Description
In 2017, a pioneering water concession reached financial closure in Rwanda for the Kigali bulk water supply project to provide 40 million litres of potable water per day for use in the city of Kigali with a cost of USD 61M. The private partner in the project is a subsidiary of Dubai-based Metito Group, an international water management company active in emerging markets. The water supplied by the concessionaire is sold to the government-owned water utility, which distributes it to end-users to help meet the water demands of Kigali’s expanding population of households and businesses. In 2018, the Multilateral Investment Guarantee Agency (MIGA) agreed to issue approximately USD 10M in guarantees to cover the equity and quasi-equity investments by Metito Utilities Limited (a UK company) for the construction, operation and maintenance of a bulk water facility in Kanzenze. The guarantees were issued for a period of 20 years against the risk of transfer restriction, expropriation, war and civil disturbance, and breach of contracts. This project is one of the few bulk water public-private partnerships (PPPs) in sub-Saharan Africa and could have important demonstration effects.
Location
Kigali, Rwanda
Region
Sub-Saharan Africa
Instrument
Partial or full risk guarantee
Instrument category
Risk mitigation instruments
Secondary instruments
Concessions build-operate-transfer (BOT) and design-build-operate (DBO) projects
Project size (range)
USD 50-100M
Project size (details)
USD 61M
Implementer
Metito Utilities Limited, Dubai
Year of financial closure
2017
Client
Government of Rwanda
Primary financer
Dubai-based Metito Group
Other co-financers
Multilateral Investment Guarantee Agency (MIGA), World Bank Group, Emerging Africa Infrastructure Fund (EAIF)
Other contributors
African Development Bank (AfDB); several members of the Private Infrastructure Development Group (PIDG) including included the Emerging Africa Infrastructure Fund and PIDG Technical Assistance; IFC’s PPP Advisory Services; PIDG’s DevCo project preparation fund.
Other transaction participants
Investec Asset Management manages the Emerging Africa Infrastructure Fund (EAIF) and arranged the debt finance for the project.
Barriers addressed
The Multilateral Investment Guarantee Agency (MIGA) Guarantees enabled private sector investor confidence: Without the guarantees, the investor would have been exposed to a range of risks (transfer restriction, expropriation, war and civil disturbance, and breach of contracts) which would have likely ended the possibility of closing the PPP deal.
Greenfield project approach provided transparency: Typically, water PPPs focus on brownfield assets, but in LMICs these can be very hard to value, as there tend to be many hidden costs as part of the rehabilitation. Kigali's greenfield approach boosted investor confidence.
Financing structure
The Kigali Bulk Water Project has an extensive project preparation process involving numerous government officials and agencies, including the African Development Bank (AfDB) and several Private Infrastructure Development Group (PIDG) members. PIDG actors included the Emerging Africa Infrastructure Fund, which arranged financing and provided debt, and PIDG Technical Assistance, which provided technical assistance funding and capital subsidy support. IFC’s PPP Advisory Services led the project structuring process, supported by PIDG’s DevCo project preparation fund. The preparation process resulted in a 27-year water concession that mirrors a greenfield independent power producer (IPP) electricity project, backed by a take-or-pay purchase agreement denominated in USD. It is a greenfield project that builds and operates new infrastructure assets, which the private partner will continue to own, operate, and maintain over the contract period. Because it is more like an IPP than a traditional water concession, the Kigali project is more attractive to private sponsors, operators, and investors – it represents lower cash flow risks than a conventional retail water distribution concession with revenue generated via end-user tariff payments in local currency.
Suitability for cities in low-and-middle income countries (detail)
Yes. MIGA supports countries eligible for financing from the International Development Association.
Weblinks
References
IFC. (2015) Rwanda: Kigali Bulk Water Project. International Finance Cooperation.
