The Bank provides Project and Infrastructure financing through various products and structures that rely primarily on the project’s cash flows for repayment. The Bank’s project financing structures are tailored to the project’s financing and operational requirements, and also to investor preferences particularly on the need to warehouse projects into Special Purpose Vehicles (SPVs) in order to facilitate the ring-fencing of the project assets and attendant cash flows as a mechanism to provide comfort to investors over the term of the project financing structure.
The following instruments and/or structures are utilised by the Bank:
- Term Loans
- Mezzanine funding
- Equity participation/Shareholder loans
- Preference shares
- Loan guarantees
- Infrastructure/Project Bonds/Commercial Paper
- Climate finance
The Bank has a growing focus on the use of blended finance to de-risk projects and catalyse private sector investment through innovative funding structures.
Projects that the Bank will finance will first go through a robust preparation process where they will be screened, appraised and packaged to ensure project bankability before they are marketed for investment or financed directly by the Bank. A project is considered bankable if it is packaged in a way that addresses the typical concerns of lenders/investors who should finance it.
Project bankability will be assessed based on the following factors:
- Technical scope: definition of the project including needs analysis and output specification, technical designs, track record of proposed technology, risks and mitigation measures, and availability of inputs and support skills.
- Implementation framework: promoter’s track record and capacity, institutional arrangements for project implementation, to implement the planned project, and proposed contract management arrangements during the project’s operational life cycle.
- Procurement: compliance with procurement legislation/regulations.
- Environmental and Social impact: compliance with applicable legislation and information on environmental and social impact assessment (ESIA), including gender considerations.
- Market for project outputs: analysis of the market and demand (or offtake potential) of the project’s products/services over the project’s life, including affordability.
- Legal aspects: information on statutory/regulatory approvals, licenses and permits; land rights; Government undertakings, etc.
- Investment costs: information on project costs and its detailed components, and comparison with cost of similar projects for reasonableness.
- Financial viability: project financial viability, measured in terms of Net Present Value (NPV), Internal Rate of Return (IRR), payback period, Debt Service Coverage Ratio (DSCR), and other financial metrices.
The Bank will take the above issues into account in analyzing project financing options and structuring a sustainable financing package. Once financed, the Bank will monitor project implementation and draw lessons for future project implementation.
Project Preperation and Development Fund (PPDF)
The Bank realises that the dearth of bankable projects is the biggest challenge to increasing infrastructure investments in Zimbabwe. Consequently, the Bank has established a PPDF facility as a mechanism for providing funding support towards project preparation activities such as bankable feasibility and technical studies, ESIA studies, and other project planning activities. It is anticipated that the Bank’s PPDF facility will be complemented with resources from Government and cooperating partners in order for the Bank to build a robust pipeline of investment-ready projects, thus helping to scale up infrastructure investments in the country.