***Update: On June 22, 2016, MIGA issued a guarantee of €13.2 million ($14.9 million)—bringing the total guarantee amount up to $526.7 million—to HSBC Bank Plc. ("HSBC") of the United Kingdom to cover the risk of Non-Honoring of Sovereign Financial Obligations by the Government of Angola under an Interest Rate Swap (IRS) arrangement. The coverage is for a period of 10 years against the risk of non-honoring of sovereign financial obligations.
On March 25, 2019, MIGA increased the IRS guarantee by the amount of €1.4 million ($1.6 million), leaving the tenor of the guarantee unchanged.
MIGA coverage for the IRS follows a previous NHSFO guarantee issued on June 28, 2013 to HSBC to cover its non-shareholder loan and interest for the financing and development of the Cambambe hydroelectric dam (HPP), in an amount of up to $511.8 million. The IRS is currently provided in connection with MIGA- and CESCE-covered loans from HSBC, SocGen and BHF.***
The Project, supported by the MIGA-backed financing and IRS, involves Phase 2 out of the rehabilitation and expansion of the existing Cambambe HPP located 180km east of Luanda on the Kwanza River, adding 480MW of installed capacity to the plant. Upon completion of its three development phases, the total installed capacity of Cambambe HPP is expected to reach 960MW.
Angola is one of the most energy starved countries in Africa. The country's power sector suffers from low installed generation capacity, poor technical performance and energy inefficiencies. Lack of reliable electricity is another factor that negatively impacts the socioeconomic conditions of the people and the country's economic growth. The Project is expected to ameliorate Angola's power sector needs by increasing the country’s generation capacity through an efficient cost-competitive facility.
The key development impact of the IRS is to enable the Government of Angola to manage its debt payments more efficiently, which is critically important in the light of recent economic challenges caused by the low oil price environment. The timing coincides with (i) the start of repayment period under MIGA and CESCE facilities since the construction is near completion; as well as (ii) a low interest rate environment and hence the attractive swap rates for the Government.
MIGA’s support for the development of the Cambambe HPP is aligned with the Agency’s strategic directions, as it supports investments into a complex infrastructure project and in a post-conflict country.