1. DBDP: Experience of Similar Hydropower Projects in Developing Countries Presentation at the U.S.-Pakistan Diamer Basha Dam Project (DBDP) Business Opportunities Meeting October 8, 2014 Washington, DC by: Mr. Suman Babbar, Senior Advisor, Finance and Mr. Norman A. Bishop, Senior Advisor, Hydro USAID/Energy Policy Program – Pakistan USAID/EPP Implementing Partner: Advanced Engineering Associates International, Inc. – AEAI

2. A Look at Similar Large Hydro Projects Constructed and under Construction: Financing Features Case Studies: Nam Theun 2, Bujagali, Others Financing of Large Hydro – Key Takeaways Conclusions and Recommendations: The Way Forward for DBDP 1 Presentation Topics 1

3. Features of World’s Largest Hydro Projects The world’s largest hydro projects (> 4,000 MW) were publicly funded. 2

4. DBDP & Hydro Projects >3,000 MW under Construction NameCountryRiverInstalled MWEst. Completion Yr. 3

5. . Some Recent Hydro Projects with PPP Structure 4

6. Private Sector Nam Theun 2 Hydropower Project (PDR of Laos) -1070 MW Bujagali Hydropower Project (Uganda) – 250 MW Others World Energy Council, 2014: Based on public information not validated by the entities. Case Studies 5

7. US$ 1.45 billion, 1070 MW project in Lao PDR NT2 primarily exports electricity to EGAT of Thailand, with about 5% for domestic use Original concession awarded in 1993 Asian financial crisis: project put on hold (1997-2000) Preparation resumed in 2001 Due diligence undertaken About 4 years’ preparation time (2001-2005) Financial close: June 15, 2005 Project completed on budget and schedule Operational since 2010 6

8. NT2 - Financial Structure The finance plan comprises 27 financial institutions: 5 MLAs 4 ECAs 2 BLAs 7 Thai banks 9 international banks Debt Tenor USD 16.5 yrs, repayment in 12 yrs THB 15 yrs, repayment in 10.5 yrs 7

9. BOOT project on the Nile River in Uganda Run-of-the-river Project cost at approval: US$798 million Debt: Equity ratio of 78:22 leverage Equity:Sithe Global Power - 58%; IPS (Kenya) - 31.5%; Government of Uganda - 10.5% WBG investment: − IFC:$100 million A Loan and up to $30 million C Loan − IDA:$115 million Partial Risk Guarantee (PRG) − MIGA:Up to $115 million MIGA Guarantee Other lenders: EIB, AfDB, Proparco, AFD, DEG, KfW, FMO; commercial banks (Absa Capital, Standard Chartered Bank) under IDA PRG Transmission line: Financed by AfDB and JBIC Formal inauguration: October 8, 2012 Bujagali Hydropower Project (250 MW) 8

10. 11,233 MW hydro project in Brazil Limited recourse financing Energy auction April 2010 – concession awarded to consortium led by Norte Energia Eletrobras (state-owned utility holding company) the largest shareholder Financing structure Equity: 20%, Debt: 80% Equity to be provided by winning consortium Debt – BNDES loan of $10.8 billion Completion guarantee by the consortium Other: Belo Monte – Salient Financing Aspects 9

11. 1993 –China Three Gorges Corporation created 1996 - China State Development Bank loan of $3.6 billion Support from Three Gorges Construction Fund and revenue from Gezhouba Hydro 2002 – China Yangtze Power Company created 2003 – IPO by CYPC ECA support from most of the developed countries and Brazil Revenue levy dedicated to Three Gorges 10 Other: Three Gorges - Salient Financing Aspects

12. Objective Use Value Engineering (VE) to improve DBDP’s best value for least cost without changing project function (# MW and projected energy): −Reduce costs, schedule and construction risk −Seek project revenues at earliest date to reduce escalation and IDC −Reduce financing cost −Obtain the best overall value for the money spent −Minimize possibility of project budget cost increases Methodology Analyze each element of the project: VE analysis conducted on each element and its relationship to the precedent element Cost basis critical path method scheduling: to analyze the cost for each schedule task A risk assessment performed: to understand how each element or task affects others over time until final project commissioning DBDP: Best Value Analysis 11

13. Financing of Large Hydros: Key Takeaways In most cases an anchor financier: e.g., ₋ BNDES (Brazilian Development Bank) for large private hydros ₋ World Bank for Dasu Long tenor funding mobilized Key role played by Export Credit Agencies Varied approaches to equity financing Effective management of social and environmental aspects critical 12

14. GOP fully committed Strong economic rationale – − Power generation, flood control and irrigation − Improved downstream generation Ongoing infrastructure development Existing framework for private sector participation in power generation GOP open to flexible approach to attract private sector participation during dam construction Key Supporting Factors for Development Diamer Basha Dam Project: The Way Forward 13

15. Needs: A dedicated, qualified implementation team, preferably via a separate corporate entity Excellent project and construction management team capabilities, experienced in large hydro projects Compliance with international social & environmental standards Conclusions and Recommendations: The Way Forward for DBDP 14

16. Needs, cont.: A clear national financing strategy defined, prioritizing all national infrastructure projects competing with DBDP Financing advisors with international experience hired An anchor financier identified A clearly articulated incentive framework implemented to encourage private participation Conclusions and Recommendations: The Way Forward for DBDP 15

17. Thank you! 16

18. Source: The Financing of Water Infrastructure - A Review of Case Studies by Chris Head for The World Bank, 2005 17