THE ROADMAP

PARTIAL RISK GUARANTEES
(PRGS) AND PARTIAL CREDIT
GUARANTEES (PCGS) ARE
POWERFUL RISK MITIGATION
TOOLS THAT CAN HELP
SUPPORT PRIVATE SECTOR
INVESTMENT
PRGs cover private sector lenders
against risk of payment default due
to non-performance by governments.
PCGs cover debt-related instruments
for a portion of scheduled payments
against all risks, thereby improving the
terms of commercial debt. PCGs and
PRGs are particularly powerful tools
for larger-scale infrastructure projects.
For example, in 2013 the AfDB used
a $20 million PRG to facilitate the
financing of the Lake Turkana Wind
Power Project transmission line in
Kenya, the first ever PRG granted
by the AfDB’s African Development
Fund (ADF). The PRG protects private
lenders and investors against the risk
of contractual failure by the Kenyan
government and delays in construction
of the transmission line. The PRG was
a key condition for accessing longterm
debt and subsequent financial
close for the project. Beyond PRGs,
we are supporting additional tools to
reallocate the risk and reduce the cost
of financing.
To help private sector developers overcome these
hurdles, we directly provide and/or facilitate access to
a range of financing and risk mitigation mechanisms,
including equity investment for small-to-medium
renewable energy projects, guarantees to mobilize
commercial debt capital, mezzanine financing, senior and
sub-senior loans, grants, blended finance, and export
credit insurance to cover commercial and political risks.
When projects demand further risk mitigation, we use
other innovative tools to attract investors.
The transition from a power sector composed of
mostly non-renewable energy to one that heavily
features renewables must be carefully managed. These
changes will have significant startup and establishment
implications for individual projects, and unique finance
and risk mitigation tools are essential for both public
and private sector renewable power projects.
We plan to expand our financial and risk mitigation
support, particularly by improving utility performance
and solvency, and by scaling support for blended
finance products. These products marry competitive
finance from development finance institutions,
export-credit authorities, and philanthropic entities
with traditional private sector products. See the
ElectriFI feature on page 34 for an example of using
blended finance to move transactions forward.
Power Africa provides a variety of finance and risk
mitigation tools. One of our most prominent financing
partners is OPIC. It invests in late-stage transactions
across the continent and has been influential in
bringing transactions to financial close. OPIC has
pledged $2.5 billion in total to Power Africa, and has
already committed $1.6 billion to create almost
1,500 MW of on-grid and off-grid power across sub-
Saharan Africa and supports generation, transmission,
and distribution projects for traditional fuels and
renewable resources.
As a share of OPIC’s portfolio, sub-Saharan Africa has
grown from 9% in 2002 to 28% in 2015, reflecting
increased focus to deploy its wide array of tools in
the region.
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