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FINANCING INFRASTRUCTURE :
Breaking the Barriers to Sustainable Development
Ade AdeolaManaging DirectorProject & Export FinanceStandard Chartered Bank, LondonApril 2009
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Agenda
Introduction
Infrastructure Finance Trends
Breaking the Barriers to Sustainable Investment
Conclusions & Recommendations
Leveraging on Experience
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Leading the way in Asia, Africa and the Middle
East Largest international bank in the Middle East & Africa
Strong focus on China, Japan,Korea, and Africa top 3foreign bank in each major market
Our Global Presence
FTSE 100 and Hong Kong Stock Exchange listed
Long term credit rating A2 (Moodys) and A (S&P) 550 locations serving 56 countries
Our Local Presence
On the ground expertise in Asia, Africa, the Middle East,India region and Latin America
Facilitates delivery of innovative products, supported byquality delivery systems and excellent customer service
Our Value Proposition and Product delivery
Strong on-shore presence and in-depth local knowledge
Relationship and leverage with key corporates andinstitutions
Coupled with a deep understanding of the local markets,our product capabilities are tailored to suit clients needs.
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Forfaiting M & A
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Providing banking solutions to meet the needs of our clients
Standard Chartered-Leading the Way in Africa, ME & Asia
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2008 Financings & Current Mandates
NNPC/ExxonMobil NGL 2 Project- Nigeria-$220m
SCB acted as Financial Advisor and MLA in providing the NGL II project with US$220m add-on facility that was the
first substantial oil and gas sector financing to come exclusively from Nigerias newly consolidated local banks.
ADDAX Petroleum-Gabon/Nigeria- $500m
In May, Addax Petroleum entered into a two-year, US$500 million senior revolving credit facility arranged by
Calyon, Standard Chartered Bank and BNP Paribas. This was a hybrid corporate deal with a greenshoe option
OANDO plc- - Nigeria USD138m
Financial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields.
ALSCON-Rusal- - Nigeria USD130m
Sole Arranger for $130m bridge facility to finance acquisition and upgrade of the ALSCON aluminium smelter.
The bank has committed substantial resources to Africa . This is evidenced by the number of financial advisory and
structuring mandates awarded by top tier sponsors in 2008. This includes:
1. Lekki Port Nigeria, $1.1billion2. Main One Telecoms Cable Project-Nigeria, $120m
3. Lafarge Euro 225m Expansion facility
4. Viva Methanol Project, $1.2billion
5. Natural Gas Liquids supplemental financing, $200m
6. NNPC /ExxonMobil Satellite Oilfields Advisory, $680m
7. Addax Izombe LPG Project-
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2008 Financings & Current Mandates NNPC/ExxonMobil NGL 2 Project- Nigeria-$220m
SCB acted as Financial Advisor and MLA in providing the NGL II project with US$220m add-on facility that wasthe first substantial oil and gas sector financing to come exclusively from Nigerias newly consolidated local
banks.
ADDAX Petroleum-Gabon/Nigeria- $500m
In May, Addax Petroleum entered into a two-year, US$500 million senior revolving credit facility arranged by
Calyon, Standard Chartered Bank and BNP Paribas. This was a hybrid corporate deal with a greenshoe option
OANDO plc- - Nigeria USD138m
Financial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields.
ALSCON-Rusal- - Nigeria USD130m
Sole Arranger for $130m bridge facility to finance acquisition and upgrade of the ALSCON aluminium smelter.
The bank has committed substantial resources to Africa . This is evidenced by the number of financial advisory and
structuring mandates awarded by top tier sponsors in 2008. This includes:
Lekki Port Nigeria, $1.1billion
Main One Telecoms Cable Project-Nigeria, $120m
Viva Methanol, $1.2billion
Natural Gas Liquids supplemental financing, $220m
NNPC /ExxonMobil Satellite Oilfields, $680m
Lafarge Euro 225m Expansion facility
Addax Izombe LPG Project
DP World Port -Senegal,
Tullow Jubilee Oilfields project Ghana
Tata: Itezhi-Itezhi Power project-Zambia,
Sasol Inzalo- South Africa
Kosmos Energy-Ghana,
Kengen- Kenya .
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Infrastructure Finance Trends:Statistics and Commentaries
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Infrastructure Projects- Setting the Scene
Physical Infrastructure projects are those services without which primary, secondary, and
tertiary production activities cannot function Specifically capital-intensive facilities in:
Electric power (generation and distribution)
Energy (refineries, pipelines, processing facilities, etc.)
Telecommunications
Transportation (ports, toll roads,railways, etc.)
Water / Sewerage
The Input technology, capital equipment, expertise are sourced mainly in the
international markets and typically financed in international currencies.
The output (e.g., electricity, petroleum products) is sold primarily in the domestic market
and paid for in local currency
The Debt/Bonds used to finance these projects are therefore exposed to 2 main risks
Devaluation Reduction of USD value of cashflows below debt service levels.
Convertibility Risks that local authorities may block the exchange of local currency
revenues into dollars or block currency transfers from the host country
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The Infrastructure Situation at a Glance
Infrastructure investment a 15-25+year proposition that requires insight & foresight!
Governments adopting concessions/greenfield projects , PPPs vs. asset privatisations
Sector Trends
Telecommunications: strong cashflow from cellular services. Currently Private sector driven
Power: Poor cashflows due to sub-economic tarrifs and under-investment
Historically, cross-subsidised to benefit small residential consumers, implying politically difficult
adjustment process to generate sustainable cashflows.
Private sector involvement without govt capacity support may be limited to independent power
producer (IPP) projects servicing large customers (industrials, distributors, etc.)
Transport:
airports and shipping ports generate strong cashflow today.
roads and rail networks generate limited revenues and may need govt transfers (shadow tolling).
Water and Sewerage: limited cashflow in Emerging mkts- viewed as the ultimate public good.
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Global Infrastructure Coverage & the Africa Situation
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InfrastructureFinance Trends
Traditionally financed out of general government revenues
Trend in recent years for infrastructure to be financed on a project basis or for infrastructure projects to bepurchased or developed by the private sector.
Given the high initial capital costs of infrastructure projects, long-term financing is essential for privately-owned
infrastructure projects to be financially viable
Financing is now available from the private sector in many instances with foreign private investors andcreditors playing a major role
Key Growth Drivers
Privatisation- Govts adopting concessions/ PPP greenfield projects vs. asset privatisations
Commodity related infrastructure e.g. Mining, Infrastructure enablers offered by Resource players
Improving Governance e.g. Pension fund and Policy reforms
Private Equity Funds looking for higher yields (Reducing margins in Europe & Middle East Markets)
Technology leverage
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Evolution of Private Infrastructure Investment in Africa (1990 2007)
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Breaking the Barriers to Sustainable Investment
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Macro & Regional Barriers
The prevalence of inefficient monopoly providers (state owned)
Scarcity of investment spend because prices have been held below cost
Inadequate local expertise to structure long term Project financing
Lack of depth and defined yield curves in local debt and capital markets
Absence of incentive mechanism (fiscal tax etc) to encourage infrastructure financing
Governance and Management Barriers
Public Sector as equity holder is problematic. ( often essential to get other partiesinvolved)
Appointment of concession holder due to political considerations which may not haveright management experience for difficult initial stages of the project
May undertake project location and or management decisions on politicalconsiderations
Increase perceived commercial risks for debt finance
Sovereign and Cross-Border risks
Barriers to Sustainable Infrastructure Development
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CASHFLOW
Regulatory Frameworkand Macro Stability
Tariffs / Fees / Tolls
Govt Supplements(MYTO?)
FINANCING
Equity and Management
Bank Debt (Loans) and
Capital Markets Debts
(Bonds)
Credit enhancementspossible?
Critical Investment Barriers & Enablers
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Sponsors: Local parties to improve credit worthiness, corporate governance and
management capacityBanks: Innovative structures to project, corporate, and sovereign financings, with the aim of
improving credit ratings for transactions:
Structures to mitigate the risk of devaluation, and
Structure to facilitate the use of local debt and capital markets, which can providefinancing denominated in the currency in which the project earns its revenues
Structure to breach the sovereign ceiling, which therefore permit the transactions(global scale) local currency rating to become its foreign currency rating
Governments: Strong institutional framework for protecting creditors rights and improvedaccess to legal enforcement and remedy
Development Finance Institutions and ECAs:
Country risk mitigation instruments (PRI & Gtees)
Deepen depth of Africa capital markets (Credit enhancement for Debts & Bonds, riskparticipations etc)
What is required to achieve sustainable development?
Need for diversification of funding sources( Equity, Debt & Capital Markets) andmobilisation of long term investment from local and international markets
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The Art of the Possible - Nigeria
Homework is key
Generation Mix: existing capacity, existing IPPs,New IPPs
Comprehensive policy for greenfield IPPs and privatisations
Sector-wide Payment security mechanism and Nature of Sovereign Support
Enabling Legislation, Permits and Approvals
Ensure sector and tariff reforms lead to reduced reliance on payment support mechanisms
Tie-in with Distribution Privatisation
Process & Packaging
Investor and Lender Roadshows
Engage Advisors
Comprehensive and transparent RFP Package Adherence to timeframe and deadlines
Dont expect too much from the very first deals
Need to attract international investors and lenders
Progressive shift in risk allocation
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How Can We Help?
Project Finance Advisory
Financial Modeling & Evaluation
Structuring multi-sourced and multi-phase financing plan
Managing Due Diligence Process
Risk Allocation and Project Agreements review / mark up
Preparation of Proposal
Negotiations with Offtakers and Financiers
Commercial Debt, Export Credits, B Loans, Debt Capital Markets
Underwriting, Lead Arranging and Financial Close
Privatisation Advisory
Sector Strategy
Risk Allocation
RFP Preparation and Packaging
Roadshows in Europe , Middle East and Asia
Bid Evaluation, Negotiation and Selection
Monitoring Financial Close
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We believe that Nigeria has a huge scope for value creating investment in infrastructure But most African markets do not have sufficient tax and government revenues for pure
public sector funding
Funding is not the critical barrier
Project finance remains available for well structured projects
Credit markets can dealing with currency and political risks, for bankable projects
Revenue is not generally the critical barrier
The Governments in Nigeria have started the broad policies and regulatory changes to
support stable revenue streams
There are greater challenges associated with revenue transfer arrangements e.g. inwater & sewerage, roads
Summary
A key management and institutional gap remains. This can be overcome by
greater involvement of private equity and debt in financing of infrastructure
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Bujagali Hydro(Uganda)
Project Financing
Mandated Lead Arranger
Ongoing
AES Ebute(Nigeria)
Independent Power Plant
Ongoing
Off-take Credit Support
Provider
Energia Azteca x Energiade Baja California
(Mexico)
USD 804 MProject financing for a 1,060MW natural gas power plant
Arranger
On-going
Empresa ElectricaVentanas
(Chile)
USD 440 M
Project financing for a 242MW greenfield coal-fired
plantArranger & DocumentationAgent
2007
PT Indonesia Power(Indonesia)
USD 55 M
SBLC for Gas Purchase
Lead Arranger
Ongoing
IBOM IPP(Nigeria)
Independent Power Plant
Ongoing
Mandated Lead Arranger &
Modelling Bank
ConfidentialConfidential
Itezhi-Tezhi IPP(Zambia)
Proejct Financing of IPP
Ongoing
Financial Adviser Mandated Lead Arranger
2007
Marrafiq IWPP(Saudi Arabia)
US$ 3,300 M
Project Financing
Power & Infrastructure CredentialsNotable Deals
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Shuqaiq IWPP(Saudi Arabia)
USD 1,400 M
Project Financing
Mandated Lead Arranger
2007
Mandated Lead Arrangerand Hedging Bank
2006
Fujairah IWPP(UAE)
USD 1,500 M
Project Financing
Taweelah A-1 10(Abu Dhabi)
USD 1,100 M
Project Financing
Mandated Lead Arranger
2005
Mandated Lead ArrangerHedging Bank
2005
Nam Theun 2 HydropowerProject
(Laos)
US$ 1,581 M ProjectFinancing
AES Sonel(Cameroon)
Capex Programme
Financing
2006
Security Trustee & Facility
Agent for IFC, Proparco,
EIB, AfDB, DEG & FMO Mandated Lead Arranger
2006
Al-Hidd IPP(Bahrain)
Project Financing
Shuaibah IWPP(Saudi Arabia)
US$ 2,542 M ProjectFinancing
Mandated Lead Arranger
2006
MALAKOFF
Taweelah B IWPP(Abu Dhabi)
US$ 2,670 M ProjectFinancing
Mandated Lead ArrangerStructuring Bank, Insurance Bank
Documentation Bank, JointBookrunner, JBIC Co-ordinator,
Hedge provider
2005
PENDEKAR POWER
(LABUAN)
Power & Infrastructure CredentialsNotable Deals
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Regional Infrastructure Deals (I)
(U.A.E)
USD 855mProject Financing
Umm-Al-Naar IWPP(U.A.E)
USD 855mProject Financing
Mandated Lead Arranger
Mesaieed IWPP
(Qatar)
Project Financing
USD 2.2 bn
Mandated Lead Arranger
Sohar Power (Oman)
USD 446M
Project Re-Financing
Bookrunner and
Mandated Lead Arranger Mandated Lead Arranger
Port Said EastPower(Egypt)
USD 302MProject Financing
Mandated Lead Arranger
Suez Gulf Power(Egypt)
USD 296MProject Financing
Umm-Al-Naar IWPP(U.A.E)
USD 855m
Project Financing
Umm-Al-Naar IWPP(U.A.E)
USD 855mProject Financing
Mandated Lead Arranger
Dolareh Container Terminal
(Djibouti)USD 300M
Islamic Project Financing
Financial Advisor,Mandated Lead Arranger
XXX(XXX)
USD XXXProject Financing
Mandated Lead Arranger
(U.A.E.)USD 290M
Project Financing
Mandated Lead Arranger
Emirates Cement Company
Umm-Al-Naar IWPP(U.A.E)
USD 855m
Project Financing
Umm-Al-Naar IWPP(U.A.E)
USD 855mProject Financing
Mandated Lead Arranger
Masdar
(U.A.E)USD 500M
Project Financing (Current)
Financial Advisor
Umm-Al-Naar IWPP(U.A.E)
USD 855m
Project Financing
Umm-Al-Naar IWPP(U.A.E)
USD 855mProject Financing
Mandated Lead Arranger
Qasim InternationalContainer Terminal
(Pakistan)USD 100M
Islamic ProjectFinancing (Current)Financial Advisor,
Mandated Lead Arranger
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XXX(XXX)
USD XXXProject Financing
Mandated Lead Arranger
Marafiq IWPP(Saudi Arabia)
USD 2.2BProject Financing
Financial Advisor
XXX(XXX)
USD XXXProject Financing
Mandated Lead Arranger
Shuqaiq IWPP(Saudi Arabia)
USD 2.0BProject Financing
Financial Advisor
Umm-Al-Naar IWPP(U.A.E)
USD 855mProject Financing
Umm-Al-Naar IWPP(U.A.E)
USD 855mProject Financing
Mandated Lead Arranger
Disi-Mudawwara WaterConveyance Pipeline
(Jordan)
USD 1,000MProject Financing
Financial Advisor
ADWEA SewageTreatment Plant (U.A.E)
Confidential
Financial Advisor
Project Financing
Regional Infrastructure Deals (II)
XXX
(XXX)USD XXX
Project Financing
Mandated Lead Arranger
Al Ezzel Power
(Bahrain)USD 372M
Project Financing
Mandated Lead Arranger
Rousch
Power
Ras Laffan
(Qatar)USD 712m
Project Financing
Mandated Lead Arranger
Rousch Power
(Pakistan)USD 328M
Interest Rate Swaps
Structuring & Hedging Bank
Taweelah-B
(U.A.E)USD 2,056M
Project Financing
Pre-bid Underwriter andMandated Lead Arranger
XXX
(XXX)USD XXX
Project Financing
Mandated Lead Arranger
Shuaibah IWPP
(Saudi Arabia)USD 1.9B
Project Financing
Financial AdviserMandated Lead Arranger
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National District Cooling(U.A.E)
AED 700MProject Financing
Lead Arranger Mandated Lead Arranger
Project Financing
USD 855M
Umm-Al-Naar IWPP
(U.A.E)Tihama Power(Saudi Arabia)
USD 510MProject Financing
Lead Arranger
Sohar IWPP
(Oman)
USD 414MProject Financing
Pre-bid Underwriter and
Mandated Lead Arranger
Regional Infrastructure Deals (III)
Thuraya Satellite(U.A.E)
Project Financing
Financial AdvisorSole Arranger/Lender
2003
Ministry of Finance GhanaRe: Korle Lagoon Ecological
Restoration Project(Ghana)
USD 37 millionECA Buyer Credit Facility
Ghana Telecom(Ghana)
USD 30 MillionECA Facility
Mandated Lead Arranger & SoleLender
2005
Sole Arranger/Lender
2003
Ministry of Finance GhanaRe: Korle Lagoon Ecological
Restoration Project(Ghana)
USD 37 millionECA Buyer Credit Facility
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