From Africa to Asia: An Integrated Project Development Offer
12th Nov 2024 | Leave a comment | By Philippe Valahu
It is increasingly understood that, to meet the urgent challenges facing our species and our planet, we must find the courage to develop new ways of doing things. At The Private Infrastructure Development Group (PIDG), we recognise that this transformation starts with how we operate – both internally and with our partners.
To create faster routes to impact, we are integrating our project development entities – InfraCo Africa and InfraCo Asia – into InfraCo, PIDG’s project development offering. In presenting a more unified face to the market, this will allow simpler, strategically aligned relationships with our partners. And it will offer investors a more singular, powerful proposition.
Scaling the pipeline
A distinctive feature of our work at PIDG has long been our ability to operate throughout the project lifecycle, mobilising finance and applying our development expertise to accelerate action at every stage.
A central pillar of this lifecycle is the project development stage, where InfraCo operates. Leveraging our deep regional expertise, we de-risk projects through equity investments and co-development expertise. We also address a spectrum of early-stage challenges, including regulatory issues, technical feasibility considerations, and bankability. Through our investments, and by overcoming these obstacles, we are able to take projects to financial close and into operations – creating a pipeline of bankable projects ready to attract private capital. So far this has helped PIDG to bring 200+ projects to financial close.
Integrating InfraCo Africa and InfraCo Asia into a single offering allows us to retain our regional expertise while working in an increasingly streamlined way, deploying resources more flexibly to meet the most pressing needs, regardless of geography. It will also lead to the creation of a vehicle in which capital providers will be able to invest – a broad, diversified portfolio that draws in projects from across regions and mitigates risk for all involved.
Overcoming the obstacles to mobilising finance
Infrastructure projects can fail to progress beyond the planning stage due to limited development capacity, risky business cases, and delays in administrative approvals, to name but a few challenges. Shortcomings in risk management, weak off-takers and a lack of local execution capacity also contribute to the challenges. If private finance is to be mobilised in a way that helps to bridge the infrastructure gap in developing markets as well as address the effects of climate change, de-risking projects at an early stage is of paramount importance.[1]
Taking a project from concept to reality in the markets in which we work – sub-Saharan Africa, and South and Southeast Asia – is a complex endeavour, demanding a unique blend of vision, expertise, patience and tenacity. It requires deep local knowledge to understand community needs, rigorous technical and environmental assessments, and the agility to navigate ever-shifting political and economic landscapes. Patient capital must also be deployed at an early stage: it is key to facilitating the long-term investment and more risk-tolerant approach that is needed to bring projects to life.
At the heart of this process lies access to early-stage equity – in the form of capital invested into projects, and risk capital that covers feasibility studies and other early-stage expenses that are necessary to get projects off the ground. In the markets that we work in, equity capital is crucial but scarce.
Traditional investors are often deterred by perceived risks. This is where InfraCo steps in. Through it, we provide not only funding but also the expertise to structure deals that can attract further investment. We aim to cultivate transformative projects and scalable platforms that can mobilise even more investment and development activity.
Towards a thriving infrastructure ecosystem
The integration of our project development offering is designed with a clear purpose in mind: to create a robust pipeline of bankable and investable projects. This pipeline is crucial for mobilising institutional capital and other forms of investment that are essential for addressing the infrastructure gaps in our target markets.
What we are working toward – through our project development offering, in addition to our technical assistance, debt solutions, and guarantee solutions offerings – is a thriving infrastructure ecosystem, delivering climate resilience and sustainable development for all. We know that private-sector investment has long been held back by market failures – failures that often include the high upfront costs and risks of developing projects and the low availability of long-term financing.
Our track record of success shows that these failures can be addressed but we cannot, on our own, achieve everything. And certainly not as quickly as it needs to happen. While others are working towards similar targets, efforts are currently fragmented with too much duplication.
By 2030, we hope to double our yearly commitments and contribute to new types of investment platforms that combine philanthropy, development finance institutions, and the private sector. In doing these things – taking other essential steps – we believe we can transform markets, accelerating the flow of finance to where it is most urgently needed.
We firmly believe that a widespread culture of collaboration – across internal structures and partners – must become the ‘new normal’ if we are to build a pipeline of commercially viable, investment-ready opportunities, and enable capital to flow to where it is needed.
Only then can we say that the ecosystem is thriving.
1 https://www.mckinsey.com/capabilities/operations/our-insights/solving-africas-infrastructure-paradox
