Transcript Slide 1

IFC Power
March 2009
Sarajevo, Bosnia and Herzegovina
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The IFC advantage: A wide range of services
and products for its Clients
•Variety of products: greenfield projects, corporate loans, acquisition
finance and refinancings, partial credit guarantees on loans and bonds,
securitization of future cash flows, and a new product for IDA countries
(infraventures)
•Competitive maturity and pricing: Fixed/floating rates, currency of
choice, commercial rates, repayment tailored to cash flow, long
maturities (up to 20 years), etc.
•Political Risk Mitigation: through our affiliation with the World Bank
•Long-term Partnership: IFC works closely with partners in an affected
project to address issues
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Track record
Projects:
•129 projects in 44 emerging markets countries
•15,000 MW private generating capacity
•101 generation projects
•10 transmission projects
•17 distribution companies
Financing:
•$ 3.5 billion committed in generation, T & D
•$ 2.5 billion raised through syndication
•$ 16 billion aggregate project values
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Track record
1. Corporate Finance
 Expansions / Revamping
 Restructuring / Refinancing
2. Project Finance
 IPP / Greenfield
3. Equity / Quasi Equity
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Infaventure context:
Great Need for Bankable Infrastructure
Projects
• Huge critical infrastructure needs in IDA countries, (especially in SubSaharan Africa and post-conflict countries). Globally:
 1.6 bn lack access to electricity, 1.0 bn lack access to all weather
roads, 1.1 bn lack clean water and 2.4 bn lack access to sanitation
 95% of those without access are in Asia and Africa; 1.4m children die
p/a from water-borne diseases
• Governments aware but unable to address these needs on their own
 70% of all infrastructure spending in developing countries in 1990s
financed by governments or public utilities’ own resources
 Investment needs estimated at $479 bn for years between 2006-2010
• Renewed interest in infrastructure development but while needs are
high, sector is underfinanced in most developing countries.
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Private funds available but very few
bankable projects
• Great interest from DFIs and private financiers to fund
“bankable” infrastructure projects
 18 EM infrastructure-focused private equity funds raised $7 bn
from 1996-2006; in 2007, 16 funds raised +/-$30 bn
• But, number of “bankable” projects is limited, especially in
frontier countries and difficult sectors
 Water and sanitation, roads and power
• Sponsors with successful track records of bringing projects to
full financing stage are also limited and/or few of them willing
to take early stage risks in frontier countries
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Constraints to Private Infrastructure
Development
• Overdue sectoral reforms to be implemented by government including
 Establishing a stable macroeconomic environment
 Establishing a legal framework for concessions, contract enforcement,
bankruptcy and lender remedies
 Establishing a stable regulatory framework recognizing project’s lifecycle needs
 Developing a domestic debt market
• State-owned utilities are not performing: poor generation performance, lack
of investment, high level of losses, low collections
• Tariffs do not always reflect full cost recovery, especially in sensitive sectors
like water and sanitation
• Perception of high country risk
• Persistent lack of funds and experienced professionals dedicated to early
stage project development
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What is Infrastructure Project
Development?
How does it differ from project financing?
• Earliest stages of project life cycle – sometimes at conceptual stage
• Risk capital and human resources to move project from concept to
financial close
• Project and prototype feasibility studies; pilot tests
• Financial modeling
• Economic, social, technical and environmental studies
• Negotiation of financial and legal terms
• Selection and supervision of project participants
• Negotiation of project documents
• Obtaining required permits
• Sourcing project’s equity and debt financing
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IFC Experience:
Pre-IFC InfraVentures
• To date, IFC’s active involvement in project development has
been ad hoc (e.g., Kounoune, Pamir)
• IFC’s involvement in project development not adequately
compensated
• Experienced staff not dedicated to project development, staff
incentives not aligned with project development
• Approval procedure not consistent with early stage project
development practices
• High risk profile different from IFC’s mainstream investments
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IFC’s Additionality in
Project Development
• IFC’s identity in market
• Convening power of the World Bank Group
• IFC’s access to all WBG instruments and services
• IFC senior staff depth and breadth of experience
• Track record of “hands-on” project development with sponsors
in most challenging environments
• IFC’s involvement reassures all project participants
• IFC’s global presence
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IFC Response:
IFC InfraVentures
Fund Composition and Objective
 $100 million over 5 years in IDA countries
 Up to US$ 4 million per project
 Dedicated, experienced senior professionals
 Fund staff to act proactively as project developers,
principally with co-developer, or as “surrogate” sponsor
 Objective of bringing more projects to financial close and
implementation
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IFC Response:
IFC InfraVentures
Early Stage Risk Capital
 Risk capital (not grant funding) for full range of project
development activities
 Risk capital (and sweat equity) to be compensated at
financial close through stake in equity or development fee
 Risk capital to be made available in the form of different
instruments
 IFC to seek right to arrange and participate in project
financing
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IFC Response:
InfraVentures
Efficient Processes and Access to other resources
 Streamlined processes for approval of use of funds to projects
meeting eligibility criteria
 Projects to be “handed over” to mainstream business lines at
financing stage
 Leverage other IFC’s and World Bank’s staff and resources
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Cooperation with other private and donor-funded project
development initiatives
 Possible use of Trust Funds for external consultants
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Project Eligibility Criteria
• Must be private or PPP infrastructure project in IDA country/region
• Must be at early stages of development
• Meet IFC Additionality guidelines
• Type of projects include :
 Sponsor has agreement with Government
 Projects being tendered
 Projects not requiring contract with Government
 “Post-conflict country” initiatives
 InfraVentures acts as a surrogate sponsor in the initial stages
• Projects that could reach financial close within a few years
• Must have high development impact
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THANK YOU FOR YOUR ATTENTION
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