Transcript Infra Co - Welcome

Symposium on Private
Financing for African Power
Infrastructure
US Treasury Department
Washington, DC
October 13, 2008
InfraCo Overview
 Development and Investment in Early Stage Infrastructure Projects
− Privately Managed Infrastructure Development company,
− Funded by the Private Infrastructure Development Group
 Creates Privately Financed Bankable Infrastructure Projects,
− Balancing the Interests of Host Governments,
− Private Sector Equity Investors and
− Senior Debt Lenders
2
InfraCo Scope of Operations
 Geographic Focus
− Sub Sahara Africa
− DAC I/II Countries (Least Developed and Low Income Countries)
 Project Focus
− Greenfield Investment
− Expansion/Rehabilitation of Existing Facilities
 Sector Focus
− Energy & Power
− Water and Waste water
− Transportation
 Acts as a Principal Project Developer
− InfraCo is not an advisor
 Leads and Actively Participates in the Development of Projects
− InfraCo is not a passive funding source
 Assumes Development Risk
− InfraCo shoulders the costs and risks of early stage development
3
Development Process Overview
4
Risk Allocation Matrix
 Power Purchase Agreement Tariff
 Fuel Supply
− Capacity and Energy Tariff
− Indexation (Forex and inflation)
− Completion and Functional
Guarantee (output; availability;
heat rate)
−
−
−
−
−
−
 EPC Contract
−
−
−
−
Scope
Price and Payment Milestones
Delay and Functional Guarantees
Liquidated Damages and
Performance Security
 Sovereign Guarantee
− Financial Guarantee:
− Ring-Fencing Sector Cash Flow


 O&M
−
−
−
−
Minimum Take
Price Formula
Matching Energy Payment
Delivery Risk
Security Package
Termination
More Effective
More Controversial
 Change of Law/ Regulatory Risk
Owner Operated or Outsourced
Regular & Major Maintenance
Price Protection
Availability Guarantees
− Exchange Controls
− Currency
Convertibility/Availability
− Political Events
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Typical Project Structure
Power Purchase
Agreement and
Security Package
Operations &
Maintenance
Project Financing
Project Structure
Construction Loan
Equity/Debt
Regular Operation,
Overhaul and
Outage Maintenance
Turnkey Design
& Construction
Sovereign/
Regulatory
Issues
Engineering, Equipment Procurement,
Construction Start-up
and Testing
Fuel Supply
Agreements
Environmental &
Other Permitting
Primary/ Secondary
Fuel Sources
Transportation
Permits for Plant, Air,
Water, Mining & Ash
Disposal
Site Control
Site
Right-of-Ways and
Easements
6
Constraints to Energy Project Development
 Host Governments
− Discipline in Execution of Policy
− Avoid Politicalisation of Projects
− Realistic Expectations
− Offtakers (Electric Utilities)

Still Not Bankable without Sovereign Guarantee or Other Credit
Enhancement
 Multilaterals and DFIs
− Review Conditionalities

Compatibility with the Host Country Situation
− Predictability

Consistency in Execution
− Bureaucracy

Less
− Transparency

More
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Constraints to Energy Project Development
 Contractors and Suppliers
− Market is not Competitive
 US Contractors: Absent
 European Contractors: Large Projects Only
 Asian Contractors: Increasingly Present
 Local Contractors:
o Civil Works: Adequate Local Skills/Capacity Exists
o Electro-Mechanical: Reliance on Foreign Skills/Capacity
− Construction Risk Still High
 Difficult to Mitigate
 Frontline Risk
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Constraints to Energy Project Development
 Private Debt Financing
−
Local Currency Debt
 Not Enough Competition in Local Market
 Limited Source of Long-Term Funding
 Interest Rates Are Very High
−
Hard Currency Debt
 Short/Medium Term: Closed Except with Enhancement
− Short-Medium Term Solution
 Increase Local Currency Guaranty Products
 Supplier’s Credit (ECAs’) for Hard Currency
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Constraints to Energy Project Development
 Strategic Investors
− Tied to Equipment Supplier, Contractors or Operator
− Sub-Optimal Alignment of Interests
 Financial Investors (Private Equity)
− Better Alignment of Interests
− Return Requirements:
 Unrealistic for Power Infrastructure
− Exit Requirements:
 Unrealistic for Illiquid Nature of Asset Class
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Africa Private Equity Fundraising - 2007
 Worldwide vs Africa
29,000
70,000
20,000
40,000
40,000
108,000 $2.34 billion20,000
− Only 4%
546,000
 Natural Resource Driven
67,000
306,000
924,000
1,300,000
2,122,000
$59.16
billion
1,421,000
− 56%
− Infrastructure: 2%
 Existing Businesses Not
Greenfield
Natural Resources
Generalist
North Africa
Pan-Africa
Buyout
Growth
Infrastructure
Products
Worldwide
Fundraising Consumer
Africa PE
Funds
Sub Sahara
Africa
(ex-RSA)
South
Africa
Mezzanine
Venture Capital
Technology
Other
Source: EMPEA
Source: EMPEA
 Sub-Sahara Africa (Ex
RSA)
− 61%
− Mostly in Commodities
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InfraCo Sub-Sahara Infrastructure Fund
 $300MM Private Equity Fund
− $100 Million OPIC Loan
 Approved by OPIC Board in May 2008
− $200 Million in Limited Partnership Investments
 Currently Being Raised
 ISSIF will Invest Primarily in Projects Developed by InfraCo
 Geographic Focus
− Sub Saharan Africa (Excluding South Africa)
 Transaction Focus
− Greenfield Infrastructure
 Sector Focus
− Power
− Transportation
− Water and Sanitation
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