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Spencon

Kenya

Water, sewage and sanitation Water, sewage and sanitation

USD 15 million performance bond guarantee facility for a local East African construction company.

Financing partners
Standard Chartered Bank

GuarantCo guarantee
USD 15 million

Total transaction amount
USD 225 million

Transaction benefits

Spencon is a mid-sized local civil works contractor headquartered in Nairobi specialising in the water, roads and power sectors. They were having trouble obtaining additional performance bond lines from their banks in order to bid for and execute projects in East Africa. Standard Chartered, their main banker, was unable to provide the full requirement of USD 30 million, largely due to bank regulations on single obligor limits. GuarantCo’s guarantee made it possible for Standard Chartered to offer the full additional facility required.

Development benefits

Performance Bonds are a prerequisite for carrying out any construction project in Africa and they are the most significant financial bottleneck for the company. Large construction contracts, often donor funded, are regularly awarded to international construction companies, at 15 to 25 percent higher prices because local companies cannot afford the full performance bonds required.

GuarantCo’s facility will help lower the cost of infrastructure in the target countries by enabling greater competition and local private sector participation. There will be continued expansion and employment for over 800 permanent Spencon staff and over 3,700 semi-skilled personnel across East Africa.