MAKING PRIVATE SECTOR INFRASTRUCTURE INVESTMENT HAPPEN IN AFRICA

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MAKING PRIVATE SECTOR INFRASTRUCTURE INVESTMENT
HAPPEN IN AFRICA

Keith PalmerChairman, InfraCo
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The Infrastructure Challenge

• Enormous unmet infrastructure need in Africa
• Infrastructure shortages are holding back growth
  (e.g. electricity shortages in East, West and
  Southern Africa)
• Africas response to the global food crises
  held back by poor access to agriculture-supporting
  infrastructure (e.g. irrigation)
• Need for private sector investment in Africa
  recognised (e.g. by NEPAD)
• Wholly inadequate response so far except mobile
  telephones

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Investment Constraints
Why has private sector infrastructure investment
been so weak?

• It is not because of a lack of finance
• It is due to a shortage of profitable investment
  opportunities

Why is there a shortage of infrastructure
investment opportunities?

• Few developers are willing to take on the
  front-end costs and risks of identifying new
  project opportunities and bringing them to
  market
• Lack of credit-worthy counter-parties
• Regulatory risks re. pricing of outputs
• Small project size reduces payoff of success
• Affordability of services, especially in rural
  areas
• Scarcity of good project developers

Many infrastructure projects become attractive to
private investors at financial close if properly
designed and structured
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InfraCo a Public / Private Response

• Infraco is a publicly-funded, privately-managed
  infrastructure development company
• What does InfraCo do?
• Identifies green field opportunities creates
  local subsidiary
• Develops projects to financial close at own cost
  and risk
• Secures debt financing and sells majority stake
  in local company to (domestic and foreign) equity
  investors
• Reinvests proceeds from successful sales in more
  development activity
• Uses targeted subsidiaries to make services
  affordable for the poorest
• Works with local and foreign partners when
  appropriate (e.g. leveraging mining
  infrastructure)

InfraCo makes infrastructure projects happen in
situations where the private sector would
otherwise be unwilling or unable to invest
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Examples of InfraCo Activities
Uganda integrated infrastructure services
(Kalangala)
Ghana combined cycle power generation (KPONE)
Uganda waste water and sanitation (Kampala)
Cape Verde wind power
Rwanda small hydro
Guinea power and rail
Mozambique agricultural infrastructure
Nigeria combined cycle power generation
Madagascar water supply
Zambia irrigation project
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Project Examples A Closer Look

• Kalangala, Uganda
• US40 million infrastructure services initiative
  on Bugala Island, Lake Victoria
• Existing infrastructure dilapidated or
  non-existent
• Project will provide a power supply for the
  island, a ferry service, a main island road and a
  potable water supply.
• Affordability for the poor is ensured through
  project structuring and output based aid
• Debt and equity funding being raised from
  domestic and international sources

• KPONE Power, Ghana
• C. 300m gas-fired power plant in Tema
• Will provide an additional 300-400MW of
  generating capacity - substituting for existing
  diesel generation
• Utilise capacity from West African gas pipeline
• Completed PPA negotiations with main off-taker
  (ECG) and now moving into other project
  agreements, procurement and capital raising
  activities

• Wind Power, Cape Verde
• 30MW wind power project c. 75m capital cost
• Replaces substantial portion of current diesel
  generation with lower cost, clean energy
• PPA term-sheet agreed with power utility, Electra
• Wind turbines procurement process underway
• Strong investor interest from banks and
  multilateral institutions

InfraCo business model is working. 20 invested
by private sector for every 1 invested by InfraCo
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Conclusions

• Africa needs action on the ground not words
• InfraCo is an innovative, successful approach to
  leveraging private investment into infrastructure
  in Africa
• There is great potential to extend the approach
  into agriculture / agribusiness to ensure a
  strong response to the global food crisis