ANGOLA – The government of Angola has secured a guaranteed financing package from World Bank for implementation of the BITA project, aimed to 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 i.e., Standard Chartered Bank, BNP Paribas, Crédit Agricole Corporate and Investment Bank.
With the project, valued at US$1.09 billion, 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 African Trade Insurance Agency (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 US$351 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.
“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,” said Benjamin Mugisha, Chief Underwriting Officer – ATI.
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.
Sebnem Erol Madan, Practice Manager – Infrastructure Finance, PPPs and Guarantees, The World Bank said, “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.”
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.
Ministry of Finance of the Republic of Angola indicated, “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.”
Since inception, ATI has supported projects valued at over US$66 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 US$25 million expected in the coming months.
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