Case Study: USD 1.1bn financing project to develop and improve water infrastructure in Angola

Learn how we helped Angola’s Ministry of Finance fund a transformational development project that brought together multiple stakeholders.

USD 1.1bn financing project to develop and improve water infrastructure in Angola

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Background

Angola’s water supply infrastructure requires development, and the country faces significant challenges in providing access to safe and reliable water for the population. According to the World Bank, it ranks 138 out of 140 for reliability of water supply1. The country has an abundance of water, but its hydraulic infrastructure needs strengthening for reliability, capacity, and resilience.2

The situation is particularly acute in the region’s towns and cities, which are among the most rapidly urbanising in the world.3

Therefore the Government of Angola embarked on a transformational project in the capital city of Luanda for the development of water production, purification, transmission, storage and distribution facilities - comprising a water treatment plant, a transmission system, water storage facilities, distribution centres and installation of new networks and metered connections. Once completed, the Luanda Bita Water Supply Project is intended to improve access for over two million residents to potable water service in selected parts of South Luanda.

The project will also contribute towards meeting the United Nations’ Sustainable Development Goal 64, which relates to increasing access to clean drinking water and sanitation for all.

However, mobilising commercial financing has often proven a challenge in sub-Saharan Africa.  Therefore, Angola’s Ministry of Finance engaged Standard Chartered -a bank with which it has a longstanding relationship to advise and coordinate USD 1.1 billion of financing to fund this project, and to bring together multiple stakeholders through a new and innovative structure.

Deal structure - collaboration and World Bank guaranteed financing

The financing has been structured as two separate facilities:

(A) USD 900 million, IBRD (International Bank for Reconstruction and Development) Guaranteed facility with Standard Chartered Bank acting as Sole Co-ordinator & Structuring bank, Joint Underwriter and Joint Initial Mandated Lead Arranger, BNP Paribas as Joint Underwriter and Joint Initial Mandated Lead Arranger and Crédit Agricole Corporate and Investment Bank as Joint Initial Mandated Lead Arranger. Société Générale and Credit Suisse acted Mandated Lead Arranger. Norton Rose Fulbright acted as the Borrower legal counsel and Allen & Overy acted for the Lenders. In addition to IBRD (the lending arm of the World Bank Group), this loan is also guaranteed by the African Trade Insurance Agency. The loan sets a global record as the biggest World Bank guaranteed financing; and

(B) USD 165 million, BpiFrance Assurance Export guaranteed facility with Standard Chartered Bank acting as structuring & co-ordinating bank, book runner and mandated lead arranger. Santander and Helaba Bank came in as mandated lead arrangers into this facility. The facility will be used for financing design-build contracts awarded to Suez International and Saint Gobain PAM with assistance from the French ECA i.e. BpiFrance Assurance Export.

Unlocking capital for critical and sustainable infrastructure in sub-Saharan Africa

The deal has the distinction of being one of largest single term loan financings provided by commercial banks for an African sovereign during 2021.

The innovative financing structure of the Luanda Bita financing could also unlock more sustainable investment for other countries that need it most. This could include an increased appetite among insurers and investors for other projects in the region and provide a blueprint on how to structure future longer term, lower interest loans, potentially benefiting some of the world’s most underdeveloped markets. Standard Chartered intends to repeat the successful structure used in this project financing to unlock opportunities in other markets.

At a time when demand is surging for Environmental, Social, and Governance (ESG)-compliant investments,5 financings such as this demonstrate Standard Chartered’s ability to offer a path for aligning the Borrower’s financing need with the investor’s requirements. The financing structure for Luanda Bita can be replicated for other projects and clients as well with the involvement of the right partners. As Ottoniel dos Santos, Secretary of State for Finance and Treasury at the Republic of Angola puts it, “If you want to go fast, you go alone, if you want to go further, you go with your partners.”

1 https://documents1.worldbank.org/curated/en/684321563588092995/pdf/Angola-Luanda-Bita-Water-Supply-Guarantee-Project.pdf

2 https://documents1.worldbank.org/curated/en/684321563588092995/pdf/Angola-Luanda-Bita-Water-Supply-Guarantee-Project.pdf

3 https://documents1.worldbank.org/curated/en/306721565242541252/pdf/Overview.pdf

4 https://www.un.org/sustainabledevelopment/water-and-sanitation/

5 https://www.ftadviser.com/investments/2021/07/07/growing-client-demand-for-esg-bonds/

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