MERU COUNTY INVESTMENT

&DEVELOPMENTCORPORATION

Joel Kinyua Imitira / Managing Director

Who are we?

Integrated County Corporation (Parastatal)

Legal Foundation

– Meru County Investment and Development

Corporation Act, 2014

– Establishment of Special Purpose County

Corporations

– Desire to deliver Investment in a Coherent Manner

Mission & Vision

To create value for all Our Partners by attracting and promoting growth oriented investments that are innovative and sustainable

To be the leading Investment Corporation in Kenya through design and Execution of World-Class Commercial Ventures

Mission

MISSION

Vision

Core Values

Concern for Environment

Adaptability and Flexibility

Humility

Accountability

Integrity

Transparency

Our Structure

Board of Directors

Managing Director

Directorate Technical Services

Directorate Economic &

Financial Analysis

Directorate Support Services

Administration

Governance

Fidelity to the Law

Modern Corporate Governance

Frameworks

Internal Corporate Structures

External Engagements

Why MCI&DC : What’s the end game?

1. County Allocations Vs Many Needs

2. Opportunity to harness Private Sector Enterprise/Resources to deliver services

3. High Opportunity Cost for Public Resources – Focus on Public Goods - non Rivalrous, non excludable

4. MCIDC- Organizing to Engage Private Sector Better

Value Proposition from this Model :

1. Underwriting Political Risks – Insulate Investments Decisions from Political Cycles

2. Focal/Dedicated institution on investments

3. Local Private Sector Advocate – Policies, Laws, JVs, PPP, BOTs etc

Our Mandate

Enhance prudence in County Investments

Develop Effective Investments Instruments at the County

Enhance Competitiveness of County Investments

Promote Local/International Investments

Mobilize Resources for

Investments

Facilitate/Coordinate

Investments

Promote Investments with

Social Returns

Undertake PPP & JVs

Why we exist Why we exist

Assets/property on behalf of the County

Undertake Investments

Identifying/Profiling Investment Opportunities

Undertake Ventures –sorely/Partnerships

Advising on Investment Opportunities

Facilitating Investors

Promoting Investments

Focal Agency on investment promotion

Advise on Policies/Laws

How we will execute How we will execute

…Cont…

Our Approach

Investment Profiling/Building a Business Case:

Identifying and Profiling Opportunities

Partnerships - Identifying and Building Mutually

Rewarding Partnerships

Defining Attractive Financing Models - Hybrid

Debt Equity Financing Framework; Joint

Ventures; PPP, (D)-BOT

Financial Closure + Execution

Our Partners

County Government – Policy, Law, Resources

Local/Diaspora Communities – Meru Home of

Cooperatives –

Investors – Sport the Opportunities; Focus on the

Future

Financial Institutions – Innovative Financing

Models/County Peculiarities

Technical Assistance – Project Life Cycle (USAID –

County Investment Plan)

Our Mantra…..Finding the Rough Diamonds…

….that require some little polishing to sparkle

So How Does a Rough Diamond Look Like?

Rough Diamonds would easily be passed up on the beach,

looking like nothing more than broken glass that may

have washed up on the shore.

The famous beauty of a diamond only appears with the

skill Art of a diamond cutter.

Meru-IDC –aspires to find, polish and Skillfully Cut

Commercial Diamonds in Meru County and the Region

So,what are our rough Diamonds?

a)Agriculture & Livestock Value Addition:

a) Coffee & Tea, Miraa – Processing, branding

b) Nuts – Macadamia, Groundnuts

c) Oil Crops

d) Grapes – Wine Making

e) Banana – flour, wine, crisp, puree, etc

f) Potatoes – Cold Storage and Processing – chips, crisps

g) Fruits & Vegetables

h) Leather – Mini-tannery

….Cont….

Bananas & Potatoes

…Cont…

Macadamia & Honey

b)Rough Diamonds in Renewable

Energy

Wind Farms – Various (KenGen, Windlab, Gulf,

Blue Sea etc) Wind Speeds – 5-7m/s;

Solar – 30MW Solar Park – Naanovo (K) Ltd

Waste to Energy – 7MW – Naanovo (K) Ltd

Small Hydo Power – Energy Asset Map 16 Sites

Pre-feasibility for a further 20 sites

….Cont..

Mini HydrosProject Name Location

(River)

Size (MW) Estimated

Annual Power

Generation

(MWH)

Company

1 Mukarangatine Upstream SHP Iraru 2.6 13,666 IDEA Power

3 Kanyakine SHP Iraru 1.5 7,884 Available

4 Yururu SHP Iraru 1 5,256 Achelis

5 Kiringa SHP Iraru 1.6 8,199 Achelis

6 Baranga Kamachege SHP Kithino 2.4 12,373 Eco Power

7 Mikambune SHP Kithino 1 5,256 Abbey Construction

8 Kithino - Nkubu road SHP Kithino 0.3 1,645 Available

9 Thangatha Kunati SHP Thangatha River 3.1 16,451 IDEA Power

10 Irindiro - Mbiili SHP Thangatha River 2.4 12,373 IDEA Power

11 Ura SHP Ura 3.1 16,499 IDEA Power

12 Kiagu Forest SHP Kathita 2.3 12,299 IDEA Power

13 Kathita SHP Kathita 1.2 6,150 Achelis

14 Ura - Achenge SHP Ura River 0.3 1,645 IDEA Power

15 Kathita Community SHP Kathita River 0.3 1,577 Available

16 Thingithu SHP Thingithu 0.3 1,577 Available

Total 144.9 MW 122,850

C) Rough Diamonds in Real Estate

i)Maua Mall – Design, Finance, BOT Model

ii)Edu City The Master Plan

…Cont….Edu City-Concept Developments

Cooperative University

iii)The Meru Rising Tower

Ready Design

….Cont…

The Meru Rising Tower-Master Plan

Meru Rising Tower - Milestones

• Ready Grade A-Design

• Ready Feasibility – Attractive Returns

• Ready Investment Vehicles for you

• Ready Structure - LLP

• Land Transfer to Meru-IDC

• Initial Capitalization by Meru County

Government – Ksh200M

Can we do this?

• Yes

– Inspiration from the cooperative movement in Meru

(Mccu, Nyambene Hse, Imenti Hse…etc)

– Inspiration from the Kicc Model, Timing & History

– We can recreation of Kicc Model in Meru in 2016

.

.

What’s Ongoing?-The Meru County Hotel

• A standard Room

• Conference Room

• The Dining Room

What are we looking for?

Partnerships – Let’s do this together

Value Addition

Opportunities

Thilange Acquilino M

Director; Technical Services

Why Agro Processing in Meru County?

Proposed 15,000MT Banana processing Plant

Proposed 150,000M2 Leather processing

Proposed 1,000MT Potatoes

Investment Model

County Incentive In Agro business

Content

Benefits- Why Meru County?

A• Create Employment

B• Increase returns to farmers

• Eradicate Poverty and improve standard of

C• Generate Revenue

Proposed 15000MT Banana Plant

PROPOSED BANANA PROCESSING

PLANT

A

• Second Largest Produced fruit after Citrus,

• 16% of worlds total fruit Production.

• India is the largest producer contributing to 27%

• Banana is highly nutritious, and easily digestible than many

other fruits.

•During ripening process, starch is converted into sugar throughenzymatic process. Sugar content in a fully mature banana is highmaking it ideal for wine making

Banana

• Meru County is leading in Banana production in the Country, producing an average of 200,000MT/year, Valued at KSH 5B.

• Followed by Kisii County

•Mainly used for food and commercial purposes•Approx. 40% of the crop get damaged due to lack of storage facility

Crop Cover In Meru County

Banana Products

Crisp

Wine Flour

Raw Materials

• Annual Banana Production from Meru County: 200,000 MT

• Proposed to process 8%(15000MT) of the produced Bananas into various product.

Input/output Analysis

Tonnage from

farm Input Conversion Factor Unit Output

15,000MT

(8% per year)

Wine 5000MT

30%

1,500,000

(1LT Pack)

Crisp 5000MT

30%

1,500,000

(1Kg Pack )

Flour5000.00

30%

500,000

(1Kg Pack)

Production Facility

PARTICULARS QTY

Building (5000MT) 1 1,200,000

Banana Brush Washer 2 200,000

Banana inspection Conveyor 1 200,000

Pre Cooler and Pre cooling chambers @5MT per day 4 7,000,000

Banana Ripening Chamber 10MT 3 5,000,000

Heavy Duty Plastic crates for Banana storage and

handling 20000 1,000,000

Ammonia Compressor for Pre cooling and Cold Storage 4 6,000,000

Atmospheric Condenser 2 4,000,000

HT/LT Electrical syatem with DG st for standby

Power Lot 5,000,000

Pallet handling truck 1 1,000,000

Refer insulated vans for transport of Banana from Farm

and to Market 2 2,000,000

32,600,000

Receiving and Storage

32,600,000

Wine Making Process

Fermentation (9 days at 26 Deg Cent)

Inoculation Saccharomyces Cerevociae

Pectinase treatment(0.25% for 45minutes)

Banana Pulp

Banana Fruit

Banana Wine

Pasteurization( 60 Deg, 3min) and 0.1Bentonite

Bottling

Racking

Wine Processing Cost

PARTICULARS QTY COST

Receiving Equipment Lot 5,802,375

Cellular Equipment Lot 1,662,265

Material Handling Lot 4,952,000

Refrigeration Lot 2,891,857

Fermentation/Storage Lot 4,981,525

Cooperage Lot 5,194,400

Tasting room Lot 367,595

Plant and Offices Lot 20,000,000

Total 45,852,017

45,852,017

Crisp Processing

PARTICULARS QTY COST

Peeling Room accessories 1 2,000,000

Preservation area and accessories 1 3,000,000

Deep frying and accessories 4 5,000,000

Packaging 3 3,000,000

Tasting room 1 1,000,000

Offices, Furnitures, office equipment 1,000,000

Total 15,000,000

15,000,000

Flour Processing

PARTICULARS QTY COST

Peeling Room accessories 1 2,000,000

Preservation area and

accessories 3 3,000,000

Drier 3 10,000,000

Milling 4 2,500,000

Formulation Preparation lot 3,000,000

Packaging 3 3,000,000

Total 23,500,000

23,500,500

Employment Cost Per annum

PARTICULARS QTY COST

General Manager 1 2,400,000

Supervisors 2 2,400,000

Wine maker 2 1,680,000

Operators(Packers) and Support

Staff 50 24,000,000

Technicians 10 6,000,000

Total 36,480,000

36,480,000

Other Cost

Particular Cost

Plant Depreciation 15,343,201

Overheads 24,000,000

Operational and Maintenance 40,000,000

79,343,201

79,343,201

Total Investment

PARTICULAR COST

Receiving and Storage 32,600,000

Wine Processing 45,852,017

Crisp Processing 15,000,000

Flour Processing 23,500,000

Employment Cost Per annum 36,480,000

Other Costs 79,343,201

192,432,017

192,432,017

Financial Analysis

Profitability Index

CapacityNet Profit

MarginGross Profit

Margin EBIT Margin

100% Capacity 0.43 0.71 0.62

75% Capacity 0.33 0.60 0.48

50% Capacity 0.22 0.51 0.34

30% Capacity 0.01 0.34 0.04

At a 50% and above capacity, Net profit is 32% of Revenues, a Net Profit Margin of 30% and above is ideal for this project

Internal Rates Of Return

At a capacity of 50% and above IRR is above

WACC making the project desirable

Capacity IRR

100% Capacity 363%

75% Capacity 222%

50% Capacity 117%

30% Capacity 31%

At a capacity of 50% and above IRR is

above WACC making the project desirable

Capital Recovery

WACC 23.33%

Years (n) 10

CRF 0.265969674

Initial Investment 145,329,997.00

Annual Desirable Cash flow 38,653,371.99

For the capital to be fully recovered in

10yrs,annual cash flow of 38,653,371.99 must be achieved which at any capacity above

50% it surpasses this threshold

Potato

1,000MT POTATO PLANT

PROPOSED 1000MT

POTATO PROCESSING PLANT

• Potato is the second main crop in the County with a

production of about 160,000 tons/year.

•Almost 30% of the crop get damaged due to lack of

storage facility

• Proposed to set up a 1,000MT plant in Meru County preferably.

Product Description and Application

Potato Processing (UOP)

Blanching

Slicing Washing

Slicing

Peeling

Potato Loading

Packing

Flavoring

Inspection

Frying

Receiving, Cleaning Storage PARTICULARS QTY COST

Building 1 4,200,000

Washer 2 600,000

Inspection Conveyor 1 700,000

Pre Cooler and Pe cooling chambers @5MT

per day 4 6,000,000

Cold Storage Facility 3 4,000,000

Heavy Duty Plastic crates for Banana

storage and handling 100000 1,000,000

Ammonia Compressor for Pre cooling and

Cold Storage 4 6,000,000

Atmospheric Condenser 2 4,000,000

HT/LT Electrical syatem with DG st for

standby Power Lot 4,000,000

Pallet handling truck 1 1,000,000

Refer insulated vans for transport of Banana

from Farm and to Market 2 2,000,000

Total 33,500,000

33,500,000

Machinery and Equipment

Pre Frying PARTICULARS Cost

Batch Peeler 3,000,000

Elevator 1,000,000

Continuous Slicer 1,200,000

Slice Washer Drums 800,000

Drum Bluchers 3,000,000

Dewatering and even feed shaker 1,000,000

Total 10,000,000

10,000,000

Machinery and EquipmentFrying and Seasoning Equipment

Frying System 6,000,000

Sub-merger Belt 4,000,000Holding Belt 600,000Hood and hood lift 1,000,000Hot oil circulation system 2,000,000Oil Top up with oil indicator 500,000Automatic temperature controller 200,000Continuous Fat Filter 300,000Oil Heat Exchanger for dryer 2,000,000Inspection belt 400,000Salt Flavor dispenser 200,000Tumbling Drum 800,000Multi Head Weigher 2,100,000Other Accessories 1,000,000Control Panel 2,000,000Total 23,100,000

Total 33,100,000

33,100,000

PRODUCTION PROCESS AND COSTINGOther cost

Utility Quantity KES

Electricity 480,000 10,080,000

Water 4800000lt 15,790,909

Operation and Maintenance

20,000,000

Total Utility Cost 44,228,309

44,228,309

PRODUCTION PROCESS AND COSTINGEmployment Cost

POSITION No Required Total Annual SalaryManaging Director 1 1,200,000

Production Manager 1 1,200,000

Administration/Finance Head 1 1,200,000

Accountant 1 960,000

Secretary 1 720,000

Sales Clerk 2 1,200,000

Store Keeper 2 1,200,000

Technician 2 960,000

Supervisor 3 2,520,000

Daily Laborers 8 2,880,000

Cleaners 2 720,000

Messengers 1 240,000

Driver 1 300,000

Guards 4 960,000

Total 30 16,260,000

16,260,000

PRODUCTION PROCESS AND COSTING

Production Cost

Raw Materials 7,300,000

Depreciation 6,772,676

Utility 24,228,309

Employment cost 16,260,000

54,560,985

54,560,985

PRODUCTION PROCESS AND COSTINGTotal Initial Cost

Utility 24,228,309

Raw Materials 3,300,000

Receiving, Cleaning and Storage 33,500,000

Equipment and Machinery 33,100,000

Employment cost 16,260,000

Depreciation 6,772,676

Land 5,070,422

Building and Civil works 16,901,408

Office equipment 1,126,760

Vehicles 5,070,422

Total 165,329,997

165,329,997

Financial Analysis

Internal Rate of Return

Capacity IRR

100% Capacity 145%

75% Capacity 100%

50% Capacity 53%

30% Capacity 9%

At 50% capacity IRR is Above

Weighted Avg Cost

At 50% capacity

IRR is Above Weighted Avg

Cost

Profitability Index

CapacityNet Profit Margin

Gross Profit Margin

EBIT Margin

Pretax Margin

100% Capacity 0.51 0.86 0.74 0.72

75% Capacity 0.44 0.82 0.66 0.63

50% Capacity 0.32 0.74 0.50 0.50

30% Capacity 0.05 0.57 0.15 0.07

At a 50% and above capacity Net profit

is 32% of Revenues, A NPM of 30% and above is ideal for

this project

Capital Recovery

WACC 23.33%

Years(n) 10

CRF 0.27

Initial Investment 165,329,997.00

Annual Desirable Cash flow 38,653,371.99

For the capital to be fully recovered in 10yrs,annual cash flow of 38,653,371.99 must be achieved which at any capacity

above 50% it surpasses this threshold

Tannery

Industrial Process

PROPOSED 150,000M2

TANNERY PROCESSING PLANT

• Leather is animal skin that has been chemically modifiedto produce a strong, flexible material that resists decay.

•Hides and skins undergo a number of processing stagesbefore a final product called finished leather is reached.

• World Demand projection divulges that the domestic demand for finished leather is substantial and is increasing with time.

Product Description and Application

Raw Materials Availability In Meru County

Total Annual Hideproduction **

Total Annual Skin production **

Total Annual production

Annual requirement for tannery for the Proposed Tannery

60,000 units 90,000 units 150,000 Units

-

240,000M2 90,000M2330,000 M2

**Source Department of Agriculture Meru County

Other sources include animal from neighboring County (Isiolo, Marsabit) and Country (Ethiopia)

150,000M2

PRODUCTION PROCESS AND COSTINGMaterial Input

Material Input Quantity KES

Wet Blue Hides 150,000 48,600,000

Lacquer Emulsion 3 tons 1,363,636

Sodium Bicarbonate 2 tons 297,818

Sodium Acetate 2 tons 400,000

Formaldehyde 1 tons 318,181

Dyes (different Colours) 4 tons 2,000,000

Total Material Cost 52,979,635

52,979,635

PRODUCTION PROCESS AND COSTINGEmployment Cost

POSITION No Required Total Annual SalaryManaging Director 1 2,400,000

Production Manager 1 1,200,000

Administration/Finance Head 1 1,200,000

Accountant 1 960,000

Secretary 1 720,000

Sales Clerk 2 1,200,000

Store Keeper 2 1,200,000

Technician 2 960,000

Supervisor 3 2,520,000

Operators 18 8,640,000

Daily Laborers 8 2,880,000

Cleaners 2 720,000

Messengers 1 240,000

Driver 1 300,000

Guards 4 960,000

Total 48 26,100,000

26,100,000

PRODUCTION PROCESS AND COSTINGMachinery and Equipment

Machinery and Equipment Quantity

Drum with 5HP motor shaft pulley 2

Electrical Unit Heater for Stuffing Drum 5HP 2

Shaving Machine - single width 1 1

Electrical Hand Operated Setting Out Machinery 1

Lace Cutting Machine 1

Spraying Machine with Dryer 1

Hydraulic Press 1

Brushing Machine with Drier 1

PRODUCTION PROCESS AND COSTINGTotal Initial Cost

ITEM TOTAL

Land 5,070,422

Building and Civil works 16,901,408

Office equipment 1,126,760

Vehicles 5,070,422

Plant Machinery and equipment 35,211,267

Operational and Maintenance 20, 000,000

Total 90,215,492**Pre production Capital Expenditure pre investment studies, consultancy,expence for company

90,215,492

PRODUCTION PROCESS AND COSTING

Total Investment Cost

ITEM COST

Material Input 52,979,635

Utility 24,228,309

Employment Cost 26,100,000

Total Initial Cost 90,215,492

Total 193,523,436

Machinery Depreciation 5,830,986

Total Investment Cost 199,354,422

199,354,422

PRODUCTION PROCESS AND COSTING

Revenue

Input Volume in Square meters 150,000.00

Yield 90% 135,000.00 Price per Square Meter KES (Global

Range) 800

Total Revenue 108,000,000.00

Cost of producing square meter 481

Financial Analysis

Profitability Index

CapacityNet Profit Margin

Gross Profit Margin

EBIT Margin

Pretax Margin

100% Capacity 0.42 0.74 0.61 0.59

75% Capacity 0.24 0.47 0.36 0.34

50% Capacity 0.09 0.32 0.15 0.13

30% Capacity (0.21) 0.03 -0.27 (0.30)

10yrs,annual cash flow of 46,151,971.78 is achieved above 50%

Internal Rates Of Return

Capacity IRR

100% Capacity 164%

75% Capacity 112%

50% Capacity 58%

30% Capacity 7%

At 50% capacity IRR is Above Weighted AvgCost making project viable

Capital Recovery

Capital Recovery

WACC 23.3%

Years (n) 10

CRF 0.27

Initial Investment 173,523,436

Annual Desirable Cash flow 46,151,971.78

For the capital to be fully recovered in 10yrs,annual cash flow of 46,151,971.78 must be achieved which at any capacity

above 50% it surpasses this threshold

Free Land – Long term leases to allow capital recovery

Grading and Maintenance of roads to useable standards

Connection to water supply mains within reasonable distances

Pre-feasibility studies/data collection/collation

Waiver of plan approval fees

Waiver of rates for 5 years

Facilitation and support in processing other national and county regulatory approvals

County Incentive In Agro business

Investment Models

• Available Models:

• 100% private investment with incentives from Govt

• Public Private Partnership/Joint Venture

• 100% Government investing

Thanks!

The Meru Rising Tower

The Tower ….from a distance

Space Appropriation

SPACE GBA (Mtrs.sq) Sq.Ft

Anchor tenant 5,043 54,282.35

Other retail areas 4,637 49,912.20

Restaurants/food court 1,294 13,928.49

Office block 11,190 120,448.04

Meeting rooms 980 10,548.62

Basements 9,000 96,875.10

Breakout & service areas 4,808 51,752.83

TOTAL 36,952 397,747.63

Retail 16,872.00 181,608.52

Office 20,080.00 216,139.11

SPACE GLA (Mtrs.Sq)

Retail 12,654.00 136,206.39

Office 12,170.00 130,996.66

TOTAL 24,824.00 267,203.05

PARKING BAYS 440

Financing Structure

Partner 1-MCIDC, 13.73%

Partner 2-ILLP, 20.59%

Partner 3-PS, 17.16%Partner 4-HNW I & I, 10.29%

Partner 5-The Company, 4.80%

Parner 6-The Building Society,

3.43%Mezzanine Funding,

30.00%

Meru Rising LLP

The company

ILLPMCIDC

Building Society

HNW-Investors

How to Enter

a)HNW Investor-With a minimum of kes.5M an investor can

directly buy a unit and become a partner in the LLP.

……Cont

The Company

Investor 2

Investor 1

Investor 3

Meru Rising LLP

b)The Company-At 1Mn@share, investors will be pooled

together in a private company and the company shall be

the partner in the LLP

c)The building Society-An aggregating vehicle , small investors will

buy a share ,then the small amounts will be pooled and invested

together by the company as a partner in the LLP.

2 Mn. 2 Mn.

2 Mn.2 Mn

200K

200K200K

200K

Returns Scorecard

The tower shall offer investors up to 14% net rental yield in a

payback period of 7 years based on the base case scenario.

Return Measure Rate

Net Rental Yield (%) 14%

Gross Income Multiplier 5.87

Payback Period 7Yrs

COC Return 22.50%

IRR 32.20%

ROI 52.70%

…….Cont

.Capital Recovery

Equity Proportion 70%

Debt Proportion 30%

COE 25%

COD 20%

WACC 23.500%

n 7

CRF 0.30

Initial Capital Outlay 2,500,000,000.00

Annual Desirable turnover 761,215,680.89

Project Best annual turnover 782,358,083.43

Off-Plan purchase

• Kes. 13,500.00Price per Sq.ft

• 1,000 Sq.ftMin.No.of Sq.ft

• 20 %Down payment

• 12 MonthsPayment Period

Off-Plan Buy/Pre-sale

…..Cont…

Historically low correlation of returns with traditional markets(Equities & Fixed incomes).

Secondary recipient of external shocks on both the currency and economy.

Opportunity to diversify investments and spread the risk

A hedge against inflation.

Constant, stable and reliable cash flows

Why real estate ?

High effective demand for commercial grade A offices in the county.

An opportunity to diversify geographically.

County government

anchor tenant taking 40% of the

GLA

Opportunity to invest in

the 5th

richest County

Why Invest in the tower ?

….and for Listening