TRADE FINANCE & LENDING: GHANA RAIL
construction works be acceptable, when compared with the longer-term impact of reduced road traffic and better logistics for Ghana’s imports and exports? Extensive environmental and social impact assessment and due diligence was therefore undertaken by the lenders, as well as two specialist consulting firms. One of these was the Danish consultant engineering firm Ramboll, which published its report in September 2021. A summary of this is available on the GRDA website.
About the deal
Signed on 15 June 2021, this 18-year ECA facility with Swedish export credit agency EKN (of almost €523m, together with the tied five-year commercial loan of around €75.6m) was the largest ever financed rail investment in Ghana. Covering the bulk of the project’s costs,
the loan is guaranteed by EKN and funded by Swedish Export Credit Corporation (SEK). Deutsche Bank acted as arranger. The €75m commercial loan to cover the down payment on the EKN-backed financing was arranged by Investec Bank and risk management specialists DNV – an accredited certifier with the Climate Bonds Standard. DNV confirmed that the financing is a sustainable loan in line with the Green Loan Principles 2021 (GLP), the Social Loan Principles 2021 (SLP) and the Sustainability Bonds Guidelines (2018). DNV said: “We have adapted our Green and Social Loan Principles methodology, which incorporates the requirements of the GLP and SLP, to create a specific Sustainability Loan Eligibility Assessment Protocol (the Protocol). We also considered the Sustainability Bonds Guidelines (2018), which define a transaction as sustainable if the proceeds are applied to both green and social projects.” The firm added, “The overarching principle behind the criteria is that a Sustainability Loan should enable capital-raising and investment for new and existing projects with environmental and social benefits.” The four criteria applied cover the use of proceeds, management of environmental impact, drawing down and disbursement of the facility, as well as ongoing reporting.
Swedish content The support of EKN and SEK reflects the significant participation of Swedish sub- suppliers in the project, and the agencies’ backing helps to secure a highly favourable borrowing rate. In addition, a sizable share of the content is supplied by Swiss companies, which has allowed EKN to reinsure close to 49% of its
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risk at SERV, Switzerland’s ECA. “This is a great way to participate in projects where total Swedish content falls short of the 30% share required by our statutes,” said Malin Tegnér Larsen, senior underwriter at EKN.
Most of the Swedish suppliers of materials and equipment were coordinated by trading house Elof Hansson and integrator specialist XLIT. This includes construction equipment from VCE, signalling systems from Alstom and railway cars from Kiruna Wagon. The construction of the railway is managed by XLIT in partnership with Scandinavian Track Group (STG), which also engages and manages local labour. “EKN and SEK are instrumental in securing a highly favourable borrowing rate that makes it possible to source high-quality products and services in the project,” said Fredrik Agerhem at XLIT. “It’s an important milestone in Ghana’s economic growth story, creating jobs and providing sustainable transport for agricultural products, minerals and passengers for decades to come.”
“It is signing deals like this that makes
working in ECA finance so rewarding,” reflects Ben Dobson, from Deutsche Bank’s Structured Trade & Export Finance team. He continues, “Our business is very much based on supporting our clients and, in this instance, we have helped both the importer and the GRDA as well as the Swedish exporters. However, more importantly, the new line will help improve the lives of millions of local people, who will soon be able to travel in Ghana by train – which is quicker, safer and has less of a carbon footprint than current travel by road.”
Deals like this make ECA finance so rewarding
Ben Dobson, Director, Structured Trade & Export Finance, Deutsche Bank
Commercial loan The tied commercial loan was Investec’s third major ECA deal in Ghana in 2021. As an Anglo-South African banking and wealth management institution, this transaction extended its impact in sub-Saharan Africa. The deal included insuring a 15% commercial loan through the Export Credit Insurance Corporation of South Africa, making it possible for South African lenders to fund it. Chris Mitman, Head of Export & Agency Finance at Investec, says: “We are delighted to have partnered with Deutsche Bank, MoF, ECIC, EKN, SEK and Bluebird to structure and bring this transaction to a successful financial close, at a time of unprecedented upheaval in the financial markets and, most importantly, realise a sustainable project which will benefit Ghana and the continent and its communities for the long-term.” With private risk mitigation disrupted significantly, 2021 was not the ideal time to get a deal over the line. But the commitment and determination of stakeholders to make it happen was vital.
45 Passengers ride on Ghana’s
railway system on the first train reconnecting Accra to Tema
Photography: istockphoto, Getty
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