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InfraCo Overview

Symposium on Private Financing for African Power Infrastructure US Treasury Department Washington, DC October 13, 2008. InfraCo Overview. Development and Investment in Early Stage Infrastructure Projects Privately Managed Infrastructure Development company,

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InfraCo Overview

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  1. Symposium on Private Financing for African Power InfrastructureUS Treasury DepartmentWashington, DCOctober 13, 2008

  2. InfraCo Overview • Development and Investment in Early Stage Infrastructure Projects • Privately Managed Infrastructure Development company, • Funded by the Private Infrastructure Development Group • Creates Privately Financed Bankable Infrastructure Projects, • Balancing the Interests of Host Governments, • Private Sector Equity Investors and • Senior Debt Lenders

  3. InfraCo Scope of Operations • Geographic Focus • Sub Sahara Africa • DAC I/II Countries (Least Developed and Low Income Countries) • Geographic Focus • Sub Sahara Africa • DAC I/II Countries (Least Developed and Low Income Countries) • Project Focus • Greenfield Investment • Expansion/Rehabilitation of Existing Facilities • Project Focus • Greenfield Investment • Expansion/Rehabilitation of Existing Facilities • Sector Focus • Energy & Power • Water and Waste water • Transportation • Sector Focus • Energy & Power • Water and Waste water • Transportation • Acts as a Principal Project Developer • InfraCo is not an advisor • Acts as a Principal Project Developer • InfraCo is not an advisor • Leads and Actively Participates in the Development of Projects • InfraCo is not a passive funding source • Leads and Actively Participates in the Development of Projects • InfraCo is not a passive funding source • Assumes Development Risk • InfraCo shoulders the costs and risks of early stage development

  4. Development Process Overview 1 2 Origination Early Stage Development Host Country Macro-economic, Political and Power Sector Assessment Financial Assessment: Prevailing Tariffs Economic Assessment: Demand Forecast and Reserves Technical Assesment Legal Assessment: Power Sector Regulatory Framework; Private Sector Investment Feasibity Gate Project Budget and Schedule MoU with Host Country or Utility Joint Development Agreement 3 Advanced Stage Development Site Control, Technology Selection, Preliminary Engineering and Costing, Preliminary Financing Plan, Basic Financial Modeling, PPA Term Sheet, [Fuel Supply Term Sheet/ Wind Resource, Assessment/Solar Irradiation Assessment/Hydrology Reports], Interconnection Study, Environmental/Social Impact Assessment 4 Implementation Power Purchase Agreement and Security Package [Fuel Agreement/Final Renewable Resource Report] Procurement and EPC Contract Financing Term Sheet Acquisition of Site and Rights-of-Ways Permits and Regulatory Approval Equity Financing Project Information Memorandum Debt Financing

  5. Risk Allocation Matrix • Fuel Supply • Minimum Take • Price Formula • Matching Energy Payment • Delivery Risk • Security Package • Termination • Sovereign Guarantee • Financial Guarantee: • Ring-Fencing Sector Cash Flow • More Effective • More Controversial • Change of Law/ Regulatory Risk • Exchange Controls • Currency Convertibility/Availability • Political Events • Power Purchase Agreement Tariff • Capacity and Energy Tariff • Indexation (Forex and inflation) • Completion and Functional Guarantee (output; availability; heat rate) • EPC Contract • Scope • Price and Payment Milestones • Delay and Functional Guarantees • Liquidated Damages and Performance Security • O&M • Owner Operated or Outsourced • Regular & Major Maintenance • Price Protection • Availability Guarantees

  6. Typical Project Structure Power Purchase Agreement and Security Package Project Financing Project Structure Construction Loan Equity/Debt Operations & Maintenance Regular Operation, Overhaul and Outage Maintenance Sovereign/ Regulatory Issues Turnkey Design & Construction Engineering, Equip-ment Procurement, Construction Start-up and Testing PROJECT Fuel Supply Agreements Primary/ Secondary Fuel Sources Transportation Environmental & Other Permitting Permits for Plant, Air, Water, Mining & Ash Disposal Site Control Site Right-of-Ways and Easements

  7. Constraints to Energy Project Development • Host Governments • Discipline in Execution of Policy • Avoid Politicalisation of Projects • Realistic Expectations • Offtakers (Electric Utilities) • Still Not Bankable without Sovereign Guarantee or Other Credit Enhancement • Multilaterals and DFIs • Review Conditionalities • Compatibility with the Host Country Situation • Predictability • Consistency in Execution • Bureaucracy • Less • Transparency • More

  8. Constraints to Energy Project Development • Contractors and Suppliers • Market is not Competitive • US Contractors: Absent • European Contractors: Large Projects Only • Asian Contractors: Increasingly Present • Local Contractors: • Civil Works: Adequate Local Skills/Capacity Exists • Electro-Mechanical: Reliance on Foreign Skills/Capacity • Construction Risk Still High • Difficult to Mitigate • Frontline Risk

  9. Constraints to Energy Project Development • Private Debt Financing • Local Currency Debt • Not Enough Competition in Local Market • Limited Source of Long-Term Funding • Interest Rates Are Very High • Hard Currency Debt • Short/Medium Term: Closed Except with Enhancement • Short-Medium Term Solution • Increase Local Currency Guaranty Products • Supplier’s Credit (ECAs’) for Hard Currency

  10. Constraints to Energy Project Development • Strategic Investors • Tied to Equipment Supplier, Contractors or Operator • Sub-Optimal Alignment of Interests • Financial Investors (Private Equity) • Better Alignment of Interests • Return Requirements: • Unrealistic for Power Infrastructure • Exit Requirements: • Unrealistic for Illiquid Nature of Asset Class

  11. Africa Private Equity Fundraising - 2007 • Worldwide vs Africa • Only 4% • Worldwide vs Africa • Only 4% $2.34 billion • Natural Resource Driven • 56% • Infrastructure: 2% • Natural Resource Driven • 56% • Infrastructure: 2% $59.16 billion • Existing Businesses Not Greenfield • Existing Businesses Not Greenfield • Sub-Sahara Africa (Ex RSA) • 61% • Mostly in Commodities

  12. InfraCo Sub-Sahara Infrastructure Fund • $300MM Private Equity Fund • $100 Million OPIC Loan • Approved by OPIC Board in May 2008 • $200 Million in Limited Partnership Investments • Currently Being Raised • ISSIF will Invest Primarily in Projects Developed by InfraCo • Geographic Focus • Sub Saharan Africa (Excluding South Africa) • Transaction Focus • Greenfield Infrastructure • Sector Focus • Power • Transportation • Water and Sanitation

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