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Changing the Game for Africa UK and Rwanda Trade & Investment Forum 22nd October 2014 Confidential Africa is on the Move Emerging as an Economic Success Story Today US$2.0 trillion Collective GDP in 2013 Africa’s Population 2013 Population in Urban Areas 2013 Tomorrow 1.1 billion 38% Consumer Spending 2013 US$ 1tr Collective GDP in 2050 US$5.5 trillion US$ 4.75tr 2.4 billion Africa’s Population 2050 60% Population In Urban Areas 2050 Consumer Spending 2050 2 African Infrastructure Market Market Opportunity Innovative Solution Africa50 3 African Infrastructure Market Robust, Safe and Steady Returns AN ATTRACTIVE ASSET CLASS Secured cash flows backed by contractual agreements Long term investment horizons Responsible investments for institutional investors Historically, well-structured projects have generated returns of 16-18% IRR in Africa 4 African Infrastructure Market Low Default Rates Africa 138 1 0.7% 1 0.7% 5 African Infrastructure Market What is Holding us Back? Significant Infrastructure needs, however… Lack of well prepared projects Lack of Public Resources Lack of early risk-takers Lack of Transaction Advisors Lack of “Smart Capital” Overcoming these will increase number of projects reaching commercial viability and bankability African Infrastructure Market What is Holding us Back? PPFs resources are nowhere close to development capital needs Project Development Licensing and permitting Negotiation of concession Selection and negotiation of EPC Structuring Equity and debt fund raising PPF Size of funding requirement to finance PIDA and Project Development PIDA Total Financing Required $68 billion Development Capital Required $2.5 billion per annum for 5 years $80 mil Track Record of AfDB Private Sector Infrastructure Investments PPP or Private Infrastructure Investments between 2006 and 2014 49 projects delivered USD 3.1 billion invested USD 4.6 billion syndicated Facilitated USD 32 billion worth of PPP and Private Sector Projects Acted as Mandated Lead Arranger on 10 Projects 8 What is Africa50? A “One-Stop-Shop” Approach Project Development Company Providing steady deal flow of well-structured Projects Project Finance Company Sound investments generating commercial returns Africa50 will operate across the project life cycle through two separate companies each with dedicated investor groups 9 What is Africa50? A Capital Base at Sufficient Scale Paid-in Capital of $3billion Single “A” rating target Leverage 2-3 times capital reaching up to $10billion Project Development Capital of $500m INFRASTRUCTURE INVESTMENT OPPORTUNITY $100 Billion 10 What is Africa50? A New DNA, Flexible and Efficient A Corporation - Commercial Structure Autonomous - Own Rules & Procedures Independent - Legally & Financially Independent Capital Structure - A, B & C Shares A TRUE PUBLIC PRIVATE PARTNERSHIP 11 Accelerated Implementation Strong African Commitment African Development Bank Cornerstone Investor Project Development Company Seed investment of USD100 million over 3 to 4 years Project Finance Company Seed Investment of up to USD500 million in tranches AFRICAN GOVERNMENTS Initial Expressions of Interest USD650 million 12 A project Example in Rwanda 13 Leveraging public and private resources Rail Project First phase to cost $8 m and financed as follows: USD 8 million Country A USD 2m USD 2m Country B USD 2m Rwanda USD 2m The 2nd and 3rd phases are estimated to cost around $40 m and $60 m. The cost sharing modalities for each party are described in the JDA including incoming strategic investors 14 Leveraging public and private resources Rail Project Private financing $1.5-4.5 10-35% Vendor and user financing $1.2–2.5 5-20% Sovereign Financing $7.5-10 50-70% Total project cost $14 billion Railway PPPs around the world have benefited from government participation of 50% to 80% 15 Africa50 as a Partner Adding value to increase pace of delivery Driving force Ensures close monitoring on progress Win – Win Partnership Acting as a honest broker, not for pure profit Skin in the Game Financial contributor Facilitator Coordinating activities among Government and Partners 16 Malik Faraoun Principal Investment Officer [email protected]