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
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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