Regional Liquidity Support Facility (RLSF)

At the time that RLSF was first set up, the total pool of funding available was EUR 63.2M, split equally between cash collateral from KfW and on-demand guarantees from ATIDI. Under Phase 1, the EUR 63.2M served as collateral for the benefit of the LC issuing bank which provided Standby Letters of Credit (SBLCs) to 5 projects. In 2022, Norad committed an additional grant of NOK 500M (around USD 56M) towards RLSF – more than doubling the capacity.

The additional funding that was added in 2022 and experience gained since launching RLSF in 2017 has prompted ATIDI to explore various ways to improve on the product. The changes are summarized as follows:

1. ATIDI will issue guarantees directly to the beneficiary IPP without the involvement of an LC issuing bank.
2. The costs to the IPP will be reduced as any fees currently charged by the LC issuing bank will be removed; the reduction in pricing is expected to be up to 50 bps compared to pricing under Phase 1.
3. The RLSF contractual structure will be made simpler i.e. a single “ATIDI Liquidity Support Agreement” will be entered into between ATIDI and each IPP; this replaces the Terms of Use Agreement (ToUA) and the Standby Letter of Credit (SBLC) issued under Phase 1.
4. With ATIDI issuing the guarantees directly, the RLSF policy will benefit from ATIDI’s rating of “A Stable” and “A3” from S&P and Moody’s, respectively. This removes any limitations on account of the rating of the LC issuing bank which will typically be restricted by the rating of the sovereign in which the bank is registered (e.g. Absa South Africa’s credit rating is capped at the rating of the South African sovereign).

Traditionally, RLSF was structured to provide cover for renewable energy projects under 50 MW. Projects of up to 100 MW will now be eligible for cover under Phase 2 – larger projects can be considered on a case by case basis.

Projects in any country that has signed the RLSF MoU with ATIDI can benefit from RLSF cover. The following countries have signed the RLSF MoU: Benin, Burundi, Côte d’Ivoire, Ethiopia, Ghana, Kenya, Madagascar, Malawi, Togo, Tunisia, Uganda and Zambia.

None. RLSF covers only the risk of non-payment by the national utility. However, additional perils are under consideration by ATIDI and other stakeholders with the possibility of extending cover beyond the current limitation to non-payment.

Under Phase 1, the RLSF policies issued were limited to six months of non-payment (i.e. six months’ worth of invoices) for a tenor of up to 10 years. RLSF policies issued under Phase 2 will cover up to twelve months’ worth of revenue and for tenors of up to 15 years. The actual cover to be provided by ATIDI will be informed by the country, sector and project assessment.

RLSF cover can have an indemnified percentage of up to 100%

1. Fourteen (14) calendar days for projects covered under Phase 1.
2. Thirty (30) calendar days for projects covered under Phase 2.

The project company can submit a maximum of three (3) draws per year. However, each drawdown is not limited to a single invoice and as such each demand or drawing can be made for the full amount covered.

Once a Demand/ Claim has been paid, ATIDI will engage the national utility and the host country’s Ministry of Finance to reimburse all payments made. Once reimbursed for the pay out by either the Ministry of Finance or the utility, ATIDI will reinstatement the value of the RLSF policy allowing the project to claim once more within the same year or any of the successive years (subject to the maximum number of draws noted above).

The ATIDI underwriting processes are aligned with other similar international institutions (particularly on Environmental and Social Impact Assessment). From commencement of the Due Diligence to approval by (i) ATIDI Management and (ii) the RLSF Steering Committee, the process can take a minimum of four to six weeks subject to all material information being made available.

Yes, RLSF can be issued along with a separate Political Risk Insurance policy. The PRI policy can be issued by ATIDI or any other underwriter/ insurer.

Yes, some of the RLSF policy terms can be adjusted (e.g. Number of months covered, reduction of the policy tenor). However, this is subject to review by ATIDI and all fees incurred as a result are payable by the project company (i.e. legal fees, transaction fees for the LC issuing bank, etc.)

Yes, like all other ATIDI policies that cover the risk of default by the Host Country, RLSF benefits from ATIDI’s Preferred Creditor Status in all of its member countries.

Once a claim has been paid, ATIDI will have a prominent role in pursuing all recoveries from the offtaker through the Ministry of Finance as a Preferred Creditor. All recoveries made within 12 months under Phase 1, and 6 months under Phase 2 from the date of settling the Demand/ Claim will lead to automatic replenishment of the SBLC or the ATIDI Liquidity Support Agreement. Replenishment of the SBLC or the ATIDI Liquidity Support Agreement for recoveries made beyond these timelines from the draw date will be at ATIDI’s sole discretion.

The RLSF policy can be issued to match the currency of the tariff in the PPA.

The IPP will be responsible for payment of all of the fees as quoted in the Non-Binding Indication. i.e. the Availability Fee, Commitment Fee, Claim Fee and potentially legal fees as may be quoted by ATIDI on any transaction.

Yes. In addition to the declaration by the IPP, ATIDI will write to the host country’s Ministry of Finance seeking their No Objection before the transaction can be bound.

No, the total value of the LCs that will be issued will never exceed the total value of the RLSF pool of funding (i.e. each SBLC or ATIDI Liquidity Support Agreement will be backed fully by collateral).

Yes, ATIDI reserves the right to charge Due Diligence and/ or Legal Fees – the IPP will need to settle these upfront before issuance of the SBLC or ATIDI Liquidity Support Agreement.