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A history of providing innovative credit solutions to the benefit of local people in Africa and Asia
Since inception in 2005, GuarantCo, part of the Private Infrastructure Development Group (PIDG), has set out to support development in lower income countries across Africa and Asia through the application of credit solutions for sustainable infrastructure projects. In these markets, where there is often limited track record of debt-financed infrastructure projects, GuarantCo has sought to suitably de-risk projects to strengthen the participation, confidence and the knowledge of lenders and investors.
GuarantCo operates in a range of countries, each bringing distinctive challenges that need overcoming. Fortunately, the credit guarantee is a flexible tool that helps provide long-term solutions to address the infrastructure funding gaps to the benefit of the economy and the local people that need it most.
Whilst initially operating on a case by case basis, GuarantCo has now developed a range of well-established credit solutions that can be adapted to specific situations and applied quickly and efficiently. These include partial credit and liquidity extension guarantees, EPC contractor, portfolio and framework guarantees. In addition, GuarantCo can also provide other solutions for bonds and loans depending on individual project requirements.
Mid-2022, GuarantCo provided a guarantee for a VND 1,150 billion (c. USD 50 million) green bond issued by EVNFinance. This was the first local currency, externally verified green bond in the country and the first partially guaranteed corporate bond to attract institutional investors. Despite many first-of-a-kind characteristics, the deal was completed efficiently within just over a year. The funds from the guaranteed green bond will help EVNFinance to issue longer term loans to finance capital expenditure of green infrastructure aligned with the company’s Green Bond Framework including loans towards the fast-growing rooftop and ground-mounted solar sub-sectors in Vietnam.
GuarantCo also provides a partial guarantee solution for loans. A good example of this is the 15-year USD 13.5 million dual currency finance solution that GuarantCo provided in 2019 to Technaf Solartech Energy the first utility-scale solar project in Bangladesh, developed by Joules Power Limited, a Bangladeshi developer. The solar power plant located at Teknaf, Cox’s Bazar Bangladesh, has an annual yield of around 43,000 MWh. At peak production the plant supply will cover up to 80 percent of the present electricity demand of the entire Teknaf region.
Late 2019, GuarantCo provided its first Liquidity Extension Guarantee (LEG) in Togo, a product that enabled the 65MW natural gas-fired thermal plant to secure the long-term loans required to fund the construction of the project. The plant now provides electricity to 20 percent of the population in Togo and supporting the Government of Togo to address the country’s power deficit. Debt tenor limitations are a constraining factor in infrastructure development throughout West Africa and so it is not surprising that GuarantCo has been able to replicate the LEG product in the region. GuarantCo’s second LEG solution was provided to the TollCam project in Cameroon mid-2022, which is the first PPP road project in the country and one that had stalled due to similar debt tenor limitations. The project will lead to significantly higher toll revenue collection via more secure and efficient toll gates, collections and payment systems. The extra revenues will benefit the Government of Cameroon’s Road Fund which will invest in further development of the road network in the country.
CRDB Bank, the largest bank in Tanzania, become the beneficiary of GuarantCo’s first ever portfolio guarantee in 2020. The TZS 116 billion (USD 50 million), 5-year guarantee has created a risk-sharing partnership which allows the bank to invest more in Tanzania’s infrastructure sector without breaching regulatory and capital limits set by the Bank of Tanzania. GuarantCo closed it second portfolio guarantee with Orabank Togo in January 2022. The XOF 14.55 billion (c. USD 25 million) guarantee enabled the bank to grow its infrastructure portfolio including telecommunications and road projects. This was followed by another portfolio guarantee with Orabank in Cote d’Ivoire for XOF 10 billion (c. 15 million) in December 2022 to enable the bank to grow its infrastructure-related portfolio across the region.
The Bridge Power project in Ghana is an example of a project that typifies the flexibility that a guarantee can provide in the form of an EPC guarantee. The project finance lenders in the country were not prepared to finance the construction phased of the project. However, the EPC contractor was able to fund the construction but required credit support in order to do so. To this end, GuarantCo provided a USD 50 million guarantee for the benefit of the EPC contractor during construction. This was subsequently taken out when long-term financing became available upon completion of the project. The project increased Ghana’s power generation capacity by 5 percent.
Mid 2020, GuarantCo signed its first framework guarantee with Axis Bank. The climate mitigation guarantee provided the third largest private sector bank in India with an USD 200 million INR equivalent guarantee, allowing mobilisation of funds between USD 300 and 400 million in local currency to finance the e-mobility ecosystem in the country. This guarantee-backed debt funding is a first of its kind initiative in India. Each qualified loan made by Axis Bank to the underlying borrowers will be partially credit guaranteed with a maximum tenure of up to 10 years. Loan proceeds within the framework agreement will be used for greenfield capital expenditure in EV infrastructure.
Using innovative credit solutions has been in GuarantCo’s DNA since closing its first transaction in 2005 and the company continues to be a pioneer in the application of credit guarantee solutions in lower income countries throughout Africa and Asia. Now, in 2023, bolstered by the skills and experiences developed over 18 years and 64 transactions to date, GuarantCo can combine innovation and efficiency to meet the needs of clients faster – boosting capital market capabilities and accelerating much needed development impact for the people that need it most.
More information on GuarantCo’s contingent credit solutions, can be found here.