Transcript Emergin Africa Advisers

Accessing Finance for Development
Ghana Investment Forum
Accra 21st to 23rd May 2007
Nick Rouse
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- FMFM
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Frontier Markets Fund Managers –
FMFM
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A Fund Management Team
Managing transactions for
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Emerging Africa Infrastructure Fund; and
GuarantCo
A group of multi nationals fluent in English;
French; Dutch and Italian
Based in London
- EAIF
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Emerging Africa Infrastructure Fund EAIF
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First dedicated debt fund for sub-Saharan Africa
Size: US$305 million, refinanced to US$360 million by the
end of 2006
Original sponsor: UK Government – DFID
3 other European Governments joined (Sweden,
Netherland, Swiss)
Debt from three development finance institutions and two
private sector international banks
Public/private sector partnership
Donor aid funds leveraged private sector capital for
development purposes
First multi-donor initiative by Private Infrastructure
Development Group (PIDG)
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GuarantCo
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Aims at addressing failures in domestic
markets to supply capital to infrastructure
projects in Emerging Markets by:
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providing guarantees as credit enhancement of
local currency debt
supporting both:
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private and municipal sectors to obtain such capital
domestic market to supply such capital
GuarantCo Offers
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Credit enhancement products such as:
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Partial Credit Guarantee to local banks to cover default risk
on under-lying debt service
Liquidly guarantee
Bond guarantees
Tenor extension
Principle of risk sharing with local debt providers
Acceptance of certain local currency risks
TECHNICAL ASSISTANCE FACILITY
- TAF
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FMFM has access the TAF funding
TAF provides grant funding to support the following activities;
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Infrastructure development strategies
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Policy, regulatory and institutional reforms
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support for the design and implementation of particular projects or
transactions that are pioneering in some important respect or reflect some
measure of innovation
Capacity building
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advice and training on the design and implementation of specific reforms
aimed at facilitating infrastructure financing by the private sector
Pioneering or pilot transactions
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studies intended to guide governments on options for financing of
infrastructure
activities aimed at building government capacity and/or the capacity of
local capital markets, financial institutions, and/or quasi-public enterprises
Infrastructure finance – hierarchy
of difficulty
Easy
• Telecoms
• Mining
• Agribusiness
• Power
• Transport
• Water
Difficult
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And how this looks in figures?
Primary Sector
Investment in
government
assets (US$
millions)
Investment in
facilities (US$
millions)
Total investment
(US$ millions)
% of Total
investment
Energy
1,086
6,084
7,171
20.7%
Telecom
3,773
19,754
23,527
67.9%
Transport
899
2,927
3,826
11.0%
Water & Sewage
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111
146
0.4%
Total
5,793
28,876
34,669
100%
Private participation in infrastructure, in Sub Saharan Africa 1990-2005
Source: Private Participation in Infrastructure Projects Database, World Bank Group
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Infrastructure finance – Telecoms
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Mainly Mobile
Well established model – Celtel worth US$3.4 billion
Operators have a full control on cash flows generation
No failure once EBITDA positive
Less risk than Developed World
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Financing issues:
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No free handsets
Lower churn / competition
US$ lending -v- local currency cash flows
Short Tenors – repay in five years
Infrastructure finance – Power
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Creditworthy off-takers
Regulator not always independent or in place (political interference in tariff
setting)
Affordability / subsidy availability
Fewer sponsors
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Enron departed, leading to other developers retreating from the region
Current Players
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Financing issues:
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Globeleq
Aldwych
Corporate
Local players
US$ lending -v- local currency denominated tariffs
Long Tenors – repay in fifteen years or more
What do Private Investors look for
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A clear and transparent legal and regulatory
framework
Contracts with an appropriate risk allocation
Credit worthy off-takers
A long term sustainable market structure which:
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Allows the private investors to predict cash flows, and
returns
Reflects cost recovery tariffs
Stimulates collection discipline
What do finance providers look for
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Business and policy rationale for concession
Sponsor quality and strategic commitment to business
Mitigation of completion risk
Sustainable cash flows
Incentives for equity to perform
Clear legal frame work
Involvement of domestic players: investors, lenders,
commercial participants
Mitigation of environmental impacts
Transparency of procurement process
Which leads to a number of
challenges for Governments
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Transition from Public to Private Sector
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Implications for existing legislation
Loan security law
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Creation of regulatory framework and body
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Resistance from vested interests
Past tariff history of sub-economic pricing
Tariff affordability for poor and compatibility with poverty
reduction strategies
Integration of donor aid, multilateral institutions and private sector
finance
Tender process versus direct negotiation
key success factors for private sector
investment in the Infrastructure sector
projects
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Government
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Market
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Adequate tariffs (cost recovery)
Customer payment discipline
Financing
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Legal protection of investors
Judiciary / regulatory independence
Transparency
Availability of long term financing
Availability of local currency financing
Emerging Africa Advisers Team
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Direct Tel
Number
Email Address
+44 (0)20 7815-
@frontiermarketsfm.com
Nick Rouse
Managing Director
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nick.rouse
Sofia Bianchi
Deputy Managing Director
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sofia.bianchi
Chris Vermont
Head of Debt Capital
Markets
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chris.vermont
Douglas Bennet
Senior Guarantees
Executive
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douglas.bennet
Orli Arav
Senior Investment Adviser
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orli.arav
Tarun Brahma
Investment Adviser
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tarun.brahma
www.emergingafricafund.com