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Kalangala Infrastructure Services

Uganda

Multisector Multisector

This is a highly developmental project to bring basic utilities to the largest island in Lake Victoria and has required imaginative financing to attract the debt required to meet the challenging economics.

Financing partners
Nedbank Limited, EAIF and USAID (as co-guarantor)

GuarantCo guarantee
USD 1.74 million

Total transaction amount
USD 12 million

Transaction benefits

This is a highly developmental project to bring basic utilities to the largest island in Lake Victoria and has required imaginative financing to attract the debt required to meet the challenging economics. GuarantCo played a crucial role over a five-year period in underwriting (at times for substantially larger amounts), structuring and executing the finance. This is the first time that GuarantCo has provided a joint guarantee with USAID and the first time that Nedbank has been the beneficiary of a guarantee from GuarantCo. In particular, GuarantCo worked closely with USAID to amend their standard form documentation in order to align it more appropriately with a project financed structure.

The Kalangala Infrastructure Services project consists of the ownership, financing, upgrade, construction, operation and maintenance of two roll-on roll-off passenger and vehicle ferries, the upgrade of the island’s 66 kilometer main road from a dirt road to a gravel road, and a series of solar-powered pump-based water supply systems, in each case to serve the population, institutions and businesses of the Island. This project is part of an integrated project with Kalangala Renewables.

Development benefits

The enhanced infrastructure is required in order to satisfy the growing and unmet demand and will be transformative for Bugala Island. It is highly unlikely that the existing dilapidated and unsafe ferry would have been replaced in the foreseeable future, nor the water supply systems installed. In addition, the ability for the project to support the water supply systems is due to the project’s multi-revenue streams, diversification and economies of scale and scope provided by other aspects of the project. As a stand-alone project, these water schemes are highly challenging to finance and operate.

The objective of the Project has been to develop new and rehabilitate existing infrastructure in order to satisfy the growing and unmet demand for infrastructure services for the population and establishments of the Island. This growth in demand has been accelerated and multiplied by the economic activities resulting from development, by e.g. Bidco Oil Palm Limited, of a 10,000 hectares, including a 3,500 hectares out grower scheme for local farmers, oil palm plantation and related mill facilities.