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DEG: We finance opportunities.

DEG: We finance opportunities. G20 Africa Infrastructure Investment Conference Financing Infrastructure in Africa Stephan Diefenthal, Vice President London, 18 July 2013. A bank with a wide range of responsibilities DEG, a subsidiary of KfW. Domestic Promotion. International Financing.

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DEG: We finance opportunities.

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  1. DEG: We finance opportunities. G20 Africa Infrastructure Investment Conference Financing Infrastructure in Africa Stephan Diefenthal, Vice President London, 18 July 2013

  2. A bank with a wide range of responsibilitiesDEG, a subsidiary of KfW Domestic Promotion International Financing We promote Germany We ensure internationalisation We promote development Promotion SMEs, business founders, start-ups Promotion construction of new housing and modernization as well as education Financing municipal infrastructure projects and global loans Germany agency business for Federal Government International project and export finance Developing and emerging-market countries: Financial cooperation Developing and emerging-market countries: Private sector promotion Business area Privatkundenbank Business area Kommunalbank Business area Mittelstandsbank KfW IPEX-Bank Business area KfW Entwicklungsbank DEG Promotion of environmental and climate protection

  3. DEG at a glanceFacts and Figures 2012 • Established 1962 • Employees 480 • Head officeCologne • Shareholder KfW Frankfurt • Equity EUR 1.8 billion • Balance sheet total EUR 4.7 billion • New business EUR 1.3 billion • Portfolio EUR 6.0 billion • DEG is a partner for companies investing in emerging markets and developing countries. For more than 50 years, we have been successfully supporting people and markets on the spot.

  4. DEG at a glance Mandate and working method German development finance institution (DFI) for the private sector in emerging markets and developing countries Specialistforentrepreneurialdevelopment in all sectorsoftheeconomy Agribusiness, finance sector, infrastructure, manufacturing industries, services Long-term investment capital for private enterprises Financing of investments with a positive developmental impact Market-oriented conditions Ecological and social acceptance according to international guidelines Contributions to sustainable economic growth and poverty reduction

  5. Reasonstocorporatewith DEG Strategic planning Long-term finance Competent partnership • Information on possible types of finance • Advice on strategy and countries • Evaluation of business plans • Advice via local DEG offices • Arranging contacts with local authorities and institutions • Participationdevelopmentcost • Political support • Structuring of tailor-made finance • Provision of various financing instruments • Arranging of additional finance from commercial banks or financial institutions • Finance from public programmes • Coordination of the complete finance package • Establishment of suitable controlling instruments • Mobilisation of additional funds • Analysis of weak points • Restructuring • Specificprojectandsectorexpertise Infrastructure Brochure / Cologne / 25.02.2013

  6. New business 2012EUR 1.3 billion Sectors Regions • With a share of nearly 40 per cent, risk capital financings are at the core of DEG’s new business.

  7. DEG worldwideOur work on-site Our commitment Our portfolio: EUR 6.0 bn • Strategic • Reliable • Developmental effectiveness • International networks Moskow Asia EUR 1.8bn191 companies Europe EUR 1.3bn108 companies Istanbul Peking New Delhi Mexico City Bangkok Singapur Accra Latin America EUR 1.6bn146 companies Our project criteria Nairobi Jakarta Lima Africa EUR 1.1bn123 companies São Paulo • Profitable • Successful in the long-term • Environmentally andsocially compatible Johannesburg DEG representative offices Portfolio, as of: 31/12/2012 Our customers benefit from our network across the globe and individualised on-site advisory services.

  8. A strong allianceDEG is a member of the European Development Finance Institutions International partnerships • Mobilisation of further capital • Shared risks • Structuring of complex finance • Further partners outside Europe (International Finance Corporation, regional development banks) DEG is one of the leading European development finance institutions which have joined to become the association of European Development Finance Institutions (EDFI).

  9. Promotion ofthedeveloping countries: private sector Establish and expand private sector structures in developing and transition countries for a sustainable economic growth for lasting improvement in the living conditions of the local population By means of: Long Term Loans Mezzanine Finance Equity Guarantees supportedbytechnicalassistance

  10. Financial instrumentsLong-term loans Currency: EUR or USD, in exceptional cases also local currencies Term: usually between four and 15 years Grace period: depending on cash-flow of the project company Interest rate: fixed or variable, margin is market-oriented depending to project and country risks Collateral: fixed and movable assets in the country of investment, project-specific arrangements Amount: usually up to EUR 30 million; larger volumes through cooperation with EDFI

  11. Financial instrumentsEquity capital Equity participation in the project company Minority stake, usually over a limited period Variable arrangement of the risk components (common shares, preference shares) In certain cases, voting rights and board seat Clearly defined exit strategies

  12. Financial instrumentsMezzanine finance Financing combining elements of equity and debt: • Tailor-made arrangements • Subordination • Conversions options • Risk-oriented yield (equity kicker/ Ebitda multiple)

  13. General criteria for DEG financing Integrity, transparencyof shareholder Track recordof shareholder (knowhow, finance, management) International accountingstandards Transparent corporategovernance; secured local legal framework Majority interest in the project company through private company and private management Adequate protection for foreign capital investment; transfer of capital must be assured Limited governmental influence on license and concession agreements (independent regulatory authority) Financing: Equity ratio of at least 25 % (depending on project structure up to 40 %), adequate cash-flow oriented structure (i.e. debt service coverage, current ratio, flexible repayment structures) Minimum environmental social standard: in compliance with local, EU and World Bank requirements; in compliance with international standards of the International Labour Organisation and the UN Construction:Preferred: EPC contract on turn-key basis with completion and performance guarantees; adequate arrangements to cover cost overruns, project delays, unexpected event Operation:Long term O&M contract with experienced operator; modern equipment and operating system

  14. DEG activities in the African Infrastructure sector Infrastructure Brochure / Cologne / 25.02.2013

  15. Infrastructure: The African context High and sustainable economic growth of Africa’s economy: 5.4% average growth 2004-2012 (source: African Economic Outlook 2013) Expected increasing FDIs: USD 42.7bn in 2011, USD 49.7bn in 2012 and expected USD 56.6bn in 2013 (source: African Economic Outlook 2013) Current spending on African Infrastructure: USD 45bn p.a.; need to spend USD 93bn p.a. to plug the infrastructure gap in Africa (source Infrastructure Investor Africa/AICD/World Bank)

  16. DEG activities in the African Infrastructure: sub-sectors Power production and distribution: conventional thermal (HFO, diesel, gas), renewables (wind, hydro, geothermal, solar, biomass) Telecommunication: mobile, fixed line, towers, submarine cables, satellite Water & waste: treatment, supply, sewage systems, desalination Transport: airports, railways, toll roads, harbors, container terminals, pipelines

  17. Type of Transactions Expansion of existing business Greenfield projects (with strong sponsor) Privatization Buy-outs (combined with new investments or significant improvements through new shareholder structure)

  18. DEG financing in the African Infrastructure DEG commitments in African Infrastructure (as of 31.05.2013): All Infrastructure: USD 664m (= 29% of USD 2.3bn global DEG commitments) Power: > USD 200m = 31% of USD 650m globally (10 projects – gas, diesel, geothermal, hydro, wind, solar); strong African project pipeline: > USD 150m in 2013/4 Telecommunication: Africa USD 380m (21 projects – mobile (18), fixed line (1), towers (1), submarine cables (1), satellite (1); project pipeline: > USD 80m (mobile, towers) Water & waste: nil Transport:> USD 100m (gas pipeline, rail, container terminal, toll road/bridge, barges, logistics)

  19. Conclusions for future DEG activities in African Infrastructure Strong business potential in African infrastructure due to existing gap and high GDP growth rates; DEG to almost double its new commitments in Africa to ca. USD 600m p.a. within next 4 years, expects up to 40-50% of its future business in Africa coming from infrastructure sector Power/Energy to remain the key sector for DEG; focus on renewable energy but also conventional thermal energy and energy distribution. Key countries: South Africa, Kenya, Nigeria, Ghana, Côte d’Ivoire, Cameroon, Zambia; also open for other countries (off-take structure, legal environment for IPPs) Telecommunication remains strong sector, shift from mobile (voice) to data transfer and infrastructure service providers (e.g. towers) expected High potential for transport sector: container terminals/ports, toll roads, airports, pipelines, logistics, etc. Water & waste: on selective basis (market liberalization = prerequisite)

  20. Selected References Mobile Telecommunication NetworkCELTEL International - Africa The Challenge • Setting upof an Pan-African mobile phoneoperator in 13 African countries • High growth potential fortelecommunicationservicesacrossthecontinent • Low teledensity / poorfixedlinesystems The Solution • Promoting a newlyestablishedcompanyfoundedby Dr. Mohamed Ibrahim withequitycapitalprovided in severaltranchesby international financialinstitutions, investmentfundsand DFIs • Board- and Management teamwithrichtrackrecord in telecommunicationandexperience in Africa Value Addedby DEG • DEG contributed USD 15 millionventurecapital in start-upphaseandsuportedexpansionphasewithanother US$ 7 million • DEG experience in developmentalprojectsconveyedthrough Board Observer Seat Financingof a Mobile Phone Operator in Sub-SaharianAfrica Equity Amount: US$ 22 million

  21. Selected References 48 MW Geothermal Power PlantOlkaria III – Kenya The Challenge • Oneoffirst IPPs in Kenyaandfirst geothermal IPP in Africa • High potential for geothermal power in Africa • Country risk (2009), off-take risk • Environmental andsocialimpacts The Solution • Project finance USD 105m • Compliance with IFC Performance Standards (environmental/social) • Strong projectsponsorandmanagementteam • Strong projectadvisors Value Addedby DEG • DEG contributed USD 50m ownfinanceandactedasarrangerfor USD 105m debtfinance. • Strong DEG experience in Kenyaand power sector • Geothermal know-howavailable in KfW Banking Group Financingof a Geothermal Power Plant in Kenya Senior Loan: USD 50m • DebtArrangerfor USD 105m

  22. Get in touch! Stephan DiefenthalVice President AfricaInfrastructure & Mining Phone: +49 (0) 221 / 4986 - 1359Fax: +49 (0) 221 / 4986 – 1582 Stephan.Diefenthal@deginvest.de DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH Kämmergasse 22 50676 Köln Germany www.deginvest.de

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