New debt partner for Africa


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New debt partner for Africa

  1. 1. TEMPLATE 20 October 2003 New debt partner for Africa
  2. 2. INTRODUCTION <ul><li>First dedicated debt fund for sub-Saharan Africa </li></ul><ul><li>Public/private sector partnership </li></ul><ul><li>Original sponsor: UK Government as lead equity provider. Joined by three other European Governments </li></ul><ul><li>First multi-donor initiative by Private Infrastructure Donor Group </li></ul><ul><li>Debt from three official development finance institutions and two private sector international banks </li></ul><ul><li>Donor aid funds leveraged private sector capital for development purposes </li></ul><ul><li>Fund manager: advised by Emerging Africa Advisers </li></ul>
  3. 3. FUND STRUCTURE Subordinated Debt $85m Equity $100m Senior Debt $120m Emerging Markets Partnership (USA) 11.6% Development Finance Company FMO (The Netherlands) 18.4% Standard Bank Group (RSA) 70% Emerging Africa Advisers (Standard Bank) (London) Borrowers Standard Infrastructure Fund Managers (Africa) Limited (Mauritius) EMERGING AFRICA INFRASTRUCTURE FUND (Mauritius)
  4. 4. SOURCES OF FUNDING <ul><li>US$,m </li></ul><ul><li>Senior Debt </li></ul><ul><ul><li>Barclays Bank (of the UK) 60 </li></ul></ul><ul><ul><li>Standard Bank Group (of the RSA) 60 </li></ul></ul><ul><li>Subordinated Debt </li></ul><ul><ul><li>FMO (of The Netherlands) 40 </li></ul></ul><ul><ul><li>Development Bank of Southern Africa (of the RSA) 25 </li></ul></ul><ul><ul><li>DEG (of Germany) 20 </li></ul></ul><ul><li>Equity </li></ul><ul><ul><li>Governments of the UK, The Netherlands, Sweden 100 </li></ul></ul><ul><ul><li>and Switzerland </li></ul></ul><ul><ul><li>Total: 305* </li></ul></ul><ul><ul><li>*can be increased to $450m </li></ul></ul>
  5. 5. FUND OBJECTIVES <ul><li>Poverty reduction in pursuit of MDGs and economic growth from improved infrastructure </li></ul><ul><li>Promotion of infrastructure at interface of private and public sectors </li></ul><ul><li>Supplement capacity from market sources </li></ul><ul><li>Development of domestic capital markets: guarantees on loans by financial institutions to eligible projects </li></ul><ul><li>Demonstration effect: viability of long term debt, meeting commercial criteria and development objectives </li></ul><ul><li>Use private sector expertise </li></ul><ul><li>Increase Fund size: once initial funding committed and Fund viability established </li></ul>
  6. 6. PRINCIPAL INVESTMENT POLICIES <ul><li>Products: senior and subordinated loans. Portion as guarantees to domestic debt providers </li></ul><ul><li>Eligible borrowers: private sector owned (>51%), managed and controlled entities with infrastructure focus </li></ul><ul><li>Region: creditworthy countries in sub-Saharan Africa, excluding Mauritius </li></ul><ul><li>Investment size: US$5-30 million </li></ul><ul><li>Tenor: up to 12 years </li></ul><ul><li>Pricing: market-based </li></ul><ul><li>Environmental and social policy standards: monitored by FMO </li></ul><ul><li>Compliance with poverty reduction criteria </li></ul>
  7. 7. ELIGIBLE PROJECTS <ul><li>Electricity: generation/transmission/distribution </li></ul><ul><li>Water/sanitation: fresh water (production, treatment, supply, distribution), bulk supply (reservoirs, transfer schemes, dams, pipelines), waste (collection/treatment/disposal) </li></ul><ul><li>Fixed transport assets: toll roads/bridges/tunnels, rail, airports, ports, warehouses, bulk storage/handling </li></ul><ul><li>Gas or oil: import/distribution/storage for domestic market </li></ul><ul><li>Telecommunications: long distance/local fixed line services, cellular services, radio common carriers, microwave links, private networks </li></ul><ul><li>Types: start-up or expansion projects, operating infrastructure firms, privatised or to be privatised companies </li></ul><ul><li>Support possible for infrastructure associated with ineligible projects if local communities benefit </li></ul>
  8. 8. BENEFITS FROM USE OF PROJECT FINANCE TECHNIQUES <ul><li>Focus on: </li></ul><ul><ul><li>Tight covenants </li></ul></ul><ul><ul><li>Early warning triggers </li></ul></ul><ul><ul><li>Transparency of project accounts/cashflows </li></ul></ul><ul><ul><li>Enhanced contractual rights </li></ul></ul><ul><ul><li>Multiple counter-parties with incentives to cooperate to cure default </li></ul></ul><ul><li>Effects: </li></ul><ul><ul><li>Default probability: comparable to unsecured solid corporate risk </li></ul></ul><ul><ul><li>Loss rates: better than for equivalent secured/unsecured corporates </li></ul></ul><ul><li>Sponsors benefit: </li></ul><ul><ul><li>Risk-based appraisal by third parties </li></ul></ul><ul><ul><li>Mitigation of Government action risk </li></ul></ul><ul><li>But: expensive and time consuming to put in place </li></ul>
  9. 9. ELIGIBLE PROJECT PROFILES <ul><li>Commercial viability </li></ul><ul><li>Quality of sponsor equity investors </li></ul><ul><li>Operating skills </li></ul><ul><li>Allocation of project risks </li></ul><ul><li>Efficient and transparent contractual structures </li></ul><ul><li>Robust cashflows </li></ul><ul><li>Receipt of sponsor returns (from dividends/royalties/management fees, etc) in line with debt service </li></ul><ul><li>Mitigation of environmental and social impacts </li></ul><ul><li>Government approvals and support </li></ul>
  10. 10. FUND EXPERIENCE TO DATE <ul><li>2 transactions closed in 2003: US$ M </li></ul><ul><ul><li>MSI (Regional Mobile Telecoms) 30 </li></ul></ul><ul><ul><li>AES Sonel (Power utility, Cameroon) 30 </li></ul></ul><ul><li>Total committed to date 60 </li></ul><ul><li>4 further deals potentially to close by end 2004 </li></ul><ul><ul><li>Power developer, regional 30 </li></ul></ul><ul><ul><li>Gas field/treatment plant, Southern Africa 20 </li></ul></ul><ul><ul><li>Single point mooring (oil imports), West Africa 10 </li></ul></ul><ul><ul><li>Port terminal, West Africa 10 </li></ul></ul><ul><li>Total potentially committed to 2004 130 </li></ul><ul><li>Slow pace of deal flow - few opportunities in Southern Africa </li></ul><ul><li>Lack of viable water/sanitation projects </li></ul><ul><li>Benefits of partnering with other development institutions </li></ul>
  11. 11. HOW TO CONTACT FUND <ul><li>Emerging Africa Advisers Team in the UK </li></ul><ul><li> Direct Tel Number Email Address </li></ul><ul><li>Patrick Crawford +44 20 7815 2780 patrick.crawford </li></ul><ul><li>Managing Director </li></ul><ul><li>Nick Howard +44 20 7815 2782 nhoward </li></ul><ul><li>Senior Investment Adviser </li></ul><ul><li>Sofia Bianchi +44 20 7815 2785 sofia.bianchi </li></ul><ul><li>Senior Investment Adviser </li></ul><ul><li>Magchiel Groot +44 20 7815 2786 magchiel.groot </li></ul><ul><li>Investment Adviser </li></ul><ul><li>Yusuf Macun +44 20 7815 2784 yusuf.macun </li></ul><ul><li>Investment Adviser </li></ul><ul><li> </li></ul>