IFC Power March 2009 Sarajevo, Bosnia and Herzegovina

1. IFC Power March 2009 Sarajevo, Bosnia and Herzegovina

2. The IFC advantage: A wide range of services and products for its Clients • Variety of products: greenfield projects, corporate loans, acquisition finance and refinancings, partial credit guarantees on loans and bonds, securitization of future cash flows, and a new product for IDA countries (infraventures) • Competitive maturity and pricing: Fixed/floating rates, currency of choice, commercial rates, repayment tailored to cash flow, long maturities (up to 20 years), etc. • Political Risk Mitigation: through our affiliation with the World Bank • Long-term Partnership: IFC works closely with partners in an affected project to address issues

3. Track record Projects: • 129 projects in 44 emerging markets countries • 15,000 MW private generating capacity • 101 generation projects • 10 transmission projects • 17 distribution companies Financing: • $ 3.5 billion committed in generation, T & D • $ 2.5 billion raised through syndication • $ 16 billion aggregate project values

4. Track record • Corporate Finance • Expansions / Revamping • Restructuring / Refinancing • Project Finance • IPP / Greenfield • Equity / Quasi Equity

5. Infaventure context:Great Need for Bankable Infrastructure Projects • Huge critical infrastructure needs in IDA countries, (especially in Sub-Saharan Africa and post-conflict countries). Globally: • 1.6 bn lack access to electricity, 1.0 bn lack access to all weather roads, 1.1 bn lack clean water and 2.4 bn lack access to sanitation • 95% of those without access are in Asia and Africa; 1.4m children die p/a from water-borne diseases • Governments aware but unable to address these needs on their own • 70% of all infrastructure spending in developing countries in 1990s financed by governments or public utilities’ own resources • Investment needs estimated at $479 bn for years between 2006-2010 • Renewed interest in infrastructure development but while needs are high, sector is underfinanced in most developing countries.

6. Private funds available but very few bankable projects • Great interest from DFIs and private financiers to fund “bankable” infrastructure projects • 18 EM infrastructure-focused private equity funds raised $7 bn from 1996-2006; in 2007, 16 funds raised +/-$30 bn • But, number of “bankable” projects is limited, especially in frontier countries and difficult sectors • Water and sanitation, roads and power • Sponsors with successful track records of bringing projects to full financing stage are also limited and/or few of them willing to take early stage risks in frontier countries

7. Constraints to Private Infrastructure Development • Overdue sectoral reforms to be implemented by government including • Establishing a stable macroeconomic environment • Establishing a legal framework for concessions, contract enforcement, bankruptcy and lender remedies • Establishing a stable regulatory framework recognizing project’s lifecycle needs • Developing a domestic debt market • State-owned utilities are not performing: poor generation performance, lack of investment, high level of losses, low collections • Tariffs do not always reflect full cost recovery, especially in sensitive sectors like water and sanitation • Perception of high country risk • Persistent lack of funds and experienced professionals dedicated to early stage project development

8. What is Infrastructure Project Development?How does it differ from project financing? • Earliest stages of project life cycle – sometimes at conceptual stage • Risk capital and human resources to move project from concept to financial close • Project and prototype feasibility studies; pilot tests • Financial modeling • Economic, social, technical and environmental studies • Negotiation of financial and legal terms • Selection and supervision of project participants • Negotiation of project documents • Obtaining required permits • Sourcing project’s equity and debt financing

9. IFC Experience:Pre-IFC InfraVentures • To date, IFC’s active involvement in project development has been ad hoc (e.g., Kounoune, Pamir) • IFC’s involvement in project development not adequately compensated • Experienced staff not dedicated to project development, staff incentives not aligned with project development • Approval procedure not consistent with early stage project development practices • High risk profile different from IFC’s mainstream investments

10. IFC’s Additionality in Project Development • IFC’s identity in market • Convening power of the World Bank Group • IFC’s access to all WBG instruments and services • IFC senior staff depth and breadth of experience • Track record of “hands-on” project development with sponsors in most challenging environments • IFC’s involvement reassures all project participants • IFC’s global presence

11. IFC Response:IFCInfraVentures Fund Composition and Objective • $100 million over 5 years in IDA countries • Up to US$ 4 million per project • Dedicated, experienced senior professionals • Fund staff to act proactively as project developers, principally with co-developer, or as “surrogate” sponsor • Objective of bringing more projects to financial close and implementation

12. IFC Response:IFC InfraVentures Early Stage Risk Capital • Risk capital (not grant funding) for full range of project development activities • Risk capital (and sweat equity) to be compensated at financial close through stake in equity or development fee • Risk capital to be made available in the form of different instruments • IFC to seek right to arrange and participate in project financing

13. IFC Response:InfraVentures Efficient Processes and Access to other resources • Streamlined processes for approval of use of funds to projects meeting eligibility criteria • Projects to be “handed over” to mainstream business lines at financing stage • Leverage other IFC’s and World Bank’s staff and resources • Cooperation with other private and donor-funded project development initiatives • Possible use of Trust Funds for external consultants

14. Project Eligibility Criteria • Must be private or PPP infrastructure project in IDA country/region • Must be at early stages of development • Meet IFC Additionality guidelines • Type of projects include : • Sponsor has agreement with Government • Projects being tendered • Projects not requiring contract with Government • “Post-conflict country” initiatives • InfraVentures acts as a surrogate sponsor in the initial stages • Projects that could reach financial close within a few years • Must have high development impact

15. THANK YOU FOR YOUR ATTENTION