PIDG to Launch $100 Million Guarantee Firms Across India, Africa, Vietnam

(Bloomberg) — The Private Infrastructure Development Group, which is owned by some of the world’s richest countries, aims to set up local currency guarantee firms across Africa and Asia with a combination of equity and callable capital.

The firms are planned for India, Vietnam, Bangladesh, Zambia, Ghana and Francophone West Africa, Chief Executive Officer Philippe Valahu said in an interview.

“The equity infusion in each facility is expected to be under $100 million with an additional element of callable capital” of as much as $50 million, he said. The new entities would add to the group’s existing vehicles in Nigeria, Pakistan and Kenya.

The credit guarantee firms are designed to give institutional investors in developing nations the confidence to invest in longer-term infrastructure projects rather than sinking the bulk of their capital into government securities. That’s expected to make more money available to meet the needs of the countries for facilities such as power plants, roads and bridges.

PIDG has already been able to exit Infracredit in Nigeria, which it established in 2017, and won investment from Kenyan pension administrator CPF Group in its Dhamana vehicle in that country.

“Nine years ago you didn’t have a single pension fund or insurance company invested in the infrastructure asset class,” Valahu said of Nigeria.“If you fast forward nine years, 21 or 22 pension fund investors are invested into the infrastructure asset class.”

The funds are expected to start with a conservative leverage ratio of one-to-three before moving up to as much as one-to-10 as the confidence of investors increases, he said.

Asset Class

They have “opened up a whole asset class for domestic institutional capital,” he said.

African banks, pension funds, insurers and sovereign institutions have financial resources of $4 trillion, the Africa Finance Corp. estimated in a report this year.

The PIDG is also advising on a much larger credit guarantee fund for a South African power transmission project that’s being led by the World Bank.

“The capital base is going to be several hundred million dollars at a minimum,” he said.

The PIDG is backed by the British, Dutch, Swiss, Swedish, Australian and Canadian governments.

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