GuarantCo Enabling long-term infrastructure finance in local currency Quarter 1 2019
Who we are
Our owners GuarantCo is funded by the governments of the United Kingdom , Switzerland , Australia and Sweden through the PIDG Trust and the Netherlands , through FMO and the PIDG Trust . 3
Our fund manager Cardano Development Group “TCX contributes to reducing currency risks by hedging these risks in frontier markets.” Cardano Development Group took over management of GuarantCo in May 2016. “ILX aims to improve the functioning Committed to helping frontier economies develop of development finance by creating “ Frontclear provides guarantees to and prosper by introducing innovative financial risk a managed investment vehicle to enhance (interbank) collateralised assist institutional investors to management products and services to make trading in frontier economies.” participate in development finance people and businesses active in the local real through participation in loan economy more resilient and protected against risk. syndications originated by development banks with a positive “BIX Capital stimulates the use Focuses on developing innovative financial risk track record.” of impact certificates for management solutions that are practical and can essential household products in be scaled-up. developing countries.” Cardano Development Group has incubated and grown the following funds: “The Water Finance Facility mobilises domestic investment into climate compatible water sector projects through the local bond market.” 4
Where GuarantCo fits in the Private Infrastructure Development Group Financial close Commercial operation Concept Early stage development Construction Operation Technical Assistance Facility (TAF) DevCo InfraCo Africa Able to hold equity stakes during construction and operation InfraCo Asia The Emerging Africa Infrastructure Fund (EAIF) GuarantCo Debt, guarantees and mezzanine Technical assistance Project preparation TAF grants support PIDG companies at any stage of the InfraCo Africa and InfraCo Asia originate, develop, EAIF provides long-term foreign currency loans in sub- 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. 5
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. 6
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. 7
Our philosophy Build capacity Develop partnerships Deliver impact 8
Our 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 contingent products as may be required between USD 5 million - USD 50 million for a particular project including: equivalent in local currency. The maximum • Partial credit guarantees tenor is 15 years . • First loss guarantees • Tenor extension • Liquidity guarantees • Joint guarantees • EPC contractor guarantees • Counter guarantees 9
We use blended finance USD 1 of public investment mobilises USD 5 of private sector investment $30 $320 $1 MILLION MILLION BILLION Public sector investors Guarantee capacity Guarantee capacity Private sector Equity + Debt enabled by leverage of USD 1 billion investment mobilised of 3x capital USD 4.4 billion ( FMO / Owners ) (Moody’s and Fitch Ratings) *As per Q4 2017 10
We are building a track record Total run-rate portfolio size (USD) 2005 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Nairobi Singapore 1 st Local currency 1 st Local currency 1 st Local currency 1 st Local currency 1 st local currency 1 st local currency GuarantCo incorporated office opens office opens as a Mauritian company Securitisation Corporate bond Bond in Sri Lanka & Project financing Project financing in Corporate bond in and tender launched for in India in Nigeria sukuk in Pakistan in Nepal Cameroon Vietnam and Ghana a new fund manager 1 st Leverage facility applied 1 st Leverage facility cancelled Increases guarantee Beneficiaries rely solely on 1 st guarantees capacity to USD 146m GuarantCo’s standalone of synthetic local credit ratings currency green bond in AAA AAA 1 st transaction 1 st Local currency India, moves market Provides 1 st co-guarantee RATED RATED of InfraCredit Nigeria from 5 to 7 years Bond issue by with US AID in Uganda as operations Celtel Kenya PACRA Bloomfield Change in Manager commence Provides 1 st guarantee Pakistan West Africa to GMC Limited, for Standard Chartered Bank part of Cardano Co guarantee platform A1 Development MoU signed with African Strategic RATED Development Bank partnership signed 1 st one PIDG project Moody’s with LSE to support developing markets’ GuarantCo, EAIF and InfraCo LSE bond listings local currency bond Africa combine on Kalangala AA- for Quantum Terminal project in Uganda issuance RATED and Sindicatum Fitch Ratings 11
Global partnerships With leading lenders, investors and project developers Lenders / Investors Sponsors / Issuers / Borrowers Strategic partners 12
London Stock Exchange partnership “This collaboration with GuarantCo is part of the London Stock Exchange’s commitment to fostering the development of emerging and frontier capital markets. Efficient capital markets are key to raising finance for GuarantCo signed an agreement companies from these economies and it’s our hope that with the LSE in presence of the UK this partnership will encourage and facilitate further Secretary of State for DFID, Priti development local currency debt markets, building on Patel on 31 st March 2017. our experience as the global leader for international RMB and Indian rupee bond markets.” Nikhil Rathi, CEO London Stock Exchange plc. 13
How guarantees work
How our guarantees work 15
Investment 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 15 years. Guarantee types Non-payment guarantee covering all risks. On-demand guarantee, not an insurance product. Principal and interest coverage. First loss, second loss, co-guarantee. EPC contractor guarantee. Innovative structures possible to solve liquidity constraints, tenor mismatch or funding timing constraints. 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 16
Portfolio overview
Current portfolio By country Country % Bangladesh 2% Cameroon 2% Gabon 7% Ghana 10% India 28% Kenya 10% Mali 1% Nepal 3% Nigeria 16% Pakistan 5% Philippines 3% 1 7 South Africa 1% Sri Lanka 1% Tanzania 0% COUNTRIES Thailand 2% Countries with active projects Uganda 0% Countries eligible for funding Vietnam 10% As per Q3 2018 data 18
Current portfolio By sector Digital communications Social Water, sewage Urban Agri-business infrastructure Energy Manufacturing Multisector infrastructure Transportation & sanitation infrastructure Bangladesh • • • • • • • • • Cameroon • • • • • • • • • Gabon • • • • • • • • • Ghana • • • • • • • • • India • • • • • • • • • Kenya • • • • • • • • • Mali • • • • • • • • • Nepal • • • • • • • • • Nigeria • • • • • • • • • Pakistan • • • • • • • • • Philippines • • • • • • • • • South Africa • • • • • • • • • Sri Lanka • • • • • • • • • Tanzania • • • • • • • • • Thailand • • • • • • • • • Uganda • • • • • • • • • Total Vietnam • • • • • • • • • Total (USD m) $24.4 $16.4 $296.6 $59.3 $152.4 $121.4 $128.3 $1.9 $00.0 $800.6 Total current exposure ( % ) 3.0% 2.0% 37.0% 7.4% 19.0% 15.2% 16.0% 0.2% 0% 100% 19
Selected transactions
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