Africa50 Overview
September 2017 No part of this document may be circulated, quoted, or reproduced for distribution outside the Africa50 organization without prior written approval of Africa50. Disclaimer
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1 Africa50 was created to help close the infrastructure gap in Africa through private and PPP investments
▪ Africa50 was created as a vehicle to complement the AfDB’s own infrastructure investment funding ▪ Africa50 not only invests in fully developed projects but also accelerates the provision of infrastructure by supporting project development in its early stages ▪ Africa50’s mandate is consistent with and supports the AfDB’s High Fives and the Sustainable Development Goals
2 An illustration of the magnitude of the infrastructure challenge
Infrastructure spending in Africa, US $ bn p.a.
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Gap: § Overall funding need 30-40 p.a. 2017-25 estimated at US 110-120 $1.2 tn § Government and public funding while critically important, will not be enough to bridge the gap § Africa50 could unlock up to US $50 bn in project value through its equity investments and value-add capabilities
2025 projected1 2025 required2
SOURCE: Infrastructure Stock and Spend Database; IHS; International Transport Forum 3 Barriers to bridging the infrastructure financing gap
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1 2 3 4 Limited public Limited Enabling Limited number of resources government environment/ early risk-takers capacity to regulatory and credible implement constraints private players projects
Budgetary Not enough well- Slow progress in Early-stage constraints and prepared projects establishing investors and inefficient use of are ready for enabling strong private resources limit the financing and environments sponsors are wary number of projects implementation conducive to PPPs of Africa due to a the public sector perception of high can fund risk
Public sector Private sector
SOURCE: AfDB 4 Existing Africa50 shareholders have made a strong commitment Africa50 shareholder countries in support of the organisation New Africa50 shareholder countries
▪ Funding from 23 African Tunisia Morocco shareholder-countries, the
AfDB, the Central Bank of West Egypt African States (BCEAO), and the Bank Al-Maghrib (BAM) – Mauritania Mali Niger US $ 812 mn committed Senegal Sudan The Gambia Burkina Faso Djibouti capital Guinea Sierra Leone Nigeria Ghana ▪ Continued support, including Cameroon Cote D'Ivoire Togo Benin non-financial, from our Kenya Gabon Democratic Republic shareholders is critically Congo of the Congo important to Africa50’s success ▪ Africa50 recently welcomed the countries of Guinea and the Malawi Democratic Republic of the Congo as shareholders Madagascar
5 Africa50’s investment strategy has 3 main pillars
DEVELOP A Pipeline of Bankable Infrastructure Projects Africa50-Project ▪ Africa50-Project Development Finance provides seeks to grow a primarily equity and pipeline of quasi-equity capital bankable projects ACCELERATE alongside strategic MOBILISE partners Private Investment into Public and Private Sector African Infrastructure Funding
▪ Public and Private Investors with priority on mobilizing long term savings managed by institutional investors from within and outside Africa
6 … with a unique core value proposition…
▪ Close relationships with African government shareholders and the AfDB which are critically important in the infrastructure development and financing process ▪ Jurisdiction-specific risk mitigation through high level public- sector engagement ▪ Preferential access to deal-flow generated from project development activities and through ongoing dialogue with its African government shareholders ▪ Experienced investment team with a demonstrated track record of deal-making ▪ Access to competitive finance, including long-term debt from the AfDB and broader DFI community, as well as existing concessional funding ▪ International best-practice ESG standards
7 …. and priority focus in the Power and Transport sectors
African annual infrastructure investment needed US $ bn p.a. (%) US $150 bn § The greatest investment need in the 18% Telecom future will be in power and transport (68%) § Both sectors also have 14% Water significant economic Projected and transformative infrastructure impact investment needs for 31% Transport 2025 (% of overall § Africa50 will contribute total) to expanding PPP and 68% private financing in today’s typically more commercially viable 37% Power segments (e.g., power generation, ports, airports, logistics, toll roads) 2025
8 Africa50 Project Development: Increasing Pipeline of Bankable Projects PD Value Proposition PD Ownership Model
▪ Identify projects through network and ▪ Typically take significant minority stakes in shareholder support projects or platforms ▪ Engage stakeholders along deal cycle ▪ Play an active role alongside main sponsor through relationships (shareholders, except for surrogate sponsor engagement government and private sector partners) ▪ Partner with other developers to complement ▪ Identify and resolve obstacles to move value proposition when beneficial projects to financial close ▪ Remain more flexible and understanding of ▪ Mitigate risk by innovative structuring and African realities financial appraisal
PD Project Cycle Positioning PD Sustainability Model
▪ Project Concept ▪ Operate following a venture capital model ▪ Feasibility (Technical, E&S, Business, Legal) ▪ Deploy risk capital in early stages ▪ Land acquisition, approvals and permitting ▪ Balance profitability and development impact ▪ Contract negotiation and structuring (Offtake, ▪ Develop a large portfolio of projects EPC, O&M) ▪ Return Target : modest return on investment ▪ Financing, guarantees and financial close on portfolio basis to ensure sustainability ▪ Ticket Size: US $2-10 million
▪ Current Allocation:10% of Africa50’s Capital 9 Africa50 Project Finance : Catalyzing Private Investment in Projects and commercial infrastructure funds PF Value Proposition PF Ownership Model
▪ Source proprietary investments through ▪ Typically take significant minority stakes in Africa50 Project Development and other projects or platforms sources ▪ Play an active role regardless of the type of ▪ Engage stakeholders post financial close investment through relationships ▪ Provide capital alongside strategic partners ▪ Access AfDB and DFI community for preferential debt ▪ Invest in and sponsor private sector funds to mobilize institutional investors capital ▪ Mitigate risk during construction and operation phases in markets perceived as high risk PF Project Cycle Positioning PF Sustainability Model
▪ Construction ▪ Operate following a private equity model ▪ Testing ▪ Provide primarily equity and quasi equity with flexible exit options depending on projects ▪ Initial operation ▪ Focus on profitability primarily without ▪ Steady state overlooking development impact ▪ Return Target : differentiated return on investment based on risk, impact and location ▪ Ticket Size: > generally US $20 million
▪ Current Allocation: 90% of Africa50’s Capital 10 Africa50’s investments will lead to multifold impact and - illustrations not to scale - mobilisation of financing Equity investments through Project development Direct equity investments commercial fund Assuming Africa50 funds 30% of Assuming Africa50 takes a 30% share Assuming Africa50 seeds 15% of the project development costs of the equity fund, and the fund takes a 60% equity stake Africa50 project Indirect Africa50 $4.5m $27m Africa50 equity $8m development equity investment investment investment
Total project $15m development Infrastructure fund investment $54m equity investment
$90m Total equity investment Total equity Total equity $90m investment at $90m investment financial close
Total project Total project costs Total project $300m costs at $300m $300m costs financial close
x65 multiplier x11 multiplier x38 multiplier
11 Nova Scotia Solar Plant in Nigeria – investment committed in December 2016
§ A Joint Development Agreement with Scatec Solar, Norfund and Africa50, for development of a 100MWDC solar power plant in Jigawa state, Nigeria. Total project cost will be about US $150 mn, with financial close expected in 2018 and operations in 2019
§ Africa 50’s role: project development and long-term equity partner (24.5%). Facilitate interactions with Government entities and prospective lenders, particularly AfDB § Strong partners: Senior debt will be provided by OPIC, Islamic Development Bank, and AfDB § Strong fundamentals: Reliable solar resources and direct access to the grid under a 20- year Power Purchase Agreement with Nigerian Bulk Electricity Trading § Strong development impact: The plant will produce about 200 GWh of power per year, contributing to the state’s US $2 bn development plan, and helping Nigeria meet its climate change commitments, with an estimated 120,000 tons of CO2 emissions avoided annually
12 Benban solar PV projects– investment committed in May 2017
§ A Joint Development Agreement with Scatec Solar, Norfund and Africa50, for development of
a 400MWDC solar power plant in Benban, near Aswan in Egypt. The projects were developed under Round 2 of the feed-in-tariff (FiT) program. Total project cost will be about US $430 mn, with financial close expected in October 2017 and operations in early 2019
§ Africa 50’s role: Project development and long-term equity partner (25%), relationship with GoE § Strong partners: Senior debt will be provided by EBRD, Islamic Development Bank, and Islamic Corporation for the Development of the Private Sector § Strong fundamentals: Excellent solar resources and interconnection facilities funded by all Benban FiT developers under a cost sharing agreement. Power sold to Egyptian Electricity Transmission Company under a 20-year Power Purchase Agreement, backstopped by the Government of Egypt § Strong development impact: The plant will produce about 900 GWh of power per year, avoiding 350,000 tons of CO2 emissions annually
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for your attention!
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