THE ABCS OF ACQUIRING INVESTMENT CAPITAL

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THE ABCS OF ACQUIRING INVESTMENT CAPITAL
PRESENTATION BY CDC CAPITAL PARTNERS Mrs Adiba
Ighodaro Director, West Africa
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CDC Capital Partners - Contents

• The facts who we are, what we do, what we
  offer.
• CDCs investment activity in Africa.
• CDCs focus and the challenges.
• Recent transactions.

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CDC Capital Partners - the facts

• A leading risk capital investor in emerging
  markets
• Committed to ethical best practice
• Operating on a fully commercial basis
• 200 professionals 40 in Africa
• Targeted sectoral focus
• Portfolio of US1.2bn (315m Africa)
• Owned 100 by UK Govt - funds structure to
  allow - private sector investors identify with
  particular region/sector - CDC concentrate
  efforts on Africa/S Asia infrastructure

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Our shareholders objectives

• Carry on doing what you are doing now, which is
  to
• Prove that commercial investment returns can be
  made in the defined CDC geographies and by doing
  so contribute towards the corporate and economic
  development in those geographies.
• But also
• Shout about it as loudly as you can! and in
  consequence
• Attract further capital into those geographies.

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Where we are today
LONDON (HQ)
CHINA
HOUSTON
PAKISTAN
EGYPT
INDIA (DELHI)
COTE DIVOIRE
INDIA (MUMBAI)
THAILAND
INDIA (BANGALORE)
MALAYSIA
GHANA
COSTA RICA
NIGERIA
SRI LANKA
SINGAPORE
KENYA
INDONESIA
ZAMBIA
TANZANIA
BOLIVIA
MAURITIUS
ZIMBABWE
MOZAMBIQUE
SOUTH AFRICA
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How much, what do we invest in?

• Invest up to US60m in any one deal
• Invest in consumer goods and retail, financial
  institutions, minerals, oil and gas,
  transport/logistics, TMT, property and
  healthcare
• Infrastructure investment is important to us -
  have established a power company, CDC Globeleq,
  to manage and grow power assets

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CDC Globeleq aims to be the Emerging Markets
Power Company

• Owner, developer, manager and operator of power
  plants
• 350m, 17 countries
• Emerging markets focus
• Commercial returns
• Substantial acquisition programme
• Energy for growth

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Total portfolio 2002 - by region (USm)
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Total portfolio by sector 2002 (USm)
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CDCs investment activity in Africa

• 1998-2003 US450m invested in 31 separate
  businesses in Africa
• 50 policy
• Focus on companies rolling out businesses across
  Africa
• 11 Africa offices (include main hubs for capital
  flows Nigeria, South Africa, Egypt)
• What we offer - fresh investment capital
  focusing on 2nd 3rd stage financing-
  experience in change of control transactions,
  including MBOs/MBIs- introduction of
  co-investors- in-depth local knowledge- sector
  expertise- a keen appreciation of risk risk
  mitigation- access to our worldwide/regional
  network of contacts

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CDCs focus

• Focus on Sectors property,
  transport logistics, TMT, minerals, oil
  gas, power, financial services, consumer
  businesses
• Product type MBOs/MBIs Mezzanine funding
  eg infrastructure
• Businesses requiring expansion capital
• First class management capabilities

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Aureos Capital

• 2001- joint venture established between Norfund
  and CDC
• 15 country and regional SME funds (11 in Africa)
• US203m under management
• Norfund committed further US50m to the venture
• Recently closed a US33m Central America fund
• In process of launching 3 new regional funds
• Aureos - an effective vehicle for mobilising
  third party investment

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Challenges

• Business principles
• Misalignment of interests
• Deal construction versus deal origination long
  gestation phase
• Shaping proposal to a do-able deal (obtaining
  credible business plan)
• Quality of earnings and management
• Vendor price expectations vs. falling market
  prices

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Recent deals -Songas, Tanzania

• US18m in new gas project, helping bring gas
  ashore and pipe it inland
• Largest foreign investment
• Helping reduce Tanzanias dependence on expensive
  imported fuel
• Should provide 1/3 of countrys power within 5 -
  10 years

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Recent deals -Prime Cure Clinics, South Africa

• CDC invested US3.1m in this primary healthcare
  business
• 50 clinics bringing affordable healthcare to blue
  collar market
• Key component of CDCs regional healthcare
  strategy

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Recent deals -MSI

• Financed the continuing expansion of an African
  telecoms company
• Invested US25m
• Pan African Existing licences in 13 countries
• High Quality Shareholders IFC, Citibank, GE
  Capital, World Tel, AIG, Bessemer Ventures

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Some other African deals -

• Protea Hotels, SA
• Trans African Concessions, SA
• Tsavo Power, Kenya
• SSB Ghana

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MINING SECTOR HIGHLIGHTS

• CDC CAPITAL PARTNERS

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AFRICAN MINERALS, OIL GAS DEALS

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African Lion Fund

• CDC founding shareholder of US34m African
  mineral fund (1999)
• Investment in pre-bankable feasibility African
  exploration mining projects
• Partners include Lion Selection, RMB, Investec
  Bank, EIB Proparco
• Currently 12 investments in diamonds, nickel,
  coal gold - across Africa

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East Africa Gold Mines (Tanzania - Gold)

• CDC invested US5m 1997-2001 as exploration
  seed capital
• Currently 4m oz gold resource
• North Mara gold mine developed in 2000 - 100
  debt financed by Macquarie Bank
• Significant exploration successes

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Mozal I Aluminium, Mozambique

• US1.34b smelter outside Maputo
• CDC investment of US55m
• Sponsor - Billiton
• Co-investor - Mitsubishi
• Annual capacity of 250,000 tons of primary
  aluminium ingots

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BUSINESS PRINCIPLESAND INTEGRITY

• CDC CAPITAL PARTNERS

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Introduction

• CDC also has a core commitment to Business
  Principles (BPs) which covers Health Safety,
  Environmental, Social (HSES) and Business
  Integrity (BI) issues

Environment
Health Safety
Business Integrity
Social
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The Overall BP Framework

• CDC uses a linked business principles framework
  to ensure each investee company is aligned with
  its business principles and produces the
  appropriate information for its stakeholders

Investee Company
CDC
BP Management System Policy Organising Plannin
g Implementing Measuring Performance Reviewing
Performance This may be formal eg ISO 14001,
etc or informal but with the system elements
BP Management System Policy Organising Plannin
g Implementing Measuring Performance Reviewing
Performance This may include dashboard
indicators, BP CBA,, Reputation Management etc
Initial Checklist (Screening stage)
Management Systems Check (Investment Management
stage)
Stakeholder Demands
Management System Defence / Strategic indicators
Strategic Indicators (Investment Management
stage)
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The Strategic Performance Indicator Process
Great care has to be taken to ensure that the
right balance is found between obtaining the
necessary information and not overburdening the
investee company
Business Integrity?
Sustainable Development?
SA 8000?
Accident data?
ISO 14001?
CSR data?
Labour practices?
Eco efficiency?
AIDs policy?
Supplier Codesof Conduct?
Development?
Use of renewables?
Pro poor?
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The Strategic Performance Indicator Process
Ideally we look for 5 or less strategic
performance indicators based on country and/or
sector and/or investment

• Equity/Debt?
• Size?
• Majority/Minority?
• Non-Exec director(s)?
• Management Commitment
• Other investors?

Country/Region ?
Sector ?
Investment ?
Strategic Performance Indicators
Investee Company
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Business Integrity

• Losing reputation worse than simply losing money
• Business Integrity company standards to meet
  legal and ethical requirements
• Headline International concerns-
  Anti-Corruption- Anti-Money Laundering
• Anti-Corruption -
• US took lead in 1977 with FCPA crime for US
  companies to bribe foreign public officials
• OECD catches up in 1999 35 countries signed OECD
  Convention on Combating Bribery of Foreign
  Officials
• Individual Country laws, e.g. UK now tightest
  law

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Business Integrity

• Anti-Corruption -
• US took lead in 1977 with FCPA crime for US
  companies to bribe foreign public officials
• OECD caught up in 1999 35 countries signed OECD
  Convention on Combating Bribery of Foreign
  Officials
• Individual Country laws, e.g. UK now tightest
  law

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Business Integrity

• UK Anti-Corruption Law
• No bribes, No facilitation payments
• Criminal offence for Directors in UK, if their
  companies pay bribes to public officials anywhere
  in World
• Internal enforcement better than external
  sanction
• International Anti-Money Laundering OECD
  Countries laws require reporting of money
  derived from crime
• All crimes including corruption and tax evasion
• Reporting even if not a crime in the country it
  takes place

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