Transcript BUILDING COMPETITIVE AFRICAN AGRI

MAKING PRIVATE SECTOR INFRASTRUCTURE
INVESTMENT HAPPEN IN AFRICA
Keith Palmer
Chairman, InfraCo
The Infrastructure Challenge
• Enormous unmet infrastructure need in Africa
• Infrastructure shortages are holding back growth (e.g. electricity shortages in East,
West and Southern Africa)
• Africa’s response to the global food crises – held back by poor access to agriculturesupporting infrastructure (e.g. irrigation)
• Need for private sector investment in Africa recognised (e.g. by NEPAD)
• Wholly inadequate response so far – except mobile telephones
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Investment Constraints
Why has private sector infrastructure investment been so weak?
• It is not because of a lack of finance
• It is due to a shortage of profitable investment opportunities
Why is there a shortage of infrastructure investment opportunities?
• Few developers are willing to take on the “front-end” costs and risks of identifying new project
opportunities and bringing them to market:
–
Lack of credit-worthy counter-parties
–
Regulatory risks re. pricing of outputs
–
Small project size reduces payoff of success
–
Affordability of services, especially in rural areas
–
Scarcity of good project developers
Many infrastructure projects become attractive to private investors at financial close if
properly designed and structured
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InfraCo – a Public / Private Response
•
Infraco is a publicly-funded, privately-managed infrastructure development company
•
What does InfraCo do?
•
–
Identifies ‘green field’ opportunities – creates local subsidiary
–
Develops projects to financial close at own cost and risk
–
Secures debt financing and sells majority stake in local company to (domestic and foreign) equity
investors
–
Reinvests proceeds from successful sales in more development activity
–
Uses targeted subsidiaries to make services affordable for the poorest
Works with local and foreign partners when appropriate (e.g. leveraging mining infrastructure)
InfraCo makes infrastructure projects happen in situations where the private sector
would otherwise be unwilling or unable to invest
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Examples of InfraCo Activities
Uganda: integrated
Ghana: combined
infrastructure services
cycle power
(Kalangala)
generation (KPONE)
Uganda: waste water
and sanitation
(Kampala)
Cape Verde: wind
power
Rwanda: small hydro
Guinea: power and rail
Mozambique:
Nigeria: combined
agricultural
cycle power
infrastructure
generation
Madagascar: water
Zambia: irrigation
supply
project
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Project Examples: A Closer Look
KPONE Power, Ghana
Kalangala, Uganda
Wind Power, Cape Verde
• C. $300m gas-fired power plant in
• US$40 million infrastructure services
initiative on Bugala Island, Lake
Victoria
• 30MW wind power project c. $75m
capital cost
Tema
• Will provide an additional 300400MW of generating capacity substituting for existing diesel
generation
• Utilise capacity from West African
gas pipeline
• Completed PPA negotiations with
main off-taker (ECG) and now
moving into other project
agreements, procurement and
capital raising activities
• Existing infrastructure dilapidated or
non-existent
• Project will provide a power supply
for the island, a ferry service, a main
island road and a potable water
supply.
• Affordability for the poor is ensured
through project structuring and
output based aid
• Replaces substantial portion of
current diesel generation with lower
cost, clean energy
• PPA term-sheet agreed with power
utility, Electra
• Wind turbines procurement process
underway
• Strong investor interest from banks
and multilateral institutions
• Debt and equity funding being raised
from domestic and international
sources
InfraCo business model is working. $20 invested by private sector for every $1
invested by InfraCo
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Conclusions
• Africa needs action on the ground not words
• InfraCo is an innovative, successful approach to leveraging private investment into
infrastructure in Africa
• There is great potential to extend the approach into agriculture / agribusiness to
ensure a strong response to the global food crisis
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