1 IFC PPP T RANSACTION A DVISORY E XPERIENCE AND L ESSONS G EORGI P ETROV R EGIONAL B USINESS L INE L EADER – I NFRASTRUCTURE E UROPE AND C ENTRAL A SIA Astana III Economic Forum July 1, 2010

2 Outline: 1. IFC - An overview 2. Financing Services 3. PPP Transaction Advisory 4. IFC’s PPP Success Stories 5. An IFC Perspective and Lessons

3 IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MIGA Multilateral Investment and Guarantee Agency To promote institutional, legal and regulatory reform Governments of poorest countries with per capita income of less than $1,025 - Technical assistance - Interest Free Loans - Policy Advice To promote private and commercial sector development Private companies in 179 member countries - Equity/Quasi-Equity - Long-term Loans - Risk Management - Advisory Services To reduce political investment risk Foreign investors in member countries - Political Risk Insurance Est. 1945Est. 1960Est. 1956Est Role: Clients: Products: To promote institutional, legal and regulatory reform Governments of member countries with per capita income between $1,025 and $6, Technical assistance - Loans - Policy Advice IFC is a Member of the World Bank Group Shared Mission: To Promote Economic Development and Reduce Poverty

IFC Overview: Two Distinct Products IFC also provides advice to governments and businesses Environment & Social Sustainability Access to Finance Business Environment Public-Private Partnerships Enterprise Assistance World’s largest multilateral provider of financing for private enterprises $30+ billion in outstanding investment commitments Advisory services to governments and businesses Advisory Services and Financing

5 Outline: 1.IFC - An overview 2. Financing Services 3. PPP Transaction Advisory 4. IFC’s PPP Success Stories 5. An IFC Perspective and Lessons

6 Utilities Water, Waste, Gas Distribution, Privatized Public Services Power Generation, Transmission, Distribution Renewable Energy Transportation Infrastructure Airports Ports Roads Infrastructure  Created in 1992 to address a market need  Current portfolio: $ 5.56 bn  FY09 Commitments: Approx $1.8 bn  100+ dedicated professionals in Washington and 8 regional hubs Transportation Services Logistics Shipping Airlines IFC Financing in infrastructure

7 Total IFC Infrastructure Portfolio By Region, in US$ Billions By Sector, in US$ Billions $5.56 billion (December 31, 2009) 16% of IFC Total

IFC’s Products Industry knowledge Relationship with / understanding of local authorities Expertise in emerging markets Capital Mobilization B loan program Credit enhancement (Partial Credit Gurantee) Pre-IPO stamp of approval Capital Mobilization B loan program Credit enhancement (Partial Credit Gurantee) Pre-IPO stamp of approval Long Term Financing Corporate / Project / Acquisition Foreign / Local currencies Equity / Quasi-equity Carbon Finance Long Term Financing Corporate / Project / Acquisition Foreign / Local currencies Equity / Quasi-equity Carbon Finance Advisory Services IFC Value Added 8

9 Outline: 1.IFC - An overview 2. Financing Services 3. PPP Transaction Advisory 4. IFC’s PPP Success Stories 5. An IFC Perspective and Lessons

10 IFC’s PPP Transaction Advisory Services Undertaken more than 200 infrastructure projects since its establishment. Since 1995, mobilized more than $3 billion in private capital in more than 20 countries. Specializing in following sectors:  Roads, railroads, airports, airlines  Water and sanitation  Power generation and distribution, off-grid power  Urban transport  Mining  Health and education Pioneering transactions  First, difficult, political, reform-based, innovative  Since 1989, over 140 advisory assignments in more than 80 countries

11 Infrastructure PPP Projects – IFC Track Record

12 What we offer… Objectivity and transparency  Independence, no links to potential investors  Separation between advisors and investors within IFC (“Chinese Wall”)  Transparency and credibility of the bidding process Focus on development results  As development institution, attaches importance to social and development objectives  Transactions structured to be sustainable and bankable  Staying the course with our clients Knowledge of investors’ market  Broad expertise of private sector transactions  Regular contacts with leading companies  Marketing on behalf of our clients Synergies within the WB Group  Access to experts and coordination of institutional reforms  Search for public financing / guarantees, when needed  Ability to mobilize best expertise and search for public financing and guarantees, when needed, through partnership and synergies with the WB Group

PPP Transaction Process Phase 1: Analysis Info memo Road show Pre- qualification Data room Contract effectiveness & assumption of service obligations Service standards Performance targets Payment procedures Penalties Monitoring Technical evaluation Financial evaluation Select winner Phase 2: Implementation Risk allocation Investment program Legal/Inst. framework Payment mechanism Typical transaction (10-16 months)

14 Recent PPP transactions Benin: port Montenegro: road Albania: hydropower Brazil: road, hospital Albania: distribution system privatization Philippines: off grid power generation Lesotho: hospital Egypt: wastewater plant Kenya: telecoms privatization Panama: special economic zone

15 Currently active mandates (46) Ports: Mauritius, Niger Roads: Colombia, Egypt, India, Brazil, Jordan Power: Vietnam, Indonesia, Philippines, Liberia, Zambia, Montenegro, Pakistan Mine/ore deposit: Tajikistan Hospitals/clinics: Egypt, Uzbekistan, Romania, Moldova Airports: Maldives, Saudi Arabia Telecoms: Botswana, Comoros Airlines: Vanuatu, Jamaica Waste: India, Maldives Grain silos: India

16 Outline: 1.IFC - An overview 2. Financing Services 3. PPP Transaction Advisory 4. IFC’s PPP Success Stories 5. An IFC Perspectives and Lessons

Albania ASHTA IFC IA appointed as Lead Advisor to the Ministry of Economy, Trade and Energy of Albania Ashta HPP implemented within the scope of IFC’s Albania Advisory mandate:  Redrafting of the Concession Law, to facilitate the transparent and efficient mobilization of PSP in infrastructure;  Establishing of a Concession/PPP Unit;  Structuring and implementing one pilot PPP projects in Albania’s energy sector. Concession contract with a private partner for the construction and operation of a hydroelectric power plant (“HPP”) in Ashta. GoA announced Verbund (Austria)as the winning bidder – key elements of their Offer: Measure of Impact Quantifiable Result Direct Foreign Investment in AlbaniaEuro 166 Million / first 3 years Savings on imports of ElectricityEuro 65 Million Inhabitants that will benefit from Ashta HPP 170,000

Albania ASHTA - Project Results PPP that consists of a long-term concession contract with a private partner for the construction and operation of a hydroelectric power plant (“HPP”) in Ashta. Bid price achieved:  5.9 eurocents per kWh Investments:  166M Euros. Installed capacity:  48.2 MW.

Albania ASHTA The new power plant will:  Increase the renewable power generation capacity of Albania by almost 50 MW;  Lower dependence on imports and thus have a long lasting positive effect on the country’s trade balance;  Improve the delivery and reliability of electricity supply in the country. Key Impact Indicators: * Impacts above are much higher than originally estimated by the team 5.9 Euro of funding will provide delivery of electricity to 1 citizen of Albania. Impact IndicatorVerbund’s OfferOrginial Estimates Direct InvestmentEuro 166Euro 70 Fiscal EffectEuro 65Euro 30

Bucharest Water, Romania IFC hired as advisor to the City of Bucharest to structure and mandate a transaction to achieve  EU level of services at lowest tariff  Create a privatized system which is efficient, financially independent and sustainable  Secure public support  Meet the privatization timetable Challenges  Largest water sector privatization in Central and Eastern Europe (by population, 2.3ml)  High losses: unaccounted for water = 50%  Poor water quality and pressure  Insufficient financial resources  Low tariffs (US cents 17/m³)  Strong labor unions 20

Bucharest Water Veolia, the world leading company in water services and water treatment, was selected in the competitive tender process. Post- tender - sustainable results and public support:  Investment of more than €70 million in modernizing services  Major project to construct a new water treatment plant launched  Water losses reduced  Drop in total demand for water following the introduction of metering, combined with leakage reduction, has led to a drop in total demand for water.  Tariffs have been adjusted periodically in accordance with the concession contract, but remain among the lowest in Europe. First water PPP in Romania and one of the first such transactions for water/sanitation services in Europe. IFC’s involvement provided assurances to international operators and the Municipality itself about the potential success of this pioneering transaction. IFC played a key role in structuring the transaction to ensure sustainable benefits and affordable tariffs. 21

22 Outline: 1.IFC - An overview 2. Financing Services 3. PPP Transaction Advisory 4. IFC’s PPP Success Stories 5. An IFC’s Perspectives and Lessons

LESSONS 1)Buy services (not equipment/assets)  PPPs can transform the role of governments from providers to purchasers of services 2)Greater risk transfer Greater potential public benefits  Private sector participation in infrastructure can improve efficiency and quality, if PPP properly structured and enforced  PFIs are not necessarily easier to structure/implement – but have fewer potential benefits 3)Choose projects which:  Are affordable to the government (in terms of the required payment to PPP operator)  Meet a real need in infrastructure and increase access for the poor  Can attract operators/investors 4)Monitoring and effective dispute resolution are essential  Independent “expert panel” can be useful 5)Public expectations are higher – so quality is important  The public are more likely to tolerate low quality under public management than under a PPP 23

24 IFC’s continued support for infrastructure PPPs in Kazakhstan: Continued strong commitment to highest government level to introduce PPPs on specific projects in Kazakhstan – as part of World Bank Group:  Strengthening institutional capacity Help prepare well structured transactions to ensure optimal risk allocation between private and public sectors – through IFC’s PPP Transaction Advisory Services Make available tailored financing solutions leveraging IFC’s global expertise and track record in cooperation with other regional institutions

25 Contacts