Kenya Pooled Water Fund (KPWF) has announced it will open a tender process to select a Lender’s Technical Advisor (LTA) on Friday August 10, 2018. The LTA sought is expected to advise KPWF as the manager of a new funding program targeted at Kenya’s Water Service Providers (WSPs), essentially licenced water utilities, to provide them with long-term local currency loans financed through Kenya’s capital market.
KPWF is looking to appoint a consulting firm to perform in broad terms, the services of an independent engineer offering technical due diligence prior to financial close; construction and performance test monitoring and operations monitoring during construction phase after financial close. The selected engineering firm is expected to provide a high level of rigour to the oversight process and contribute to the KPWF’s overall objective of instilling confidence amongst local institutional investors as to the execution of KPWF selected projects.
Interested engineering consulting firms to receive the request for proposal (RFP) should send an email to [email protected] .
KPWF Drives Commercial Finance in Water Utilities
KPWF builds on Kenya’s limited but existing history of tapping local institutional funds to help finance local infrastructure via the local capital markets, for example through the creation of tax-exempt infrastructure bonds such as the Kenya Electricity Generating Company corporate bond and the Kenya Roads Annuity Financing efforts.
From a structuring perspective, KPWF lends to a pool of creditworthy WSPs with commercially viable projects. A pool consisting of several loans is less volatile and less risky than a stand-alone loan. By financing via the bond market, KPWF targets relatively long-term loan tenors of 15 years onwards. The involvement of longer tenors, in conjunction with a range of credit enhancements, will reduce annual debt service costs for WSPs.
An additional key benefit of KPWF bond financing is that lower annual debt service allows for better matching of useful lives of water infrastructure to cost of financing and thus allows for lower future consumer water and sanitation tariff increases. KPWF’s market research shows that local investors want long-tenor, low-risk bonds. Kenya’s funding gap to achieve universal water access by 2030 is estimated at over Ksh.1,100 billion (US 11 billion) and KPWF aims to establish an annual funding program for the WSP sector of Ksh.5 billion in the medium term through the local capital market.
KPWF is an initiative started between the Government of Kenya and the Dutch government that brings in sector specialists in capital markets, water and sanitation engineering from around the world working in a collaborative manner to bring the initiative into reality. It also builds on the back of fundamental reforms in the sector over the last decade by the Kenyan Government and agencies like the World Bank that have transformed the sector to the point it is now ready for commercial finance.
KPWF is the brainchild of the Water Finance Facility of the Netherlands, a specialist finance team focused on establishing local sustainable mechanisms to finance water infrastructure around the world. In Kenya KPWF works with USAID, SIDA, GurantCo, KMT, SNV, Lion’s Head, WASREB, WSTF, CoG amongst other agencies.