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Ade Adeola Managing Director Project & Export Finance

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Presentation on theme: "Ade Adeola Managing Director Project & Export Finance"— Presentation transcript:

1 FINANCING INFRASTRUCTURE : Breaking the Barriers to Sustainable Development
Ade Adeola Managing Director Project & Export Finance Standard Chartered Bank, London April 2009

2 Agenda Introduction Infrastructure Finance Trends
Breaking the Barriers to Sustainable Investment Conclusions & Recommendations Leveraging on Experience

3 Standard Chartered-Leading the Way in Africa, ME & Asia
Leading the way in Asia, Africa and the Middle East Largest international bank in the Middle East & Africa Strong focus on China, Japan, Korea, and Africa top 3 foreign bank in each major market Our Global Presence FTSE 100 and Hong Kong Stock Exchange listed Long term credit rating A2 (Moody’s) and A (S&P) 550 locations serving 56 countries Our Local Presence On the ground expertise in Asia, Africa, the Middle East, India region and Latin America Facilitates delivery of innovative products, supported by quality delivery systems and excellent customer service Our Value Proposition and Product delivery Strong on-shore presence and in-depth local knowledge Relationship and leverage with key corporates and institutions Coupled with a deep understanding of the local markets, our product capabilities are tailored to suit client’s needs. Global Markets Corporate Banking Bilateral Credit Cash management Trade Finance FX, Derivatives Loan syndication Fixed Income Forfaiting M & A Equity Private Placement LBO/MBO Private Equity Investing Raising Capital and Risk Management Strategy and Equity Project & Export Finance Arranging & Advisory Structured Trade Finance Securitisation Providing banking solutions to meet the needs of our clients

4 2008 Financings & Current Mandates
NNPC/ExxonMobil NGL 2 Project- Nigeria-$220m SCB 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- $500m In 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 option OANDO plc- - Nigeria USD138m Financial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields. ALSCON-Rusal- - Nigeria USD130m Sole 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, $1.1billion Main One Telecoms Cable Project-Nigeria, $120m Lafarge Euro 225m Expansion facility Viva Methanol Project, $1.2billion Natural Gas Liquids supplemental financing, $200m NNPC /ExxonMobil Satellite Oilfields Advisory, $680m Addax Izombe LPG Project-

5 2008 Financings & Current Mandates
NNPC/ExxonMobil NGL 2 Project- Nigeria-$220m SCB 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- $500m In 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 option OANDO plc- - Nigeria USD138m Financial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields. ALSCON-Rusal- - Nigeria USD130m Sole 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, $1.1billion Main One Telecoms Cable Project-Nigeria, $120m Viva Methanol, $1.2billion Natural Gas Liquids supplemental financing, $220m NNPC /ExxonMobil Satellite Oilfields, $680m Lafarge Euro 225m Expansion facility Addax Izombe LPG Project DP World Port -Senegal, Tullow Jubilee Oilfields project Ghana Tata: Itezhi-Itezhi Power project-Zambia, Sasol Inzalo- South Africa Kosmos Energy-Ghana, Kengen- Kenya .

6 Infrastructure Finance Trends: Statistics and Commentaries

7 Infrastructure 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.) Telecommunications Transportation (ports, toll roads,railways, etc.) Water / Sewerage The 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 currency The Debt/Bonds used to finance these projects are therefore exposed to 2 main risks Devaluation – 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

8 The Infrastructure Situation at a Glance
Infrastructure investment – a year proposition that requires insight & foresight! Governments – adopting concessions/greenfield projects , PPPs vs. asset privatisations Sector Trends Telecommunications: strong cashflow from cellular services. Currently Private sector driven Power: Poor cashflows due to sub-economic tarrifs and under-investment Historically, 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”.

9 Global Infrastructure Coverage & the Africa Situation

10 Infrastructure Finance Trends
Traditionally financed out of general government revenues Trend 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 viable Financing is now available from the private sector – in many instances with foreign private investors and creditors playing a major role Key Growth Drivers Privatisation- Govts adopting concessions/ PPP greenfield projects vs. asset privatisations Commodity related infrastructure e.g. Mining, “Infrastructure enablers” offered by Resource players Improving Governance e.g. Pension fund and Policy reforms Private Equity Funds looking for higher yields (Reducing margins in Europe & Middle East Markets) Technology leverage

11 Evolution of Private Infrastructure Investment in Africa (1990 – 2007)

12 Breaking the Barriers to Sustainable Investment

13 Barriers to Sustainable Infrastructure Development
Macro & Regional Barriers The prevalence of inefficient monopoly providers (state owned) Scarcity of investment spend because prices have been held below cost Inadequate local expertise to structure long term Project financing Lack of depth and defined yield curves in local debt and capital markets Absence of incentive mechanism (fiscal tax etc) to encourage infrastructure financing Governance and Management Barriers Public 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 project May undertake project location and or management decisions on political considerations Increase perceived commercial risks for debt finance Sovereign and Cross-Border risks

14 Critical Investment Barriers & Enablers
CASHFLOW Regulatory Framework and Macro Stability Tariffs / Fees / Tolls Govt Supplements (MYTO?) FINANCING Equity and Management Bank Debt (Loans) and Capital Markets Debts (Bonds) Credit enhancements possible?

15 What is required to achieve sustainable development?
Sponsors: Local parties to improve credit worthiness, corporate governance and management capacity Banks: Innovative structures to project, corporate, and sovereign financings, with the aim of improving credit ratings for transactions: Structures to mitigate the risk of devaluation, and Structure to facilitate the use of local debt and capital markets, which can provide financing denominated in the currency in which the project earns its revenues Structure to breach the sovereign ceiling, which therefore permit the transaction’s (global scale) local currency rating to become its foreign currency rating Governments: Strong institutional framework for protecting creditors rights and improved access to legal enforcement and remedy Development 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

16 The Art of the Possible - Nigeria
Homework is key Generation Mix: existing capacity, existing IPPs,New IPPs Comprehensive policy for greenfield IPPs and privatisations Sector-wide Payment security mechanism and Nature of Sovereign Support Enabling Legislation, Permits and Approvals Ensure sector and tariff reforms lead to reduced reliance on payment support mechanisms Tie-in with Distribution Privatisation Process & Packaging Investor and Lender Roadshows Engage Advisors Comprehensive and transparent RFP Package Adherence to timeframe and deadlines Don’t expect too much from the very first deals Need to attract international investors and lenders Progressive shift in risk allocation There 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 supply 16 16

17 How Can We Help? Project Finance Advisory
Financial Modeling & Evaluation Structuring multi-sourced and multi-phase financing plan Managing Due Diligence Process Risk Allocation and Project Agreements review / mark up Preparation of Proposal Negotiations with Offtakers and Financiers Commercial Debt, Export Credits, B Loans, Debt Capital Markets Underwriting, Lead Arranging and Financial Close Privatisation Advisory Sector Strategy Risk Allocation RFP Preparation and Packaging Roadshows in Europe , Middle East and Asia Bid Evaluation, Negotiation and Selection Monitoring Financial Close 17 17

18 Summary We believe that Nigeria has a huge scope for value creating investment in infrastructure But most African markets do not have sufficient tax and government revenues for pure public sector funding Funding is not the critical barrier Project finance remains available for well structured projects Credit markets can dealing with currency and political risks, for bankable projects Revenue is not generally the critical barrier The Governments in Nigeria have started the broad policies and regulatory changes to support stable revenue streams There are greater challenges associated with revenue transfer arrangements e.g. in water & sewerage, roads A key management and institutional gap remains. This can be overcome by greater involvement of private equity and debt in financing of infrastructure

19 Power & Infrastructure Credentials Notable Deals
IBOM IPP (Nigeria) Independent Power Plant Ongoing Mandated Lead Arranger & Modelling Bank Confidential Bujagali Hydro (Uganda) Project Financing Mandated Lead Arranger Ongoing AES Ebute (Nigeria) Independent Power Plant Ongoing Off-take Credit Support Provider Energia Azteca x Energia de Baja California (Mexico) USD 804 M Project financing for a 1,060 MW natural gas power plant Arranger On-going Itezhi-Tezhi IPP (Zambia) Proejct Financing of IPP Ongoing Financial Adviser PT Indonesia Power (Indonesia) USD 55 M SBLC for Gas Purchase Lead Arranger Ongoing Empresa Electrica Ventanas (Chile) USD 440 M Project financing for a 242 MW greenfield coal-fired plant Arranger & Documentation Agent 2007 Mandated Lead Arranger 2007 Marrafiq IWPP (Saudi Arabia) US$ 3,300 M Project Financing

20 Power & Infrastructure Credentials Notable Deals
Shuqaiq IWPP (Saudi Arabia) USD 1,400 M Project Financing Mandated Lead Arranger 2007 AES Sonel (Cameroon) Capex Programme Financing 2006 Security Trustee & Facility Agent for IFC, Proparco, EIB, AfDB, DEG & FMO Mandated Lead Arranger and Hedging Bank 2006 Fujairah IWPP (UAE) USD 1,500 M Project Financing Mandated Lead Arranger 2006 Al-Hidd IPP (Bahrain) Project Financing Shuaibah IWPP (Saudi Arabia) US$ 2,542 M Project Financing Mandated Lead Arranger 2006 MALAKOFF Mandated Lead Arranger Hedging Bank 2005 Nam Theun 2 Hydropower Project (Laos) US$ 1,581 M Project Financing Taweelah A (Abu Dhabi) USD 1,100 M Project Financing Mandated Lead Arranger 2005 Taweelah B IWPP (Abu Dhabi) US$ 2,670 M Project Financing Mandated Lead Arranger Structuring Bank, Insurance Bank Documentation Bank, Joint Bookrunner, JBIC Co-ordinator, Hedge provider 2005 PENDEKAR POWER (LABUAN)

21 Regional Infrastructure Deals (I)
Umm-Al-Naar IWPP (U.A.E) Port Said East Power (Egypt) USD 302M Project Financing Suez Gulf Power (Egypt) USD 296M Project Financing Mesaieed IWPP (U.A.E) Sohar Power (Oman) USD 855m (Qatar) Project Financing USD 855m USD 446M Project Financing Project Re-Financing USD 2.2 bn Project Financing Bookrunner and Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Umm-Al-Naar IWPP Umm-Al-Naar IWPP Umm-Al-Naar IWPP Umm-Al-Naar IWPP (U.A.E) Umm-Al-Naar IWPP Qasim International (U.A.E) Umm-Al-Naar IWPP (U.A.E) (U.A.E) Masdar Container Terminal (Pakistan) (U.A.E) Dolareh Container Terminal (U.A.E) Emirates Cement Company XXX USD 855m USD 855m USD 855m (U.A.E) (XXX) Project Financing USD 855m Project Financing USD 855m (Djibouti) Project Financing (U.A.E.) USD 855m Project Financing USD 500M Project Financing USD 100M Project Financing USD 300M USD 290M USD XXX Islamic Project Financing (Current) Project Financing Project Financing (Current) Islamic Project Financing Project Financing Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Financial Advisor Financial Advisor, Mandated Lead Arranger Financial Advisor, Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger

22 Mandated Lead Arranger
Regional Infrastructure Deals (II) Umm-Al-Naar IWPP Umm-Al-Naar IWPP (U.A.E) Disi-Mudawwara Water ADWEA Sewage (U.A.E) Shuqaiq IWPP XXX Conveyance Pipeline (Jordan) USD 855m Marafiq IWPP XXX Treatment Plant (U.A.E) (Saudi Arabia) (XXX) Project Financing USD 855m (Saudi Arabia) (XXX) Confidential Project Financing USD 2.0B USD XXX USD 2.2B USD XXX USD 1,000M Project Financing Project Financing Project Financing Project Financing Project Financing Project Financing Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Financial Advisor Financial Advisor Financial Advisor Financial Advisor Rousch Power Shuaibah IWPP XXX Taweelah-B Rousch Power Ras Laffan Al Ezzel Power XXX (Saudi Arabia) (XXX) (U.A.E) (Pakistan) (Qatar) (Bahrain) (XXX) USD 1.9B USD XXX USD 2,056M USD 328M USD 712m USD 372M USD XXX Project Financing Project Financing Project Financing Project Financing Interest Rate Swaps Project Financing Project Financing Mandated Lead Arranger Financial Adviser Mandated Lead Arranger Pre-bid Underwriter and Mandated Lead Arranger Structuring & Hedging Bank Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger

23 Regional Infrastructure Deals (III)
Umm-Al-Naar IWPP Tihama Power Sohar IWPP National District Cooling (U.A.E) (Saudi Arabia) (Oman) (U.A.E) USD 855M USD 510M USD 414M AED 700M Project Financing Project Financing Project Financing Project Financing Lead Arranger Pre-bid Underwriter and Mandated Lead Arranger Lead Arranger Mandated Lead Arranger Sole Arranger/Lender 2003 Ministry of Finance Ghana Re: Korle Lagoon Ecological Restoration Project (Ghana) USD 37 million ECA Buyer Credit Facility Sole Arranger/Lender 2003 Ministry of Finance Ghana Re: Korle Lagoon Ecological Restoration Project (Ghana) USD 37 million ECA Buyer Credit Facility Ghana Telecom (Ghana) USD 30 Million ECA Facility Mandated Lead Arranger & Sole Lender 2005 Thuraya Satellite (U.A.E) Project Financing Financial Advisor


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