R.M. Gaillard Lead Officer Infrastructure and PPP’s HYDRO 2006, September 2006 AfDB and the Dams & Hydropower sector in Africa

2HYDRO 2006 The electricity sector in Africa

3HYDRO 2006 Electricity in Africa

4HYDRO 2006 Hydropower potential in Africa RegionPracticableDeveloped hydropower Hydropower TWh/a % % % Europe % % % Asia % % % Africa %1608% % North America % % % Latin America % % % Oceania % 5534 % 9559 % The World % % %

5HYDRO 2006 Impact of High Crude Oil Prices  These recent years, the drastic increase of oil prices has resulted in several effects Contribution to the global (continental wise) economic growth mainly due to the revenues cashed by oil producing African countries. Increase in the energy bill for land locked countries For theses countries additional burden on the public finance impeding investments in various sectors Raising interest for renewable energies

6HYDRO 2006 The Challenges of Hydropower Development in Africa  Capital intensive  The governments and the public sector cannot alone mobilize significant amount of funds  Long and costly development phase  Preliminary surveys, investigations and development studies require large amount of seed money  Risks  Political and market risks are perceived as high  Natural risks are not properly allocated

7HYDRO 2006 Solution to be Explored  Public Private Partnerships (PPP’s)  A contractual arrangements which bundles financing and operation/maintenance of traditionally government owned assets or traditionally delivered public services Government sets policy and identifies needs Private sector companies compete to fulfill that needs Government enforces regulations and contracts Risks are transferred to the party best suited to manage them

8HYDRO 2006 PPP Approach and its Requirements  Strong support and political will from the host country government  Existence of skills and capacities on both sides to handle complex transactions  Existence of a business and institutional environment enough conducive to attract private players

9HYDRO 2006 AfDB Activities in the Hydropower Sector  Public Sector Window  Bumbuna hydropower scheme in Sierra Leone (co financing of the project completion)  OMVG Development program (Financing of the detailed FS)  Grand INGA (co-financing for the FS to be performed soon)  Rusumo Falls scheme (Rwanda, Tanzania, Burundi, co-financing of studies for the T line)  Private sector Window  AES Sonel Investment Program in Cameroun (Bank participation 60 Mio Euros)  Bujagali Hydropower Scheme in Uganda (Bank participation 85 Mio $ + financing of the TLine)  OMVG Development program (Financing the Consultant for assistance to realization of projects under PPP. Approx 1.5 Mio $)  Memvele hydropower scheme in Cameroun. (Member of the potential Lenders Group)  Mini hydro plants in Madagascar and Eastern Africa

10HYDRO 2006 AfDB roles and products  Roles  Catalyst role  Technical assistance and project preparation  Advisory services  Financing tools  Equity participation  Senior Loans  Guarantees

11HYDRO 2006 AfDB roles  Catalyst  To provide comfort to the sponsors and other stakeholders  The leverage effect  Technical assistance  For project « last mile » preparation phase  For capacity reinforcement of the host government  Advisory services during the project appraisal and the due diligence phases

12HYDRO 2006 Financing Tools  Equity participation  Senior Loans  Various hard currencies (US$, Euro, JPY and ZAR) with possibilities in some local currencies  Interest rates: floating, fixed or variable  Loan duration: up to 15 years for private borrowers  Grace period: dependent on the project features and time frame. (up to 5 years)  Fees: appraisal fee, commitment fee, front end fee …  Guarantees  Partial credit  Partial risk

13HYDRO 2006 Organisation of AFDB  Public sector window (With sovereign guarantee)  Borrower/Beneficiary: Government  Project/sector must be included in the Country Strategy Paper  Private sector window (Without sovereign guarantee)  Borrower/beneficiary: Private Developer, the Project Company. (or public companies presenting some specific characteristics)

14HYDRO 2006 How to work with the AfDB  Criteria’s for project eligibility  The borrower must be established in a RMC  Project size : Min 10 Mios $  AfDB not the largest single lender (Limited to 1/3 rd of the project cost)  Introduction of direct requests/enquiries to the Bank

15HYDRO 2006 Typical Internal Process for a Senior Loan Concept review Review of information memorandum Analysis of project context Letter of Interest Operations CommitteeInvestment Committee Negotiation Legal review (advisor) Term – sheet negotiation: milestones, security package Term sheet Approval Final presentation to the board Board approval Loan agreement Project Appraisal Detailed review of project Technical review Risk assessment Investment proposal

16HYDRO 2006 As a Conclusion and Road Map for Africa OUTCOMES OF AFRICAN MINISTERIAL CONFERENCE ON HYDROPOWER AND SUSTAINABLE DEVELOPMENT JOHANNESBURG, SOUTH AFRICA MARCH 2006 “ Commit to working together (ministers of water and energy) to unlock the hydropower potential of Africa as a major renewable energy option to promote sustainable development, regional integration, water and energy security, and poverty eradication in Africa.”

17HYDRO 2006 Contacts at the AfDB  Infrastructure Department (OINF) R.M Gaillard, Lead Officer Infrastructure and PPP’s Tel: Fax: Web site:  Private sector Department (OPSM)