari passu security required alongside all other senior debtors.
Other key terms Limit on guaranteeing up to 50 percent of the long-term debt position of a company’s balance sheet.
Upfront fee, guarantee fees, monitoring fees.
English law.
Environmental and IFC Performance Standards.
social standards
17Portfolio overview
Current portfolio Q4 2020
Country % By country
Bangladesh 7.3%
Gabon 3.1%
Ghana 9.4%
India 15.1%
Jordan 4.9%
Kenya 3.4%
Madagascar 1.1%
Mali 0.9%
Multi-country (Africa) 3.0%
Multi-country (others) 5.8%
Nepal 2.7%
Nigeria 6.1%
Pakistan
Philippines
South Africa
Tanzania
Thailand
14.7%
2.6%
0.1%
5.8%
1.5%
18
COUNTRIES
Countries with active projects*
Togo 3.3%
Countries eligible for funding
Uganda 0.2%
Vietnam 9.1%
As per Q4 2020 data *Plus two multi-country projects
19Current portfolio
By sector
Digital communications Gas transportation, Oil transportation, Manufacturing related to
Power / energy supply Transportation infrastructure distribution and storage distribution and storage Social infrastructure infrastructure Multi-sector
Bangladesh
Gabon
Ghana
India
Jordan
Kenya
Madagascar
Mali
Multi-country (Africa)
Multi-country (others)
Nepal
Nigeria
Pakistan
Philippines
South Africa
Tanzania
Thailand
Togo
Uganda
Vietnam
Total (USD m) $292.9 $81.8 $50.0 $16.1 $11.3 $116.3 $43.6 $253.4 $865.4
Total current exposure (%) 33.8% 9.5% 5.8% 1.9% 1.3% 13.4% 5.0% 29.3% 100%Acorn
Kenya
Finance Urban infrastructure Impact
KES 2.5bn Developing capital markets
guarantee GuarantCo provided investors with a partial credit
guarantee to cover 50 percent of principal and
interest due under the KES 5 billion programme.
Issued by Acorn, the first purpose-
built student accommodation Construction of up to six green- Addressing student housing shortage
provider in Kenya. certified student properties in Creating clean, safe and affordable accommodation
Nairobi. for 5,000 students in Nairobi.
Rated B1 by Moody’s, one notch
higher than Kenya’s sovereign The properties will provide high
rating of B2 (for the first time). quality and affordable student
housing for circa 5,000 students a Contributing to reducing carbon emissions
The first project bond in East Africa year. The note programme is the first to achieve green
certification in Kenya and meets the Climate Bond
The first deferred drawdown Standard of the Climate Bonds Initiative.
structure
The first green bond in East Africa
Partnering with other PIDG companies
EAIF supported the fundraise with a KES 1.3 billion
participation whilst PIDG Technical Assistance
providing a part returnable grant to contribute
towards the costs of the loan note issue.
21Classic Fashion
Jordan
Finance Social Infrastructure Impact
USD 42.5m Demonstration effect
guarantee Demonstrating to commercial lenders how viable
businesses can be supported in similar territories to
provide employment opportunities for vulnerable
populations, empower women and drive local,
inclusive economic growth.
Provided a USD 42.5 million, on- Financing the construction of a
demand guarantee with a 5-year textile processing mill, a centralised
tenor supporting Jordan’s largest cutting station, a laundry unit and a Employing vulnerable populations
garment manufacturer. carton and polybag factory. Training and employment of around 1,000 Syrian
refugees as well as Jordanian youth and migrant
workers living in Jordan, over the next four years.
PIDG Technical Assistance of USD 305,000 used to
improve training and support for refugee workers.
Supporting inclusion of refugees
Supporting the Jordanian government initiative to
integrate Syrian refugees into Jordanian society.
22Ho Chi Minh Infrastructure Investment
Vietnam
Finance Transport Impact
VND Issuance of a bond
1.150b Bond investors are unaccustomed and therefore
unable to accept project construction and
guarantee operational risk.
GuarantCo provides VND 1.150 The local currency bond supports the Improved connectivity & safety for millions
billion (circa USD 50 million) construction of a four-lane Cutting journey times from Ho Chi Minh City to Can
guarantee with a 10-year tenor to expressway in the Mekong Delta. Tho, improving drivers’ safety whilst around 4 million
Ho Chi Minh Infrastructure people will benefit from the new expressway.
Investment JSC .
PIDG Technical Assistance is
providing post transaction support Economic growth
through funding of USD 75k used Improving access to markets for agriculture,
for the development of an fisheries, garment and manufacturing and tourism.
Environmental, Social, Health and
Safety Management System.
Supporting government strategy
Attracting private capital to allow the Government of
Vietnam realise its national development strategy.
23InfraCredit
Nigeria
Public sector invests
USD 8.3 million in
GuarantCo which is
leveraged 3x to USD 680
provide USD 25
million guarantee to
USD 25m mn
an InfraCredit. Callable capital Guarantee
x5 capacity
$61m Leverage
Leverage facility Agusto & Co
and GCR
USD
$30m 1.1bn USD 50m
Leverage facility x3 Guarantee Equity
capacity
Leverage
Moody’s and
Fitch Ratings This USD 25 million guarantee will be leveraged
USD 365m 27x to help InfraCredit mobilise up to USD 680
Equity million of guarantee capacity in local currency and
therefore leverages the original investment made
Public sector by the public sector up to 81x.
investors
Note: Capital numbers as at December 2019
24Kacific Broadband Satellites
Asia and the Pacific islands region
Finance Digital Communication Impact
infrastructure
USD 50m Mobilising long tenor private sector debt
Partial credit The guarantee allowed an institutional investor to
guarantee provide a long tenor project finance loan of USD 60
million to a satellite deal in a niche region, which
contributed to Kacific’s total investment of USD 222.8
million.
Guarantee of European GuarantCo’s first satellite financing
institutional investor alongside transaction.
Asian Development Bank (ADB) to Encouraging economic growth
co-finance Kacific Broadband Allows Kacific to build, own and Providing affordable, high-speed broadband to customers
Satellites. operate its first Ka-band, high from underserved and unserved pockets of demand in
throughput satellite. 17 countries across Asia and the Pacific islands.
First-ever co-financing of an
infrastructure project by ADB and The satellite was launched by SpaceX
GuarantCo in the region. in December 2019 and started Connecting remote country communities
operations in March 2020.
Overcoming the geographical barriers that terrestrial
Facilitated the project financing of
solutions are unable to address.
a satellite transaction in the Pacific
islands region.
Increasing affordable broadband access
Reducing end-user price through a low-cost base and long
tenor debt financing package.
25K-Electric
Pakistan
Finance Energy Impact
USD 50m
Access to dollarised markets
Dual currency Providing K-Electric with access to raw materials from
guarantee backed dollarised markets through the two tranches.
loan
Reducing power theft
Partial credit guarantee made up Financing capital expenditure
PIDG Technical Assistance funding of USD 185,000 allows
of two equal tranches: USD and projects including Aerial Bundled
a wider audience to be educated about the safety threats
PKR. Cables (ABC) roll-out, smart grid of electricity theft.
solutions and other distribution
network maintenance initiatives.
Affordable electricity
Improving the affordability of the service for end users
through access to cheaper funding than it would be
typically using in the derivative market.
Empowering women
Working to break gender stereotypes by increasing
female representation in higher paid, more skilled roles.
26Sindicatum
India and the Philippines
Finance Energy Impact
USD 60m Developing capital markets
Green bond The guarantee facilitated issuance of first-ever 7 year
tranche and a 10-year PhP tranche, a first for INR
and PhP offshore bonds respectively and was
recently listed on the London Stock Exchange.
Synthetic local currency bond Refinancing for operating solar
Issued by Sindicatum, a developer power plants in India. Green standards
/ owner / operator of renewable Construction of new solar and wind Bond issued in accordance with:
power plants in South and power plants in Philippines. • Green bond principles.
Southeast Asia (176MW in • ASEAN Green bond standards.
portfolio as of Nov 2017).
Refinancing of existing debt in INR.
Construction finance in PhP.
Promoting rating from Moody’s A1
Full credit substitution by GuarantCo.
100 percent guarantee denominated
in INR and PhP but settled in USD.
Promoting financial resilience
Providing local currency finance to reduce currency
exchange risk.
27Technaf Solartech
Bangladesh
Finance Infrastructure Impact
USD 15m Boosting power supply
Loan in Taka Improve the electricity access for circa 136,000
and USD people.
Unlock new private investment
90% Partial Credit Guarantee, and Construction of a 28MWDC solar Cleaning fuel to power local hospitals, businesses,
Tenor Extension for a new project power plant, the first utility-scale street lighting, etc.
loan making this first long-term (15 solar power plant in Bangladesh.
years) bank financing for a project
in Bangladesh.
Job creation
Enabling the provision of up to 350 direct and
indirect jobs.
Developing capital markets and promoting
financial resilience
Providing long-term finance, a requirement for the
financial viability of the project.
28Working together within PIDG
PIDG companies
How we work together
40
MILLION
Gabon
Aug 2019
Mali
Feb 2018
EURO
Gabon Special Economic Zone Kita solar project
Cargo port Electricity generation and supply
• Project due diligence • Proposal for equity restructure of Kita
• EAIF introduction through GuarantCo’s GSEZ • Coordinated KYC process and findings
USD 57 million transaction closed in Dec 2018 • Ongoing joint note to PIDG by EAIF and GuarantCo.
• Experience and knowledge share.
5
MILLION
Mali
Mar 2017
GHS
45 10
MILLION
Ghana
Mar 2018
EURO MILLION USD
Albatros Energy Quantum Terminals
Electricity generation and supply LPG storage
• Non-Payment by the off-taker • Proposal for additional investment into bottling facility
• BWSC bribery allegations • Coordinated due diligence process
• Coordinated efforts and knowledge share. • Ongoing joint discussions on borrower developments.
30PIDG companies
How we work together
Bangladesh Cameroon, Cote d’Ivoire
Apr 2019 Jul 2019, Feb 2020
Capital Market Development Capability Building Workshops
A study of the Bangladesh bond market
• Workshop to raise awareness of various approaches,
• Results of the study disseminated at conference, co- use of credit enhancement instruments and local
hosted with the Dhaka Chamber of Commerce and currency infrastructure financing credit solutions.
Industries in Dhaka, attended by 300 delegates. • Three day workshops attended by 50 local banks and
financial institutions.
Jordan From
Feb 2020 May 2020
Female Empowerment COVID-19 pandemic
• A USD 305,000 grant to co-finance vocational training • A total of USD 773,627 has been provided to five clients
together with Classic Fashion. including Acorn, Classic Fashion, Kacific, Mixta and
Technaf.
• Increases job opportunities for Jordanian youths and • These grants have ensured that working conditions
Syrian refugees particularly women. remain safe for employees during the pandemic.
31PIDG companies
How we work together
45
MILLION
Uganda
Dec 2011
USD
Kalangala Infrastructure Services
Integrated infrastructure development and improvement. Ferry
services, road development, and water and power supply.
• Structuring and executing the finance
• Risk mitigation and financial closure
• First time joint guarantee with USAID.
32Why work with us?
Why partner with GuarantCo?
Suppliers
Financier Borrower/issuer (EPC, equipment etc.)
1 Risk transfer (instead of risk 1 Positive signaling. 1 Offer more flexible terms.
mitigation) counterparty risk to
AA- / A1 entity.
2 Access new pools of capital (e.g. 2 Opportunity to accelerate
2 Efficient capital treatment for long local currency loans and bond mobilising of projects whilst capital
dated transactions. markets). is being finalised.
3 Build capacity in sustainable long- 3 Enhance overall return on 3 Risk mitigating counterparty risk in
term finance using myriad types of investments. event financing is extended.
financing solutions.
34GuarantCo’s funding
USD 317 GBP 40 GBP 90 USD 4.9
million
million million million
(USD 55 million*) Funding confirmed for 2021:
FCDO future callable capital.
• SECO – USD 3.1m
(Full disbursement expected in
• DGIS – USD 1m
2021)
• DFAT – USD 0.8m
Share capital Callable capital Committed funding
GuarantCo has a track record GuarantCo is part of PIDG, GuarantCo has no debt Leverage multiple: Moody’s and Fitch are both
of periodic equity injections with over USD 3 billion of on its balance sheet. comfortable with the
The Board allows for leverage
provided by its owners. total funding. GuarantCo Board’s leverage
up to 3 times equity plus
(As at 31st December 2019. definition and threshold.
FMO standby facility (USD 30
Includes owner funding and million), AFD leverage Facility
other funding sources)
(EUR 100 million) and
*As per Q4 2020 exchange rates
callable capital.
35Guarantee transaction process
Origination Conduct preliminary Obtain new Complete mandate Commence due diligence
assessment of deal including business approval letter/term sheet process including
initial KYC check complete KYC
Financial Conditions Recourse Negotiate Credit committee
close precedent closure agreement/contract documentation approval
36THANK YOU
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