WASH infrastructure finance specialist for utilities Scale Aqua for All was asked to guide – by way of a consultancy – the review and update of subproject Financial Proposals handed over by Kenya Pooled Water Fund (KPWF), to be submitted by WSPs to commercial banks. In preparing and reviewing the financial proposals, the consultant will assist the WSPs in updating financial models and preparation of loan applications to support access to commercial banks corporate loans, within their debt service abilities. The Kenya Pooled Water Fund (KPWF) was created in 2016 as an initiative to mobilize KES 1.5 billion in long-term domestic capital markets for bankable water service providers (WSP) to finance water and sanitation services. Although the objective to mobilize private capital through the issuance of a bond in the capital market was unsuccessful by end of program period, ending Dec 2021, the KPWF work resulted in corporate lending propositions that fit under the design of a bond with tenors and conditions that would apply accordingly. A total of 9 projects, with total investment size estimated at KES 6.1 billion were identified. The Embassy of the Kingdom of Netherlands in Nairobi (EKN) and the Water Finance Facility (WFF) are keen to see that propositions developed for WSPs are considered for alternative finance in Kenya.

The WFF and EKN approached Aqua for All to support a transition to alternative – commercial bank financing for projects that fit within the scope of bank financing in Kenya. The WSP transition plan aims to ensure that the WSP’s investment projects remain on a path towards financial close. The plan proposes for KPWF to continue working with 5 interested WSPs where the project development process is largely completed, meaning where the finalization of project proposals (feasibility studies) and detailed designs, cost estimates and tender documents require a relatively minor effort to update. The 5 utilities have expressed willingness to explore an alternative commercial financing solution. KPWF has received a positive response from the utilities, with anticipated size of the proposed investments ranging between KES 150 million and KES 450 million. Investment projects proposed by the WSPs include energy efficiency– solarization, last mile connectivity and water metering among others. 4 phases are agreed with consultant with concrete tasks and deliverables 

Task 1: Desk review of the current WSPs financial proposals The financing propositions as they are currently prepared need to be reviewed, updated and discussed with utilities before presented to the banks.

Task 2: Presenting selected projects to interested banks and improving proposals After an affirmative answer to be willing to start the due diligence process, we need to organise guidance to make sure that a good understanding is reached at both ends on the possibilities, terms and conditions as well as if there are gaps in willingness to take certain risk and de-risking requirements.

Task 3: Facilitate financial-close Facilitate the right instruments and de-risking solutions with third parties, work towards financial close, including required de-risking arrangements.

Task 4: Compile all the learnings for future use.