This document summarizes a presentation by Roland Janssens of Frontier Markets Fund Managers on financing ICT infrastructure. It provides an overview of FMFM's experience financing telecommunications and ICT projects in emerging markets. It discusses the types of telecom financings FMFM has conducted, including corporate financing, project financing, and mergers and acquisitions. It also outlines the various parties involved in telecom financings and different ways to categorize the telecom financing landscape, such as by company/project size, market attractiveness, and financing instruments.
Private Finance Initiative (PFI) changes model of funding for large-scale investment projects
First launched in 1992 by a Conservative government and was extended heavily by the Labour government of 1997-2010.
By 2011, more than 700 hospitals, schools, prisons and other public sector projects had been built under the PFI scheme
Encourages private investors manage the design, build, finance and operation of public infrastructure such as new schools, hospitals, social housing, defence contracts, prisons and road improvements.
Typical PFI contract repaid by government over 30 year period
Presentation Session 3: Marc Frilet, IFEJI
ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)
ISMED Training: Assessing the PPP Option, presentation by IFCOECDGlobalRelations
Presented at the Training Session on Public Private Partnerships organised by the MENA-OECD Investment Security in the Mediterranean (ISMED) Support Programme in September 2014.
ITS allows support travelers of all classes and to assist in road network management and performance by using systems for information, communication, and control, to provide improved safety and an enhanced traveling experience. The presentation provides highlights on Bahrain ITS Efforts.
Private Finance Initiative (PFI) changes model of funding for large-scale investment projects
First launched in 1992 by a Conservative government and was extended heavily by the Labour government of 1997-2010.
By 2011, more than 700 hospitals, schools, prisons and other public sector projects had been built under the PFI scheme
Encourages private investors manage the design, build, finance and operation of public infrastructure such as new schools, hospitals, social housing, defence contracts, prisons and road improvements.
Typical PFI contract repaid by government over 30 year period
Presentation Session 3: Marc Frilet, IFEJI
ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)
ISMED Training: Assessing the PPP Option, presentation by IFCOECDGlobalRelations
Presented at the Training Session on Public Private Partnerships organised by the MENA-OECD Investment Security in the Mediterranean (ISMED) Support Programme in September 2014.
ITS allows support travelers of all classes and to assist in road network management and performance by using systems for information, communication, and control, to provide improved safety and an enhanced traveling experience. The presentation provides highlights on Bahrain ITS Efforts.
With the increase in public debt, 100% privately funded initiatives are now re-emerging yet experience had shown earlier that early successes of privatization programs were short lived and led later to bailouts / subsidy by Governments. PPP,s are likely to remain a better way to allocate the risks based on each entity’s ability to manage , mitigate and absorb risks. This brief highlights various aspects of PPP’s in terms of explaining the various PPP’s models and PPP’s transactions types, fiscal risks in PPP’s, PPP’s best practices and how to create an enabling PPP Environment. Major MENA PPP’s projects preview of is highlighted.
Financiang Infrastructural Development in ZimbabweVincent Mutsvene
There are 88,100 km of classified roads in Zimbabwe, 17,400 km of which are paved .About 5 percent of the network is classified as primary roads and has some of the most trafficked arterials that link Zimbabwe with its neighbors. A portion of the Pan-Africa Highway passes through Zimbabwe. This part of the road network plays a major role in the movement of the country’s imports and exports as well as transit freight.
However lately due to fiscal constraints and budgetary ills, the road network has rapidly deteriorated and can be described as in intensive care. There is need for rehabilitation, maintenance and construction of new roads especially the Beitbridge- Chirundu highway ( a transit corridor) linking South Africa and the upper parts of Africa. Road carnage have been prevalent and the busy road is narrow and can not contain the level of traffic flow operating there.
A developmental Imperative therefore presents itself on how to finance the road construction against compiling government developmental initiatives. A financing mechanism is therefore proposed in this presentation. This Innovative finance model ensure private capital investments funding development against government financing. This provides a breather to the government as they focus on other initiatives and the private sector wins through greater financial and social returns inherent in these financing structures.
Infrastructure whether financed through traditional methods or PPPs relies on funding sources to repay financing, whether debt, equity, or a combination. All infrastructure investments ultimately depend on either user fees, government tax revenues, or a combination of both. Transport has a great impact on economic growth and poverty alleviation.
Therefore, community and political support for greater investment of government tax revenues or the imposition of user fees is critical to expanding investment in public infrastructure. The challenge is for PPPs to demonstrate overall cost savings and efficiencies that outweigh the lower-cost financing advantage of traditional procurement.
Creation of Infrastructure has economics both of scale and scope (i.e., minimum size of facilities, inelastic adjustment of capacity to demand, long term project completion, etc..
Presentation of the “SIGMA Workshop on PPP characteristics, models & sectors”, held in Ankara on 11-12 April 2018. Presentation made by Mr. Mario Turkovic, SIGMA.
Transport sectors projects are very political entities and governments are still held responsible should there be revenue short fall or distressed situation. further modes of transport do compete with each other but in a limited manner, however, global threats nowadays require certain redundancy in transport network, this affects PPP structure!
Also experience suggests that negotiations between public authorities and prospective concessionaires are rather asymmetrical, and lead to asymmetric risk sharing. Concessionaires have extraordinary bargaining powers as they know no competition exists after the concession is signed.
This presentation was delivered by S. Brian Samuel, PPP Coordinator, CDB at a High-Level PPP Workshop of the Caribbean Growth Forum on June 15, 2015 in Saint Lucia. For more information about PPPs in the Caribbean, visit www.caribank.org.
ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECDOECDGlobalRelations
Presented at the Training Session on Public Private Partnerships organised by the MENA-OECD Investment Security in the Mediterranean (ISMED) Support Programme in September 2014.
With the increase in public debt, 100% privately funded initiatives are now re-emerging yet experience had shown earlier that early successes of privatization programs were short lived and led later to bailouts / subsidy by Governments. PPP,s are likely to remain a better way to allocate the risks based on each entity’s ability to manage , mitigate and absorb risks. This brief highlights various aspects of PPP’s in terms of explaining the various PPP’s models and PPP’s transactions types, fiscal risks in PPP’s, PPP’s best practices and how to create an enabling PPP Environment. Major MENA PPP’s projects preview of is highlighted.
Financiang Infrastructural Development in ZimbabweVincent Mutsvene
There are 88,100 km of classified roads in Zimbabwe, 17,400 km of which are paved .About 5 percent of the network is classified as primary roads and has some of the most trafficked arterials that link Zimbabwe with its neighbors. A portion of the Pan-Africa Highway passes through Zimbabwe. This part of the road network plays a major role in the movement of the country’s imports and exports as well as transit freight.
However lately due to fiscal constraints and budgetary ills, the road network has rapidly deteriorated and can be described as in intensive care. There is need for rehabilitation, maintenance and construction of new roads especially the Beitbridge- Chirundu highway ( a transit corridor) linking South Africa and the upper parts of Africa. Road carnage have been prevalent and the busy road is narrow and can not contain the level of traffic flow operating there.
A developmental Imperative therefore presents itself on how to finance the road construction against compiling government developmental initiatives. A financing mechanism is therefore proposed in this presentation. This Innovative finance model ensure private capital investments funding development against government financing. This provides a breather to the government as they focus on other initiatives and the private sector wins through greater financial and social returns inherent in these financing structures.
Infrastructure whether financed through traditional methods or PPPs relies on funding sources to repay financing, whether debt, equity, or a combination. All infrastructure investments ultimately depend on either user fees, government tax revenues, or a combination of both. Transport has a great impact on economic growth and poverty alleviation.
Therefore, community and political support for greater investment of government tax revenues or the imposition of user fees is critical to expanding investment in public infrastructure. The challenge is for PPPs to demonstrate overall cost savings and efficiencies that outweigh the lower-cost financing advantage of traditional procurement.
Creation of Infrastructure has economics both of scale and scope (i.e., minimum size of facilities, inelastic adjustment of capacity to demand, long term project completion, etc..
Presentation of the “SIGMA Workshop on PPP characteristics, models & sectors”, held in Ankara on 11-12 April 2018. Presentation made by Mr. Mario Turkovic, SIGMA.
Transport sectors projects are very political entities and governments are still held responsible should there be revenue short fall or distressed situation. further modes of transport do compete with each other but in a limited manner, however, global threats nowadays require certain redundancy in transport network, this affects PPP structure!
Also experience suggests that negotiations between public authorities and prospective concessionaires are rather asymmetrical, and lead to asymmetric risk sharing. Concessionaires have extraordinary bargaining powers as they know no competition exists after the concession is signed.
This presentation was delivered by S. Brian Samuel, PPP Coordinator, CDB at a High-Level PPP Workshop of the Caribbean Growth Forum on June 15, 2015 in Saint Lucia. For more information about PPPs in the Caribbean, visit www.caribank.org.
ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECDOECDGlobalRelations
Presented at the Training Session on Public Private Partnerships organised by the MENA-OECD Investment Security in the Mediterranean (ISMED) Support Programme in September 2014.
Training in Corporate India is on its way to success. Know more about Training in India in this presentation on Effective HR. Training and development in different sectors like retail-FMCG, Auto-mobile, Telecom and other sectors are discussed. This presentation is an initiative by Welingkar’s Distance Learning Division.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/SlideShareEffectHR
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Corporate Finance – A Study On Idea CellularSarang Bhutada
A Corporate Finance Perspective on Idea Cellular, a listed company in India (IDEA) by traditional methods like leverage analysis, EBIT-EPS Analysis, Dividend Policy Analysis and Alternate Funding Policy Analysis
The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services.
This presentation have been made by ISBM Kolkata, students.This is basically on the reforms of Indian Telecoms Industry after liberalization.Industry analysis is the backdrop throughout the presentation 7 then emphasis on a particular company.
Presentation Session 1: Luigi de Pierris
ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)
4 December 2014 - Paris, France
Private sector in infrastructure funding/financing models and role of institu...OECD Governance
Presentation made by Raffaele Della Croce, Financial Affairs Division & Dejan Makovsek, Investment Division, OECD, at the 9th annual network meeting of Senior Infrastructure & PPP Officials held at the OECD, Paris, on 1 March 2016
Ownership and Economics of SSDAB - SSDAB & Community Radio: Past, Present, & ...CMA_Slides
SSDAB & Community Radio: Past, Present, & Future
University of Bedfordshire, Luton - Saturday 25th March, 11am-4pm
This free event was for community radio stations, commercial radio broadcasters and individuals interested in small-scale digital audio broadcasting (SSDAB) and community media.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
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An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
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This presentation poster infographic delves into the multifaceted impacts of globalization through the lens of Nike, a prominent global brand. It explores how globalization has reshaped Nike's supply chain, marketing strategies, and cultural influence worldwide, examining both the benefits and challenges associated with its global expansion.
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BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
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Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
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Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the what'sapp contact of my personal pi merchant to trade with.
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1. ICT Leaders Executive Forum
13 – 14 September 2012
Cumberland Lodge,
Great Windsor Park, United Kingdom
Financing ICT Infrastructure:
A Financier’s Perspective
Presentation by
Roland Janssens
Frontier Markets Fund Managers
London, 19 September 2012
2. Overview – What this presentation will cover
The presenter – Overview of FMFM 1 minute
FMFM Telecom Finance Experience 2 minutes
Types of Telecommunications/ICT Financings 2 minutes
Parties with an interest in Telecom/ICT financings 1 minute
Other ways to look at Telecom/ICT financing – 1 1 minute
Other ways to look at Telecom/ICT financing – 2 2 minutes
Telecom Project Financing Options – 1 through 4 6 minutes
Planned Presentation Time: 15 minutes
“Time over-run contingency/Question & Answers 5 minutes
Total: 20 minutes
2
3. Frontier Markets Fund Managers
Frontier Markets Fund Managers Limited (“FMFML”) is the fund
manager for two development oriented project finance
infrastructure funds:
Emerging Africa Infrastructure Fund (“EAIF”), founded in
January 2002, currently $750 million in fund size
GuarantCo, founded around 2006, provides guarantees for
local currency loan or capital market debt instrument
financing. It is currently $400 million in size
FMFML is owned 70% by Standard Bank, plc, a subsidiary of the
Standard Bank group of South Africa. 18% is owned by FMO;
12% by EMP
Day to day exclusive advisory work to EAIF and GuarantCo is
provided by Frontier Markets Fund Managers, a division of
Standard Bank
3
4. EAIF’s existing portfolio is spread over 7 sectors and 15 Countries
4
At 30 June 2012, 21% of the EAIF Port-
folio was to the ICT sector, down from
31% at 31 December 2010 due to faster
pre-/ repayments of mobile financing
than other new ICT financings added.
Mining
12%
Manufacturing
12%
Agribusiness
6%
Telecoms
21%
Transport
4%
Power
44%
Infrastructure
1%
Pan Africa
17.0%
Nigeria
11.8%
Uganda
14.0%
Kenya
10.4%
Senegal
3.8%
Mozambique
12.0%
Cameroon
7.2%
Rwanda
6.0%
SierraLeone
6.0%
Algeria
4.1%
South Africa
2.2%
DRC
0.0%
Tanzania
4.8%
Madagascar
0.5%
Malawi
0.2%
Infrastructure in the charts means industrial infrastructure such as cement plants
GuarantCo’s portfolio includes
further ICT financings
5. Summary of FMFM telecommunications/ICT transactions *
5
Dec 2005
Celtel Kenya
KES 3.5 billion
Guarantee of a l Kenya Shilling Bond Issue
KES 725 million (US$ 12million)
PartialCredit Guarantee
Jan 2003
MSI-Cellular / Celtel
US$ 260 million
Expansion of a GSM network across
selected countries in Arica
US$ 30m
Mezzanine debt facility
Nov 2007
Seacom
US$ 600 million
Debt financing for equity participation of IPS
Kenya (AKFED) in Seacom, the first submarine
Fibre optics cable along the east coast of Africa
US$ 36.5m lender to IPS CSH
For equity in Seacom
Jan 2009
Wataniya Palestine
US$ 145 million
Corporate facility for the expansion of
a GSM network in the Palestinian territories
US$ 10m
Guarantee Facility
Jun 2009
Zain Ghana
US$ 523 million
Construction and operation of a
Greenfield mobile network in Ghana
US$ 17.5m
Senior Debt Facility – B loan
Dec 2009
Helios Towers Nigeria
US$ 250 million
Corporate facility for the expansion of
Helios’ tower network in Nigeria
US$ 19 m
Senior Debt Facility
Nov 2010
O3b Networks
US$ 1.4 billion
MEO Satellite Constellation and ground facilities to
Deliver fibre quality broad band communications
services via satellite to emerging markets
US$ 12.5m Senior Debt
US$ 12.5m Sub Debt
Dec 2011
Helios Towers Tanzania
US$ 85 million
Acquisition of >1000 telecom towers from Millicom
Tanzania Ltd. Debt facility for refurbishment and
Expansion of the acquired tower network.
US$ 15m
Senior Debt Facility
Declined /Non Pursued Transaction
8Transactions
Declined after significant assessment or not pur-
sued, e.g. due to disagreement over terms and
conditions, including pricing
Pipeline
EAIF
4 Projects
Pipeline
GuarantCo
4 Projects
Nov 2004
MTN Nigeria
LUSD 200 million
Corporate facility for the expansion of MTN’s
pGSM network in Nigeria
-
USD 10m
–Senior Debt Facility
Feb 2007
Celtel Nigeria
US$ 190 million
Corporate facility for the expansion of
GSM network in Nigeria
US$ 35m
Senior Debt Facility
Oct 2007
Celtel Chad
XAF 14.8 billion
Expansion of a GSM network and
refinancing of USD with local currency loans
Chad
XAF 3.5 billion (US$ 8m)
Guarantee Facility
Jun 2007
Celtel Africa
US$ 320 million
Corporate facility for expansion of GSM
Network in 5 African countries
US$ 24m
Senior Debt Facility
* FMFM staff gained further Telecommunications and ICT experience before joining FMFM, a/o in Latin America, Western and Eastern Europe,
in the Russian Federation and Asia
Includes
•a mid-sized mobile operator seeking
expansion financing in local currency
• a mid-sized telco with mobile and
fibre operations seeking refinancing
to local currency and expansion
financing, as well as LT local
lender/insurance lender market
access
•a national fibre network
• a mutualised network
Includes:
• a new technology (LTE) data project
• a submarine fibre optics project
• a mutualised network
•[a rural telco project working with
existing carriers]
6. Types of telecommunications/ICT financing transactions
Corporate financing for established (majority) private sector
companies with a track record of cash flow generation
Large cross border groups – financed at group level – may
prioritise one market over another in capital allocation -
Affiliates of large cross border groups – partially financed at
country/affiliate level
Corporate financing for (majority) state owned companies
Limited recourse financing for “stand alone” projects of large private
or public sector controlled companies
Mergers and Acquisition finance (usually of large companies)
Sale/lease-back/spin-off finance (e.g. “Tower Companies”).
Privatisation finance
Distressed assets/work-out situations
Project financing of start-ups (large, medium sized or small)
Mutualised/shared infrastructure projects
Technology and other venture capital financings
6
7. Parties with an interest in Telecom/ICT financing
Users:
Pay for goods & services: end-user devices, bandwidth, etc.
Save time/effort – seek quality and quantity at best price.
Regulators seek to:
Create environment that allows growth of provision of services
Maintain/enhance service quality, orderly markets, fair competition
Potentially generate revenue from licensing, spectrum, taxes, etc.
Equipment suppliers and installation contractors: Seek profit from their
services and sometimes market share/recognition for loss lead sale
Service operators (e.g. Telecommunications carriers): (long term ?) profit
Entrepreneurs/promoters of new projects, technologies: Profit from new
entry – Often sell out to others or replaced once start-up has grown
Equity financiers/investors: Seek to maximize return for a given risk
Debt financiers: Seek repayment & to minimize risk for limited returns
Development finance financiers as a sub-class of equity and debt financiers:
Development interest beyond pure financial performance.
ECA lenders/Vendor Finance providers also have non-financial considerations
7
8. Other ways to look at the ICT infrastructure financing world -1
By size of company/investment (small, medium/large project/company)
By degree of market attractiveness (city vs. rural) or segment (data/voice)
By financing instrument/type of financier:
Equity
Lower risk equity – invests in large, quoted groups/companies and seeks
more moderate returns from diversified risk exposure
Higher risk equity – e.g. more passive private equity – co-invests in new un-
quoted ventures; may not actively manage/co-manage; incl. development
finance equity
Entrepreneurs – “sweat equity”, limited capital
Debt
Capital market issues (bonds, etc.) - mostly for existing large businesses
Vendor finance & export credit agency backed commercial debt
Non-ECA backed commercial loans
Development finance institution loans
Internally generated cash
Guarantee and insurance instruments
Debt and equity can be (and usually are) present in sub-categories (e.g.
common and preferred equity class/series A, B, C, D, ….; senior and subordinated debt, etc.)
8
9. Other ways to look at the ICT infrastructure financing world - 2
Many infrastructure industries are regulated and some have specific shared/heavily
regulated or co-owned common infrastructure structures:
E.g. Power – independent producers supply “national grid”/ “big entity to big entity risk”
Such industries may have a degree of common/shared infrastructure that industry
participants in one form or another pay for.
Expansion may be much more government planned (e.g. IPP plant by IPP Plant).
Lenders and equity investors are often comfortable to finance in such industries
based on long term take or pay commitments among market participants: a Telecom
equivalent would be long term IRU pre/”anchor tenant”-sales for use of a system.
Such system was e.g. used for the Seacom cable financing. Pre-sales of IRUs were
made to cover a certain amount of senior debt service with certain coverage ratios.
De facto subordinated lenders (e.g. EAIF )still took a degree of long term market risk.
Project promoters/equity prefer to minimize “anchor” tenant pre-sales because they
have to accept lower pricing for such commitments. Large Telco’s typically also do not
buy on this basis (and may e.g. prefer a consortium cable to an independent cable
system or to wait till the system is operational.
In ICT such joint/mutual projects, particularly involving public private sector
partnerships are also contractually complex to put together.
9
10. Other ways to look at the ICT infrastructure financing world - 2
FMFM evaluated one example of what the presenter considered a fairly well
structured joint/mutual backbone network.
In this case the regulator granted a time limited national backbone exclusivity
Nearly all mobile/ICT operators in the country became members/shareholders
Support for equipment sales was provided by a development grant institution
Credit committees may still dislike such structures for lack of a strong, dominant
sponsor, although this is what may make ICT company co-operation possible.
In practice, in the ICT sector, in the regional markets where FMFM is active, there is
much less of the “common/shared/mutually owned or regulatory imposed”
infrastructure. The success of de-regulation in the ICT industry, competitive
behaviour/(lack of ?) trust levels, the pace of technology innovation and mass market
consumer orientation (with associated payment risk) may have contributed to this.
The framework of the Telecom services segment of the ICT sector tends to be domi-
nated by oligopolies with a few large companies and difficult to finance small ones.
Consequently in ICT equity and debt providers are often faced with high market risk
financing situations requiring high returns, particularly for new entrants/projects.
10
11. Telecom Network Project Financing Options - 1
Option 1 – “Big Bang” new technology/ new network roll out –
Lenders typically want Senior Debt fully Guaranteed by a credit
worthy party – The lender concern is “market risk” they take
Equity will try to have debt assume as much risk as possible
New entrant wishes to roll out its planned network fast in all
planned regions regardless of the speed of the uptake of its
services or level of existing direct or indirect competition (e.g.
CDMA versus GSM, LTE versus HSPA+, 4th/5th mobile operator
versus incumbent 1st /2nd/3rd carrier, etc.) or “price war “ risk
Usually new entrant needs debt finance as well as equity, to
ensure adequate return to equity financiers.
To achieve the “big bank” impact, new entrant would like to
utilize the full debt (senior & mezzanine) in a short time frame
after the base equity has been invested in full, or if lenders
allow, is disbursed pari passu and pro rata with the debt.
“big bang” leaves senior lenders exposed to “equity type” of
market risk and hence this would require credit enhancement
through corporate/sponsor guarantees for the life of the loan.
From a lenders’ perspective a further problem is that much of
the expenditure is for operating rather than capital
expenditure; equipment value is also problematic to lenders
(“first mile driven on new car” issue/technical obsolescence)
“spectrum and license validity and values are also problematic
to lenders as usually transfer of license and change of
ownership require regulator approval. Lenders will seek
written or contractual regulator protection/assurances.
11
Mezzanine
$Bm
Senior
Debt
$Cm
Equity
$Am
Projectcost/Capex
2012 2013
Senior Debt
$Dm
2014 2015 2016 2017 202020192018 2021 2022
Senior Debt
$Em
Equity Investment and
Debt Disbursement period
Internally
generated
Cash
Internally
generated
Cash
Internally
generated
Cash
Continued investment by Internal Generated Cash
Debt Repayment period (Fully Guaranteed by
Sponsors
Standby
Equity
in case
of shortfall?
Length of periods/years are illustrative only. Investment periods to
equity exit and loan tenor periods are often key negotiation concerns.
12. Telecom Network Project Financing Options - 2
12
Option 2 – Performance based loan utilization
In this scenario the Senior Debt will be drawn as follows:
After equity and mezzanine debt have invested in full;
Tranche A: a minimum amount of Senior Debt [USDX-Ym]*
can be drawn in order to meet the minimum capital outlay
requirement to achieve the required basic service footprint
(e.g. national roll-out; selected regions or cities, etc.).
Trance B, C, D, E: then the Senior Debt can only be drawn in
batches of USD [Zm]* based on company meeting various
milestones/financial tests:
Subscriber base;
Revenue/EBITDA** /Cash generation;
Debt to EBITDA;
Projected DSCR***
* Exact amounts of debt and ratio between
equity/mezzanine/subordinated debt and various classes of equity is
also an important consideration for financiers, as it influences risk and
reward by type of party
** Earnings before interest, taxes, depreciation and amortization
*** Debt service coverage ratio
Mezz
$Bm
A) Debt
$Cm
Equity
$Am
Projectcost/Capex
2012 2013
B.
2014 2015 2016 2017 202020192018 2021 2022
Investment
Debt Disbursement period
Internally
generated
Cash
Internally
generated
Cash
Internally
generated
Cash
Continued investment by Internal Generated Cash
Debt Repayment period
Standby
Equity
in case
of Shortfall?
C.
D.
E.
Phase
A B C D E
Financial
Performance
Test
13. Telecom Network Project Financing options - 3
Option 3 - Debt buy down
In this scenario the Senior debt will be drawn as follows:
After equity and mezzanine debt have been invested in full;
The Senior Term Facility is then available during e.g. the first
[4] years and can be drawn regardless of performance/uptake
in the following order:
Tranche A: [USD Xm]* can be drawn to achieve the
required footprint /network/service roll-out.
This tranche will be subject to a sponsor debt
buy down obligation at each repayment date
in case certain financial milestones have not
been met. The financial test may include
preset targets for:
actual and projected Debt to EBITDA
[max: e.g. [3-4]x]
Projected DSCR on Run Rate Basis
[e.g. min run rate DSCR [1.8x]]
The debt buy down obligation would be
capped at [….%] of the loan. The Debt buy
down obligation will be enshrined in a
Sponsor support agreement.
Effectively the debt buy down means a
portion of the debt is put back to the equity
holders and extinguished or serviced from
cash flows outside the project.
Trance B: [USD Y]*.
* Exact amount and ratio between contributions of different
equity and debt classes subject to negotiation but typical
numbers known to financiers.
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Projectcost/Capex
2012 2013 2014 2015 2016 2017 202020192018 2021 2022
Investment
Debt Disbursement period
Internally
generated
Cash
Internally
generated
Cash
Internally
generated
Cash
Continued investment by Internal Generated Cash
Debt Repayment period
Mezzanine
$Bm
A
Cm
Equity
$Am
A/B
Dm
B.
Em
Financial Test
& potential
buy down
c
c
c
c
c
c
c
c
Standby
Equity
in case
of Shortfall?
14. Telecom Network Project Financing options - 4
Option 4- Mix of option 3 & 4
14
Mezz
$Bm
Debt
$Cm
Equity
$Am
Projectcost/Capex
2012 2013
d
2014 2015 2016 2017 202020192018 2021 2022
Investment
Debt Disbursement period
Internally
generated
Cash
Internally
generated
Cash
Internally
generated
Cash
Continued investment by Internal Generated Cash
Debt Repayment period
d
d
d
Phase
A B C D E
Financial
Performance
Test
Financial Test
& potential
buy down
e
e
e
e
e
e
e
e
Standby
Equity
in case
of Shortfall?
15. Other issues typically playing a role in financing
Entrepreneurs and Equity providers typically seek an “equity” exit
Lenders concern about loan maturities
Commercial lenders typically – a/o due to cost of capital and
regulatory requirements – prefer shorter term loans;
this puts more pressure on cash flows particularly for
infrastructure with long term pay back required to keep usage
costs reasonable
Technology obsolescence and asset values often also make long
tenors more difficult in ICT projects
Development finance lenders are typically more willing to lend long
term
15
16. Typical key due diligence items for equity and debt providers
Management Depth and expertise, team that has worked together or not, etc.
Technology
Lender Technical Adviser to review design, project cost, planning, proposed technology, operating procedures, logistics,
quality issues.
Financial
Financial structure;
Forex risks;
Market risks (see below)
Project budget, assumptions;
Robustness financial model/projections, key performance and covenant ratio’s;
Sensitivity analysis.
Environmental &
Social
ESIA Compliance with IFC Performance Standards/Equator Principles, etc.;
ESAP/ESMP to be developed in cooperation with Lenders Technical Adviser;
Organizational capacity.
Legal / Regulatory/
Tax/ Political
Review of all Project documents;
Regulatory framework (Concessions, permits, licenses, spectrum, etc);
Tax implications
Country or region’s social stability, economic prospects, political situation, etc.
Insurance Review of all required insurances, limits etc.
Sponsors/
Shareholders
Shareholder structure;
Shareholder technical/industry expertise and financial standing (creditworthiness, “deep pockets or not”, strategic interest
Legal, tax and accounting opinions provided by firms acceptable to the Lender;
Consolidated audited financial statements;
Corporate governance and Know Your Customer (KYC) regulatory checks
Market
Country economy and growth prospects
Accessible market
Ability to pay
Competition analysis.
16