1. Peter Gray Partner Clyde & Co December 2010 Banque Africaine D’Import – Export Critical Issues in Power Project Financing in Africa African Export – Import Bank

3. Introduction 1. Commercial Break 2. So what’s happening? 3. Power project structure – a reminder 4. Essentials for deal closure 5. Trust – the forgotten factor 6. Governments need to … 7. Private sector needs to … 8. Lenders need to … 9. Everyone needs … 10. Questions

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5. Power Project Structure – a reminder Government Fuel SupplierElectricity Utility Project Company EPC Contractor Shareholders Commercial Banks Multilateral Lending Agency Export Credit Agency (Intercreditor Deed) (Debt)(Security) (Concession, Implementation Agreement) (EPC) (Equity) (Sub Debt) (Direct Agreements) (FSA) (Direct Agreement) (Shareholder Support) (PPA)

6. Our international network of offices Our international network is supplemented by relationships with correspondent law firms in over 120 countries A significant part of our practice involves work of an international nature SAN FRANCISCO CARACAS RIO DE JANEIRO LONDON & GUILDFORD NANTES BELGRADE MOSCOW ST PETERSBURG PIRAEUS DOHA ABU DHABI DUBAI SINGAPORE HONG KONG SHANGHAI MUMBAI BANGALORE RIYADH DAR ES SALAAM NEW YORK & NEW JERSEY Associated Offices Clyde & Co Offices PARIS NEW DELHI

7. So what’s happening? Power projects in Africa: Completed in 20101.43 gigawatts Underway0.36 gigawatts Planned14.58 gigawatts All these figures are probably understated, but at current closure rates we are looking at 10 years to close the existing pipeline of projects

8. Essentials for deal closure Government identifies need for power and has political support Private sector prepared to deliver Project is bankable Banks are able to lend Risk allocation works Environmental Other implicit issues:  domestic political and economic stability  efficient and fair legal system  satisfactory infrastructure  corruption under control  no cheating  efficient bureaucracy  Good quality advisers (price/quality arbitrage) Trust/good working relationship

9. Trust – the forgotten factor Value of detailed signed contract Day-to-day working issues Different experience levels Balanced share of benefits Long haul commitment No claims culture Transparency Responsibility

10. Governments need to … Be joined up – only negotiate each issue once 4Ps Be clear about their concerns Understand investor concerns Have in place an effective legal and regulatory system Ensure broad based political support Have a realistic timetable Appoint a champion

11. Private sector needs to … Sort out consortium issues up front Be transparent with objectives and concerns Understand Government concerns Validate the technical solution Don’t sidestep difficult issues Do its homework – due diligence

12. Lenders need to … Be clear about risk concerns Don’t over promise lending capacity Don’t change the wish list Be honest about deal breakers

13. Everyone needs … Good advisers

14. THANK YOU FOR YOUR TIME QUESTIONS?

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