The challenges of raising capital for projects in emerging markets, by Samir Kasmi and Bruno Gremez

Bruno Gremez and Samir Kasmi are co-founders of Dubai based CT&F and ex bankers (BNP Paribas, ABN Amro, and Societe Generale).

Emerging countries lack key infrastructure (such as roads, power plants, water treatment facilities, etc…) that is vital to their population and their economic development. Governments of these countries have been unsuccessful in addressing these challenges, often because of mismanagement and governance issues. Attracting private investors and international lenders is therefore key to develop such strategic projects, but their country risk perception and a lack of appropriate legal framework have often discouraged them.

CT&F acted as financial advisor on a USD 105 million financing for a power plant project in Iraqi Kurdistan, which is an interesting case study on the challenges faced when raising financing in an emerging market or frontier environment.

Qaiwan Group, the sponsor of the project, has secured two long term senior unsecured loans of respectively USD 75 million arranged by Deutsche Bank and Bankmed and covered by French ECA (Export Credit Agency) Coface and USD 30 million provided by GE, the gas turbine supplier .

We summarise below the main challenges that we faced when we worked on this transaction.

Due diligence

Before approving the transaction, ECAs and lenders had to go through a very detailed and thorough due diligence on the sponsor, its business and the project. Nowadays, KYC (Know Your Customer) and compliance considerations are more important than credit risks aspects within banks. Lenders have to make sure that international laws and regulations, including AML/CTF rules (anti money laundering / counter terrorism financing) and international trade sanctions, are fully complied with. This requires high levels of understanding and transparency from all parties involved in the project.

Environmental aspects

In addition, such a project has to meet the environmental requirements of lenders and ECAs, which are in line with IFC guidelines. Therefore an ESIA (Environmental and Social Impact Assessment) report had to be prepared by a specialised consultant in coordination with all parties involved before the start of construction and a detailed action plan had to be defined with clear deliverables that had to be met during both construction and operation phases.

Construction and operational / commercial risks

In a greenfield project like this one, specific risks that lenders and sponsors have to take are the construction risk, i.e. the risk that the power plant is not constructed in time and / or within budget, and the operational / commercial risks, i.e. the risks that the power plant is not able to generate enough cash-flows to repay the debt. In more mature markets, these risks can be and are usually mitigated by complex legal constructions where such risks fall ultimately on reputable construction companies, plant operators and government entities committing to purchase some amounts of energy at pre-determined prices. The difficulty here was that the legal framework in Iraqi Kurdistan is not perfect and would have caused too many legal difficulties. Therefore, these project risks were ultimately borne by Qaiwan Group, a strong sponsor. But the prerequisite for that was to convince the lending parties to accept the sponsor risks.

Country risk

In addition to construction and operational / commercial risks, one of the main risk aspects of the project was the country risk of Iraq and more particularly the Kurdistan region of Iraq.

The fact that ECAs and lenders were approached just before the war against ISIS, in which Iraqi Kurdistan has played an important role, did not help and created further delays. However, there were additional considerations such as the lack of country risk limits and appetite within banks for Iraq in general and for the Kurdistan region in particular. Therefore, the involvement of an ECA such as Coface, covering country risks, was crucial.

The policy of ECAs with Iraq at that time consisted of requiring either a sovereign guarantee from the Government of Iraq or a bank guarantee from a state-owned bank. Neither was available for our project. Therefore we had to convince ECAs and lenders to participate into the transaction by taking and accepting the risk on the sponsor on a senior unsecured basis. Again, this required a very high level of transparency of the sponsor’s business and financials and a lot of time and efforts spent to explain the business of the sponsor, its strengths and weaknesses, and answer questions.


Despite all the above mentioned challenges, the transaction was closed in March 2016 which was a first for all the parties involved: first financing for Qaiwan and first transaction in the Kurdistan region of Iraq for Coface, GE, Deutsche Bank and Bankmed. This case study shows that ECAs and banks can be flexible and support projects in difficult environments when they are approached in a structured and transparent way by the sponsor. This process also involves a lot of work and persistence in order to be successful. The finance industry has shown great recognition to all parties involved in this transaction by awarding the transaction two awards from Trade and Finance Review (TFR ECA Deal of the Year) and Trade and Export Finance (TXF Frontier ECA Finance Deal of the Year).


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