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Rwanda, Kigali Bulk Water

Securing complex financing to deliver a ground-breaking water supply plant

Challenge

Rwanda’s capital Kigali is growing rapidly, placing strain on the city’s water infrastructure. Water rationing is common due to limited production capacity. The Government of Rwanda’s Economic Development and Poverty Reduction Strategy II highlights the need to improve public health and economic productivity. As part of this strategy, the government is committed to providing safe, clean water for its population and has worked to create a regulatory environment conducive to private sector involvement in the sector.

Solution

To attract a private sector partner to address Kigali’s water shortage, the government sought advisory services from IFC PPP Advisory Services, with funding support from DevCo, to develop a public-private partnership (PPP) transaction. Following a competitive tendering process, Metito won a 27 year license to build, operate and transfer the 40,000m³/day Kigali Bulk Water scheme in the city’s Kanzenze district. EAIF is the mandated lead arranger, coordinating the complex financing to make the scheme bankable. EAIF provided long term debt alongside the African Development Bank, with Metito providing the balance as equity finance. TAF Viability Gap Funding (VGF) covered upfront capital costs, allowing the government to expand the number of people connected to a reliable water supply without raising tariffs.

Impact

‘Kigali Bulk Water puts Rwanda on the map for the international investor community and marks an historic moment for the country.  Together…we are setting a precedent not only for Rwanda, but for the whole of sub-Saharan Africa, and surely for Metito. This is an exemplar project for public private partnerships in the region.’ Mutaz Ghandour, Chair and CEO of Metito

PIDG companies made a significant contribution to structuring the Kigali Bulk Water initiative. The involvement of DevCo in the project’s early stages helped the IFC to structure the first long-term water sector PPP of its kind in sub-Saharan Africa, creating a benchmark for future transactions. EAIF’s commitment enabled it to overcome delays and secure the finance required to become a reality, whilst TAF’s VGF grant was important to the creation of the overall financing package and to the delivery of improved quality of service for customers.

Extracting and treating water from the Nyabarongo River, the scheme will provide around one third of Kigali’s water, delivering health benefits and meeting growing demand from water-dependant businesses and households. It is anticipated that reduced spending on public health and related productivity losses will enable the government to redeploy funds to support its wider economic development and poverty reduction agenda.

 

Read more about this project in our World Bank PPP blog.