EAIF launches West Africa’s first ever social asset-backed security

The Emerging Africa Infrastructure Fund’s bond is West Africa’s first social asset-backed security, targeting 100% electrification in Cote D’Ivoire.

The Emerging Africa Infrastructure Fund (EAIF), a Private Infrastructure Development Group (PIDG) company, has committed up to $48m (€45.4m) to launch West Africa’s first ever social asset-backed security.

The $96m (€90m) bond will be issued by special purpose vehicle Fonds Commun de Titrisation de Créances Electricité Pour Tous (FCTC EPT) in local currency (XOF), building towards universal access to electricity in Côte d’Ivoire.

Background to the deal

EAIF was established and substantially funded by the governments of the United Kingdom, The Netherlands, Switzerland, and Sweden. It raises its debt capital from public and private sources, including Allianz – the global insurance and financial services company, Standard Chartered Bank, the African Development Bank, the German development finance institution DEG and its parent KFW and FMO, the Dutch development bank. EAIF is managed by Ninety One (formerly Investec).

Andreas Cremer, head of DEG Infrastructure and Energy, Africa and Latin America, said: “Infrastructure is a key factor in development, and Africa offers many investment opportunities in this area. Furthermore, DEG’s commitment might be a positive signal to other investors and aims to catalyse other private and institutional investors.”

EAIF provides a variety of debt products to infrastructure projects promoted mainly by private sector businesses in Africa.  It has to date supported 96 closed infrastructure projects across nine sectors in over 20 African countries. As of the end of 2022, EAIF had a committed loan book portfolio of over US$1.15bn.

Cremer added: “By financing infrastructure and renewable energy projects DEG helps to build core infrastructure projects and to reduce energy supply shortage, and thus contributes to a sustainable growth of the economy and an increase in access to energy and infrastructure for the local population.”

Côte d’Ivoire is EAIF’s largest country exposure, with all investments designed to strengthen the burgeoning power sector. Nevertheless, the asset-backed security is a first for EAIF.

Electricity for all

The first phase of the security, backed by revenue from energy tariffs collected from the launch of the government-led Electricity for All (PEPT) programme, will modernise the country’s power sector. Improving access to energy and boosting economic productivity, predominantly in rural areas, the bond will enhance sustainability across the energy industry, in line with the UN’s Sustainable Goal on Affordable and Clean Energy (SDG 7).

Launched in 2014, PEPT has achieved over 1.6 million connections to date. The Compagnie Ivoirienne d’Électricité (CIE) will use the proceeds of the bond to substantially expand last mile connectivity. This will contribute to financing the connection of up to 800,000 additional low-income households to the national grid over the next four years, supporting SDG 7.

The transaction also aims to ensure the longevity of the Ivorian energy sector by installing prepaid meters. Enabling customers to top-up prepaid meters from mobile phones strengthens revenue collection, which is critical to improving sustainability of energy sectors across the continent.

Revenue collected from energy tariffs over this period will be used to back the bond and support expansion of the programme in mainly rural areas, where access to electricity is much lower than urban areas. Targeting low-income households will empower marginalised communities and is intended to boost overall economic equality in the country.

Deepening local capital markets

EAIF’s local currency commitments in West Africa have included previously anchoring a bond issued by telecoms giant Sonatel, as well as investing in a bond funding the relocation of West Africa’s third busiest seaport. This new instrument has been certified as a social bond, having received a second party opinion from ratings agency Moody’s.

Deepening the role of local capital markets in financing is a critical development priority. EAIF will act as a co-investor, deploying capital in two tranches alongside the International Finance Corporation (IFC) with participation by local investors being encouraged. Africa Link Capital is serving as the mandated lead arranger with distribution being managed by local brokers BoA Capital Securities and NSIA Finance.

Commenting on the transaction, Folatomi Fayemi, investment specialist at Ninety One, said “By breaking new ground with this transaction, we hope to accelerate and deepen the participation of domestic capital markets in Africa’s sustainable development.”