Presentation on theme: "Ade Adeola Managing Director Project & Export Finance"— Presentation transcript:
1FINANCING INFRASTRUCTURE : Breaking the Barriers to Sustainable Development Ade AdeolaManaging DirectorProject & Export FinanceStandard Chartered Bank, LondonApril 2009
2Agenda Introduction Infrastructure Finance Trends Breaking the Barriers to Sustainable InvestmentConclusions & RecommendationsLeveraging on Experience
3Standard Chartered-Leading the Way in Africa, ME & Asia Leading the way in Asia, Africa and the Middle EastLargest international bank in the Middle East & AfricaStrong focus on China, Japan, Korea, and Africa top 3 foreign bank in each major marketOur Global PresenceFTSE 100 and Hong Kong Stock Exchange listedLong term credit rating A2 (Moody’s) and A (S&P)550 locations serving 56 countriesOur Local PresenceOn the ground expertise in Asia, Africa, the Middle East, India region and Latin AmericaFacilitates delivery of innovative products, supported by quality delivery systems and excellent customer serviceOur Value Proposition and Product deliveryStrong on-shore presence and in-depth local knowledgeRelationship and leverage with key corporates and institutionsCoupled with a deep understanding of the local markets, our product capabilities are tailored to suit client’s needs.Global MarketsCorporate BankingBilateral CreditCash managementTrade FinanceFX, DerivativesLoan syndicationFixed IncomeForfaitingM & AEquity Private PlacementLBO/MBOPrivate Equity InvestingRaising Capital and Risk ManagementStrategy and EquityProject & Export Finance Arranging & AdvisoryStructured Trade FinanceSecuritisationProviding banking solutions to meet the needs of our clients
42008 Financings & Current Mandates NNPC/ExxonMobil NGL 2 Project- Nigeria-$220mSCB acted as Financial Advisor and MLA in providing the NGL II project with US$220m add-on facility that was the first substantial oil and gas sector financing to come exclusively from Nigeria’s newly consolidated local banks.ADDAX Petroleum-Gabon/Nigeria- $500mIn May, Addax Petroleum entered into a two-year, US$500 million senior revolving credit facility arranged by Calyon, Standard Chartered Bank and BNP Paribas. This was a hybrid corporate deal with a greenshoe optionOANDO plc- - Nigeria USD138mFinancial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields.ALSCON-Rusal- - Nigeria USD130mSole Arranger for $130m bridge facility to finance acquisition and upgrade of the ALSCON aluminium smelter.The bank has committed substantial resources to Africa . This is evidenced by the number of financial advisory and structuring mandates awarded by top tier sponsors in This includes:Lekki Port Nigeria, $1.1billionMain One Telecoms Cable Project-Nigeria, $120mLafarge Euro 225m Expansion facilityViva Methanol Project, $1.2billionNatural Gas Liquids supplemental financing, $200mNNPC /ExxonMobil Satellite Oilfields Advisory, $680mAddax Izombe LPG Project-
52008 Financings & Current Mandates NNPC/ExxonMobil NGL 2 Project- Nigeria-$220mSCB acted as Financial Advisor and MLA in providing the NGL II project with US$220m add-on facility that was the first substantial oil and gas sector financing to come exclusively from Nigeria’s newly consolidated local banks.ADDAX Petroleum-Gabon/Nigeria- $500mIn May, Addax Petroleum entered into a two-year, US$500 million senior revolving credit facility arranged by Calyon, Standard Chartered Bank and BNP Paribas. This was a hybrid corporate deal with a greenshoe optionOANDO plc- - Nigeria USD138mFinancial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields.ALSCON-Rusal- - Nigeria USD130mSole Arranger for $130m bridge facility to finance acquisition and upgrade of the ALSCON aluminium smelter.The bank has committed substantial resources to Africa . This is evidenced by the number of financial advisory and structuring mandates awarded by top tier sponsors in This includes:Lekki Port Nigeria, $1.1billionMain One Telecoms Cable Project-Nigeria, $120mViva Methanol, $1.2billionNatural Gas Liquids supplemental financing, $220mNNPC /ExxonMobil Satellite Oilfields, $680mLafarge Euro 225m Expansion facilityAddax Izombe LPG ProjectDP World Port -Senegal,Tullow Jubilee Oilfields project GhanaTata: Itezhi-Itezhi Power project-Zambia,Sasol Inzalo- South AfricaKosmos Energy-Ghana,Kengen- Kenya .
6Infrastructure Finance Trends: Statistics and Commentaries
7Infrastructure Projects- Setting the Scene Physical Infrastructure projects are ‘those services without which primary, secondary, and tertiary production activities cannot function’ Specifically capital-intensive facilities in:Electric power (generation and distribution)Energy (refineries, pipelines, processing facilities, etc.)TelecommunicationsTransportation (ports, toll roads,railways, etc.)Water / SewerageThe Input – technology, capital equipment, expertise are sourced mainly in the international markets and typically financed in international currencies.The output (e.g., electricity, petroleum products) is sold primarily in the domestic market and paid for in local currencyThe Debt/Bonds used to finance these projects are therefore exposed to 2 main risksDevaluation – Reduction of USD value of cashflows below debt service levels.Convertibility – Risks that local authorities may block the exchange of local currency revenues into dollars or block currency transfers from the host country
8The Infrastructure Situation at a Glance Infrastructure investment – a year proposition that requires insight & foresight!Governments – adopting concessions/greenfield projects , PPPs vs. asset privatisationsSector TrendsTelecommunications: strong cashflow from cellular services. Currently Private sector drivenPower: Poor cashflows due to sub-economic tarrifs and under-investmentHistorically, cross-subsidised to benefit small residential consumers, implying politically difficult adjustment process to generate sustainable cashflows.Private sector involvement without govt capacity support may be limited to independent power producer (IPP) projects servicing large customers (industrials, distributors, etc.)Transport:airports and shipping ports generate strong cashflow today.roads and rail networks generate limited revenues and may need govt transfers (shadow tolling).Water and Sewerage: limited cashflow in Emerging mkts- viewed as the ultimate “public good”.
9Global Infrastructure Coverage & the Africa Situation
10Infrastructure Finance Trends Traditionally financed out of general government revenuesTrend in recent years for infrastructure to be financed on a project basis or for infrastructure projects to be purchased or developed by the private sector.Given the high initial capital costs of infrastructure projects, long-term financing is essential for privately-owned infrastructure projects to be financially viableFinancing is now available from the private sector – in many instances with foreign private investors and creditors playing a major roleKey Growth DriversPrivatisation- Govts adopting concessions/ PPP greenfield projects vs. asset privatisationsCommodity related infrastructure e.g. Mining, “Infrastructure enablers” offered by Resource playersImproving Governance e.g. Pension fund and Policy reformsPrivate Equity Funds looking for higher yields (Reducing margins in Europe & Middle East Markets)Technology leverage
11Evolution of Private Infrastructure Investment in Africa (1990 – 2007)
13Barriers to Sustainable Infrastructure Development Macro & Regional BarriersThe prevalence of inefficient monopoly providers (state owned)Scarcity of investment spend because prices have been held below costInadequate local expertise to structure long term Project financingLack of depth and defined yield curves in local debt and capital marketsAbsence of incentive mechanism (fiscal tax etc) to encourage infrastructure financingGovernance and Management BarriersPublic Sector as equity holder is problematic. ( often essential to get other parties involved)Appointment of concession holder due to political considerations which may not have right management experience for difficult initial stages of the projectMay undertake project location and or management decisions on political considerationsIncrease perceived commercial risks for debt financeSovereign and Cross-Border risks
14Critical Investment Barriers & Enablers CASHFLOWRegulatory Framework and Macro StabilityTariffs / Fees / TollsGovt Supplements (MYTO?)FINANCINGEquity and ManagementBank Debt (Loans) and Capital Markets Debts (Bonds)Credit enhancements possible?
15What is required to achieve sustainable development? Sponsors: Local parties to improve credit worthiness, corporate governance and management capacityBanks: Innovative structures to project, corporate, and sovereign financings, with the aim of improving credit ratings for transactions:Structures to mitigate the risk of devaluation, andStructure to facilitate the use of local debt and capital markets, which can provide financing denominated in the currency in which the project earns its revenuesStructure to breach the sovereign ceiling, which therefore permit the transaction’s (global scale) local currency rating to become its foreign currency ratingGovernments: Strong institutional framework for protecting creditors rights and improved access to legal enforcement and remedyDevelopment Finance Institutions and ECAs:Country risk mitigation instruments (PRI & Gtees)Deepen depth of Africa capital markets (Credit enhancement for Debts & Bonds, risk participations etc)Need for diversification of funding sources( Equity, Debt & Capital Markets) and mobilisation of long term investment from local and international markets
16The Art of the Possible - Nigeria Homework is keyGeneration Mix: existing capacity, existing IPPs,New IPPsComprehensive policy for greenfield IPPs and privatisationsSector-wide Payment security mechanism and Nature of Sovereign SupportEnabling Legislation, Permits and ApprovalsEnsure sector and tariff reforms lead to reduced reliance on payment support mechanismsTie-in with Distribution PrivatisationProcess & PackagingInvestor and Lender RoadshowsEngage AdvisorsComprehensive and transparent RFP PackageAdherence to timeframe and deadlinesDon’t expect too much from the very first dealsNeed to attract international investors and lendersProgressive shift in risk allocationThere is also a need to look beyond the very next deal i.e. long term forecasts and planning. And then there also needs to be a clear roadmap to sector reforms and tariff rationalisation. This is key, because this is the story that the lenders and the developers will need to be able to buy into!The next step is to determine the IPP programme framework e.g. whether to have a single-buyer model or a bilateral contract network or a combination of both. What is more important to the country – secured supply at a slightly higher capacity payments or competitive markets with lesser security of supply1616
17How Can We Help? Project Finance Advisory Financial Modeling & EvaluationStructuring multi-sourced and multi-phase financing planManaging Due Diligence ProcessRisk Allocation and Project Agreements review / mark upPreparation of ProposalNegotiations with Offtakers and FinanciersCommercial Debt, Export Credits, B Loans, Debt Capital MarketsUnderwriting, Lead Arranging and Financial ClosePrivatisation AdvisorySector StrategyRisk AllocationRFP Preparation and PackagingRoadshows in Europe , Middle East and AsiaBid Evaluation, Negotiation and SelectionMonitoring Financial Close1717
18SummaryWe believe that Nigeria has a huge scope for value creating investment in infrastructureBut most African markets do not have sufficient tax and government revenues for pure public sector fundingFunding is not the critical barrierProject finance remains available for well structured projectsCredit markets can dealing with currency and political risks, for bankable projectsRevenue is not generally the critical barrierThe Governments in Nigeria have started the broad policies and regulatory changes to support stable revenue streamsThere are greater challenges associated with revenue transfer arrangements e.g. in water & sewerage, roadsA key management and institutional gap remains. This can be overcome by greater involvement of private equity and debt in financing of infrastructure
19Power & Infrastructure Credentials Notable Deals IBOM IPP (Nigeria)Independent Power PlantOngoingMandated Lead Arranger & Modelling BankConfidentialBujagali Hydro (Uganda)Project FinancingMandated Lead ArrangerOngoingAES Ebute (Nigeria)Independent Power PlantOngoingOff-take Credit Support ProviderEnergia Azteca x Energia de Baja California (Mexico)USD 804 M Project financing for a 1,060 MW natural gas power plantArrangerOn-goingItezhi-Tezhi IPP (Zambia)Proejct Financing of IPPOngoingFinancial AdviserPT Indonesia Power (Indonesia)USD 55 MSBLC for Gas PurchaseLead ArrangerOngoingEmpresa Electrica Ventanas (Chile)USD 440 MProject financing for a 242 MW greenfield coal-fired plantArranger & Documentation Agent2007Mandated Lead Arranger2007Marrafiq IWPP (Saudi Arabia)US$ 3,300 MProject Financing
20Power & Infrastructure Credentials Notable Deals Shuqaiq IWPP (Saudi Arabia)USD 1,400 MProject FinancingMandated Lead Arranger2007AES Sonel (Cameroon)Capex ProgrammeFinancing2006Security Trustee & Facility Agent for IFC, Proparco, EIB, AfDB, DEG & FMOMandated Lead Arranger and Hedging Bank2006Fujairah IWPP (UAE)USD 1,500 MProject FinancingMandated Lead Arranger2006Al-Hidd IPP (Bahrain)Project FinancingShuaibah IWPP (Saudi Arabia)US$ 2,542 M Project FinancingMandated Lead Arranger2006MALAKOFFMandated Lead Arranger Hedging Bank2005Nam Theun 2 Hydropower Project (Laos)US$ 1,581 M Project FinancingTaweelah A (Abu Dhabi)USD 1,100 MProject FinancingMandated Lead Arranger2005Taweelah B IWPP (Abu Dhabi)US$ 2,670 M Project FinancingMandated Lead ArrangerStructuring Bank, Insurance BankDocumentation Bank, Joint Bookrunner, JBIC Co-ordinator, Hedge provider2005PENDEKAR POWER (LABUAN)
21Regional Infrastructure Deals (I) Umm-Al-Naar IWPP(U.A.E)Port Said East Power(Egypt)USD 302MProject FinancingSuez Gulf Power(Egypt)USD 296MProject FinancingMesaieed IWPP(U.A.E)Sohar Power (Oman)USD 855m(Qatar)Project FinancingUSD 855mUSD 446MProject FinancingProject Re-FinancingUSD 2.2 bnProject FinancingBookrunner andMandated Lead ArrangerMandated Lead ArrangerMandated Lead ArrangerMandated Lead ArrangerMandated Lead ArrangerUmm-Al-Naar IWPPUmm-Al-Naar IWPPUmm-Al-Naar IWPPUmm-Al-Naar IWPP(U.A.E)Umm-Al-Naar IWPPQasim International(U.A.E)Umm-Al-Naar IWPP(U.A.E)(U.A.E)MasdarContainer Terminal(Pakistan)(U.A.E)Dolareh Container Terminal(U.A.E)Emirates Cement CompanyXXXUSD 855mUSD 855mUSD 855m(U.A.E)(XXX)Project FinancingUSD 855mProject FinancingUSD 855m(Djibouti)Project Financing(U.A.E.)USD 855mProject FinancingUSD 500MProject FinancingUSD 100MProject FinancingUSD 300MUSD 290MUSD XXXIslamic Project Financing (Current)Project FinancingProject Financing (Current)Islamic Project FinancingProject FinancingMandated Lead ArrangerMandated Lead ArrangerMandated Lead ArrangerFinancial AdvisorFinancial Advisor,Mandated Lead ArrangerFinancial Advisor,Mandated Lead ArrangerMandated Lead ArrangerMandated Lead Arranger
22Mandated Lead Arranger Regional Infrastructure Deals (II)Umm-Al-Naar IWPPUmm-Al-Naar IWPP(U.A.E)Disi-Mudawwara WaterADWEA Sewage(U.A.E)Shuqaiq IWPPXXXConveyance Pipeline(Jordan)USD 855mMarafiq IWPPXXXTreatment Plant (U.A.E)(Saudi Arabia)(XXX)Project FinancingUSD 855m(Saudi Arabia)(XXX)ConfidentialProject FinancingUSD 2.0BUSD XXXUSD 2.2BUSD XXXUSD 1,000MProject FinancingProject FinancingProject FinancingProject FinancingProject FinancingProject FinancingMandated Lead ArrangerMandated Lead ArrangerMandated Lead ArrangerFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorRousch PowerShuaibah IWPPXXXTaweelah-BRousch PowerRas LaffanAl Ezzel PowerXXX(Saudi Arabia)(XXX)(U.A.E)(Pakistan)(Qatar)(Bahrain)(XXX)USD 1.9BUSD XXXUSD 2,056MUSD 328MUSD 712mUSD 372MUSD XXXProject FinancingProject FinancingProject FinancingProject FinancingInterest Rate SwapsProject FinancingProject FinancingMandated Lead ArrangerFinancial AdviserMandated Lead ArrangerPre-bid Underwriter andMandated Lead ArrangerStructuring & Hedging BankMandated Lead ArrangerMandated Lead ArrangerMandated Lead Arranger
23Regional Infrastructure Deals (III) Umm-Al-Naar IWPPTihama PowerSohar IWPPNational District Cooling(U.A.E)(Saudi Arabia)(Oman)(U.A.E)USD 855MUSD 510MUSD 414MAED 700MProject FinancingProject FinancingProject FinancingProject FinancingLead ArrangerPre-bid Underwriter andMandated Lead ArrangerLead ArrangerMandated Lead ArrangerSole Arranger/Lender2003Ministry of Finance GhanaRe: Korle Lagoon Ecological Restoration Project(Ghana)USD 37 millionECA Buyer Credit FacilitySole Arranger/Lender2003Ministry of Finance GhanaRe: Korle Lagoon Ecological Restoration Project(Ghana)USD 37 millionECA Buyer Credit FacilityGhana Telecom(Ghana)USD 30 MillionECA FacilityMandated Lead Arranger & Sole Lender2005Thuraya Satellite(U.A.E)Project FinancingFinancial Advisor