African Trade Insurance Agency (ATI) Supports Angola’s BITA Water Supply Project

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ATI (www.ATI-aca.org) issues insurance support for Angola’s’ World Bank guaranteed Water Supply Project (The BITA Water Project); The BITA project will develop water supply infrastructure to supply urban and peri-urban belts of Luanda to ease the current supply problems and meet the increasing demand; The World Bank’s partially guaranteed facility, is a syndicated loan among 5 Lenders (Standard Chartered Bank, UK – who acted as Financial Advisor, co-Underwriter, co-Bookrunner and Initial Mandated Lead Arranger, BNP Paribas – France who acted as co-Underwriter, co-Bookrunner and Initial Mandated Lead Arranger, Crédit Agricole Corporate and Investment Bank who acted as Initial Mandated Lead Arranger – France, Credit Suisse AG, UK and Société Générale as Mandated Lead Arranger S.A., France).

In a landmark water project in Angola, ATI has provided insurance support for the World Bank’s partially guaranteed facility to the Government of Angola for expansion and improvement of water supply service in the urban and peri-urban belts of Luanda. The BITA Water Project consists of production, transmission and distribution investments to serve 2 million people and is expected to have overall positive environmental and social impacts by improving the health and environmental conditions of the beneficiaries.

The project, valued at USD1.09 billion, is a 15-year syndicated loan financed through a combination of private commercial banks. The lenders provided up to USD910 million to the Republic of Angola, acting through the Ministry of Finance, with the World Bank issuing a guarantee on the loan facility. Given the size of investment required for the project and the level of uncovered risk, the Government of Angola initiated discussions with ATI to explore potential additional credit insurance options.

Working together with the private insurance market, ATI provided the lenders a 2nd loss insurance above World Bank’s Guarantee of up to USD351 million to cover principal and interest therefore, enabling the project to reach financial close. ATI’s cover will mitigate the risk of the Government’s failure to make debt service payments under the loans for the project.

Despite the challenging times ensuing from the ongoing COVID 19 crisis, along with a drop in crude oil prices in early 2020 which had a negative impact on the Angolan economy and deepened the country into recession, the BITA water project was pursued by the Government of Angola as a national priority investment to develop substantial new water production. The Government reaffirmed the importance of this project for the country that was included in the 2019 budget. The project itself is designed to be financially sustainable in its own right and it will generate cash flows.

Since inception, ATI has supported projects valued at over USD66 billion in Sub-Sahara Africa. Despite not being a member country, ATI supported this strategic deal as Angola’s membership in ATI gains momentum, with an equity injection of USD25 million expected in the coming months. Becoming a shareholder of ATI will enable Angola to access a range of guarantee instruments and other investment and trade insurance products offered by ATI. Membership will benefit both local private sector, through the provision of an extensive set of financing tools in support of trade and investment; and foreign investors, thereby enhancing access to foreign direct investment (FDI) into the country’s economy.

Quotes

Benjamin Mugisha, Chief Underwriting Officer – ATI

“ATI is proud of its support to the Government of Angola on this milestone transaction. As an African Multilateral, ATI is committed to supporting the development and improvement of infrastructure on the continent. In order to achieve this, we are very proud of the relationships and support we mobilize from the private insurance market as well as the collaboration with other multilaterals and commercial lenders. We believe that blended finance solutions are a key to delivering development on the continent. The BITA Project is therefore a testament to how multilaterals, lenders and private reinsurers achieve Africa’s infrastructure and other needs and we believe that it serves as a model for further collaborations that will benefit the continent.”

Ministry of Finance of the Republic of Angola

The Angolan Government expresses its appreciation to ATI for the support and collaboration on the BITA project in particular, and for the future benefits to come from Angola’s membership with ATI.

The BITA project has also triggered an expansion for reform of state-owned companies on the water sector. In the context of recent tariff reforms that aim to allow an efficient cost recovery and, at the same time, gradually eliminate operational subsidies, the project will in fact, support the necessary efficiency gains to the Public Water Company of Luanda (EPAL). Thus, while not influencing tariff policy or requiring tariff increases, the project promotes the development of improved access and more accessible water services, through more sustainable and less subsidized business operations, causing a positive and significant impact on the lives of populations.

Sebnem Erol Madan, Practice Manager – Infrastructure Finance, PPPs and Guarantees, The World Bank

“This transformational project is critical to meet Angola’s development goals as it will bring safe, reliable water service to South Luanda. This project is also a great example of an innovative blended finance solution using World Bank guarantees and ATI insurance that brought comfort to the financial markets and helped secure financing. Through existing water sector engagement and a strong relationship with the government, the World Bank team also helped optimize the project design and introduced distribution network investments to ensure connectivity.”

Alper Kilic, Global Head of Project and Structured Export Finance, Standard Chartered Bank

This landmark transaction is a perfect example of what can be achieved, even under challenging market conditions, if Development Finance Institutions, Export Credit Agencies, international banks and the insurance market come together to support a common objective for their key client.

We are proud to leverage our strong relationship with all the stakeholders, on-the-ground presence in Angola and export finance expertise to help the Ministry of Finance improve the country’s infrastructure, and set a benchmark for other similar structured financing in other markets.

Yasser HENDA, Global Head of Export Finance, BNP Paribas S.A., France

“Sustainable Infrastructures are critical to economic development. Clean Water and Sanitation is SDG number 6 and today more than ever, there is a focus on accelerating the path towards meeting countries needs to achieve this key goal. As such, we are delighted at BNP Paribas to be one of the leading financial institutions, who acted as co-Underwiter, Co-Bookrunner and Initial Mandated Lead Arranger in the financing of the BITA water project. This is a transformational construction for the Angolan economy and for millions of lives. This blended finance transaction proved an exciting challenge: leading alongside Angola’s Ministry of Finance, the World Bank through its PCG programme, ATI through its focused insurance underwriting and other commercial banks, we are proud of the delivery of such an innovative financing solution. All in, large financial resources are now mobilized to deliver the needed water infrastructure, a great reward for all contributing parties. Thanks to all partners and to the Ministry of Finance of Angola for their continuous trust.”

Hacina Py, Global Head of Export Finance – Société Générale S.A., France

Société Générale is particularly proud to support the Republic of Angola in the financing of this significant project that will have a positive impact on the day-to-day lives of millions of people from Greater Luanda thanks to improved water supply. SG is a longstanding partner of the Republic of Angola and is engaged in the financing of infrastructure development on the African continent. Partnering with ATI and the World Bank was a very agile way to achieve a successful structuring of the financing. We would like to thank all stakeholders for their trust and cooperation.

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