This presentation was held during the 5th GIB

Summit, May 27-28 2015. The presentation and

more information on the Global Infrastructure Basel Foundation are available

on www.gib-foundation.org

 

The next GIB Summit will take place in Basel, May 24-25, 2016.

 The information and views set out in this presenation are those of the author(s) and do not necessarily reflect the opinion of the Global Infrastructure Basel Foundation. Neither the Global Infrastructure Basel Foundation nor any person acting on its behalf may be held responsible for the use of the information contained therein.  

The 5th Global Infrastructure Basel Summit

27-28 May 2015 Basel, Switzerland

PIDG Mission

To  mobilise  private-­‐sector  investment  to  assist  developing  countries  to  provide  infrastructure  vital  to  boost  their  economic  growth  and  combat  poverty.  

A  consor;um  of  donor  organisa;ons  who  have  joined  together  to  help  facilitate    private  sector  investment  in  infrastructure  in  developing  countries.  

•  Australia  (DFAT)   •  Switzerland  (SECO)  

•  Germany  (KfW)   •  The  Netherlands  (DGIS)  

•  Norway  (MoFA)   •  United  Kingdom  (DFID)  

•  Sweden  (Sida)   •  World  Bank  Group  (through  IFC)  

PIDG

•  Structure:  designed  to  leverage  private  sector  

•  Delivers  a  social  return:  carefully  measured  

•  Demonstra;on  effect:  fron;er  markets  are  viable  

•  Risk  management:  addressed  /  managed  at  every  step  

•  Dialogue  with  industry:    key  to  our  strategy  development  

•  Aims  to  be  transforma;onal  

Constraints to Private Investment / Risks

•  Lack  of  bankable  projects  or  limited  developer  capacity  

•  Shortage  of  long-­‐term  FX  /  local  debt  (liquid,  longer  term  domes;c  investment  instruments),  depth  of  capital  markets  

•  Public  sector  capacity  constraints  

•  Lack  of  credit-­‐worthy  counter-­‐par;es  

•  Affordability  risk    

•  Regulatory  risks  

6

PIDG Facilities

7

Ongoing gaps

Early stage (2-5+ years – feasibility

studies, etc.)

Late stage development

(1-2+ years – contracts & structure, PPA, EPC,

etc.)

Construction (1-4 years – oversee delivery and project

management)

Operation (15-25 years – operation and maintenance)

Commercial operations

Financial Close

Concept stage

Gaps: •  Upstream government capacity •  Long term commitment •  Transparent process •  Lack of capitalised companies/

teams to carry out development work

•  Lack of investors able to put equity at FC

•  Lack of investors willing to take construction risk

Gigawatt Solar Power - Rwanda

•  Development,   construc;on   and   opera;on   of   an   8.5MWp   Solar   PV  (photovoltaic)  power  plant  in  Eastern  Province  of  Rwanda.  

 •  Total  cost  of  $24  m;  senior  debt  (75%)  financed  by  FMO  and  EAIF  (17-­‐

year  loan)  with  Mezzanine  loan  from  Norfund.  

•  Shareholders:   Norfund   (Norwegian   Investment   Fund   for   Developing  Countries),  KLP  Norfund   Investments   (vehicle  owned  by  KLP,   largest  pension   fund   in   Norway,   and   Norfund)   and   Gigawad   Global  Coopera;ef,  project  developer.  Built  by  Scatec  Solar.    

•  Installed   genera;on   capacity   grew   from   25MW   in   1994   to   155MW   today.   But  only  15%  of  Rwanda’s  popula;on  has  access  to  electricity,  which  is  low  compared  to  the  average  Sub-­‐Saharan  Africa  rate  of  31%.    

•  First  u;lity  scale  private  solar  PV  power  project  in  East  Africa  and  demonstrates  the   poten;al   of   solar   power   for   the   region.   This   transac;on   occurred  within   4  months,   which   is   faster   than   most   IPP   transac;ons   in   SSA   (normally   8-­‐12  months).  

 •  First  solar  power  project  in  the  region.  Skill  transfer,  training  and  development  of  

local  employees  included  adendance  at  a  renewable  energy  training  internship  at  the  Arava  Ins;tute  in  Israel  to  build    the  technical  capacity  of  local  engineers.  

Kalangala Infrastructure Services & Renewables - Uganda

InfraCo  Africa  developed  an  innova1ve  financial  structure  for  the  project  with  blended  finance  (including  OBA),  allowing  the  project  to  reach  the  poorest  residents  whilst  also  being  commercially  viable  

4  integrated  infrastructure  components:      •  Total  project  investment  -­‐  $44.5m  •  Co-­‐financed  by:    NedBank,  USAID  (co-­‐guarantor),  Ugandan  Development  

Corpora;on,  Industrial  Development  Corpora;on  of  South  Africa,  EAIF,  GuarantCo  and    OBA  support  from  TAF  

Project  details:    •  Solar  power  supply  and  distribu;on  •  Solar-­‐powered  pump  based  water  supply  •  Two  ferries  •  66  km  road  rehabilita;on  to  serve  popula;on  of  Bugala  Island,  Lake  Victoria  •  Project  developed  by:    InfraCo  Africa  

•  It  is  es;mated  that  due  to  the  project,  literacy  will  be  increased  by  5%  by  2020  and  20%  of  women  who  are  engaged  in  commercial  ac;vity,  will  be  doing  so  as  a  consequence  of  the  project.      

•  Design,   construct   and   operate   a   340MW   Combined-­‐Cycle   Gas   Turbine  plant  in  the  Tema  industrial  zone,  24  kilometers  east  of  Accra.    Adjacent  to  West  African  Gas  Pipeline  landing  point  in  Tema.  

•  Project   developed   by   Cenpower   Holdings   and   InfraCo   Africa.   Financial  close  reached  end  of  2014  with  equity  sold  to  Sumitomo  and  AFC  Equity  Investment.   InfraCo   Africa   Development   have   exited,   recovering  development  costs  and  allowing  money  to  be  recycled  for  other  project  development.  

 •  Total  cost  of  US$903m  (72:28  debt/equity)  

–  Debt:   funded  under  export  credit  cover  (ECIC)  and  DFIs:  Rand  Merchant  Bank,  Nedbank,  Standard  Bank,  FMO,  DEG,  IDC,  DBSA,  OFID,  EAIF.  

–  Equity:   AFC   Equity   Investments   (32%);   Sumitomo   Corp.   (28%);   Cenpower  Holdings  (15%);  FMO  (4%).  

   •  ‘African  Power  Deal  of   the  Year’   in  2014  (PFI  Awards),   the  plant  should  

be  fully  opera;onal  by  2017.  

Cenpower, 340 MW IPP in Tema - Ghana

First  IPP  in  Ghana  (10%  of  installed  capacity);  first  genera1on  license  (license  no.  001);  and  first  connec1on  agreement  between  the  Government  and  an  IPP.  

 

•  TBEC  sets  up  biogas  plants  near  agri-­‐processing  factories  to  extract  biogas  from  the   factories’   wastewater.   The   biogas   is   used   to   generate   clean,   renewable  energy  (replacing  coal,  Diesel  or  HFO).  

•  Plants   reduce   local   air   and   water   pollu;on,   provide   renewable   energy   &  electricity,   help   in   mi;ga;ng   climate   change   through   methane   capture,   and  provide   a   range   of   financial   and   non-­‐financial   benefits   to   the   host   agri-­‐processing  factories.  

 •  The  total  investment  of  $12.5m  has  been  used  to  set  up  two  new  wastewater  

processing  plants  in  Laos  and  Cambodia.    

•  100%   commercial   debt   financing   was   provided   by   a   local   Thai   lender,   ICBC.  GuarantCo  provided  a  100%  guarantee  for  ICBC’s  loan.  

Thai Biogas Energy Company - Mekong Region���

•  Facility  required  by  TBEC  was  too  small  for  local  banks’  project  finance  teams  and  too  complicated  for  their  corporate  banking  teams.  Even  with  a  100%  guarantee  from  GuarantCo  it  took  one  year  to  find  a  suitable  commercial  lender  for  the  project.    

•  GuarantCo’s  flexibility  in  structuring  solu1ons  is  cri1cal  in  enabling    small,  unconven1onal  yet  highly  development  projects  to  successfully  raise  commercial  financing.  

Mobilink Pakistan – PKR 8bn ($75m) Sukuk

•  The  Sukuk  was  structured  as  a  "Service  Ijara",  the  first  ;me  this  structure  has  been  used  in  Pakistan.    

•  Strengthening  and  deepening  local  capital  markets  –  mobilising  16  Islamic  investors,  60%  of  financing  from  new  sources.  

•  GuarantCo  now  has  relevant  Islamic  capital  markets  experience  that  can  be  applied  in  other  countries.  

•  CSR   ac;vity   (part   supported   by   TAF)   involves   a   successful   SMS   based   literacy   programme   to   impart   educa;on   through  mobile  phone  technology  to  illiterate  women  in  KPK  province  of  Pakistan.  

•  Pakistan   Mobile   Communica;ons   Limited   was   seeking   to   expand  network   into   underserved   rural   areas   to   enable   access   to  telecommunica;on  services  for  wider  propor;on  of  popula;on.    

•  To   fund   this   capital   expenditure   PMCL   decided   to   issue   a   local  currency  Islamic  bond  (Sukuk)  of  up  to  $75  mm  equivalent.    

•  Given   limited   size   of   the   corporate   bond   market   in   Pakistan   PMCL  was  constrained  by  exis;ng  investors  having  reached  their  regulatory  limits   either   in   terms   of   exposure   to   PMCL   or   telecommunica;ons  sector.  

CocSan Run-of-River Hydro - Vietnam

•  29.7  MW  run  of  river  hydro  in  Lao  Cai  province.  

•  Project  developed  by  InfraCo  Asia  Development.  

•  Total  cost:  $50  m.    

•  Debt  provided  100%  by  local  Vietnamese  bank.  

•  20  year  standard  PPA  with  Northern  Power  Corpora;on  •  EPC   Turn   Key   Lump   Sum   Contract,   24   months   construc;on  

period.  

•  Benefits:   (1)   Reduce   cost   of   electricity   and   enhance   energy  security   by   providing   an   alterna;ve   to   the   high   cost   and  unreliable   electricity   from   China;   (2)   Support   expansion   of  various   industries   such   as   iron   mining,   copper,   and   fer;lizer  produc;on  from  apa;te  mines.    

PIDG  at  work  -­‐  Coopera;on  with  other  Facili;es:  

Ø  TAF  grant   to  par;ally  finance  the  costs  of  an  early  stage  appraisal  of   the  subsidy  requirements  of  a  hydropower  project  in  Vietnam.    

Ø  VGF  grant  of  US$  5  mm  to  close  the  viability  gap.  Ø  InfraCo  Asia   Investments  provided  funding  of  US$10m  at  financial  close  to  bridge  the  gap   in   funding  required  at  

financial  close.  

Thank you

14

www.pidg.org  

15

PIDG Facilities and the Project Cycle

PIDG: Key Facts

•  From  2003  to  31  Dec  2014,    the  PIDG  Facili;es  have  commided  US$1.9  bn  of  funding  to  128  PIDG  projects  that  have  reached  financial  close  in  58  countries,  mobilising:  

•  US$  27.3bn  of  Total  Investment  Commitments,  of  which:  

–  US$  18.6bn  or  68%  is  from  commercial  private  sector  investment  (PSI)  sources;  and    –  US$  8.7bn  or  32%  is  through  DFI  financing.  

Every  $1  of  contribu1on  from  PIDG  donors  will  leverage    $20  of  private  sector  investment  in  infrastructure    

 •  49%  of  project   investments  mobilised  by  PIDG   facili;es   are   located   in   Fragile   and  Post  

Conflict  States.  

•  55%  of  project  investments  mobilised  by  PIDG  facili;es  are  located  in  the  poorest  DAC  I/II  countries.  

16