Andrew Mari Position: MD Utho Capital/ Utho Minerals & Energy RSA / Zimbabwe

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1 Andrew Mari Position: MD Utho Capital/ Utho Minerals & Energy RSA / Zimbabwe

2 Major Issues Affecting Cross Border Project Closure Political commitment Rolling Priorities Endorsement at a Heads of State level Reduce bureaucracy Comfort of Gvt underwriting Lack of a Project Champion Strong oversight & accountability Low Tariffs Tariff gap Need gvt underwriting InstitutionalFramework Project preparation, stucturing & implementation capability Offtaker Project Preparation, Structuring/Implementation Currently not at the required standard No understanding of bankability No regional coordinated planning/execution Institutional Framework SAPP mandate & structure inappropriate SADC historical focus on politics No institution accountable for delivery Regulatory Framework No clarity on cross-border trade No clarity on cost pass through No framework to encourage competition No security of supply Weak project sponsors/ developers No capacity to implement Need to be reconstituted Transaction advisors role Dependence On PPAs To Get Projects Finance Market in each country too small relative to size of projects Single buyer model only utility Credibilty/ creditworthiness Impact on balance sheet Need energy intensive private users Dominant Role of Eskom as Major Buyer Ratings downgrade Reduced borrowing capacity Inability to enter into PPAs Risk allocation (currency risk, etc) Complex negotiations, learning curve Too long to close PPAs Too long to financial close Need standardisation Tariff gap Progress (Years) towards financial close 2

3 Complete & Bankable Project Status Assessment : How Close to Bankability Completeness (relative to checklist) Estimated time to bankability 12 months 3+ Years Projects will be at different stages to bankability, depending on 3what elements on the checklist are still outstanding

4 Role of DFI s in Funding Power Projects Revolving Risk Capital Facility Normal DFI Lending Commercial Partners Tier 1 Tier 2 Cash Flows Tier 3 FC1 FCn Back-office / Coordination DBSA Local Agent Cash Flows Repayment Booking Consolidated Investment Commitments AfDB/ DBSA LOR / IOR Repayment Loan / Equity Disbursement SADC Power Projects Inc SPV It is envisaged that the ADB, DBSA and the other Promoting DFI Partners will be required to commit the agreed percentage of the total capital required for the SAPP cross border projects on the SAPP Emergency Project, possibly about 50% of the total capital required. Each of the participating SADC countries will be required to also commit to taking up a portion of the Risk Capital Facility, in accordance with their affordability. The Promoting Partners will then invite other DFIs to commit to taking up the Tier 2 Capital. The funding from the Commercial Partners (including local capital markets) will be raised on a project by project basis 4

5 Role of DFI s in Funding Power Projects DFIs are sitting on large amounts of unused risk capital and are not optimizing its use for development finance, and its potential to catalyze commercial financing Huge market and tariffs now generally going up, but no customers ie PPA Wide variety of other sources of funding makes it very difficult for project funders to know where to begin Based on the AfDB High Level Panel Report, the bank should leverage its knowledge and resources through partnerships with other institutions and donors to reduce duplication of efforts and enhance coordination go a step further, be more proactive and seize the moment and take the lead in defining needs and priorities, designing strategies and action plans and coordinating and managing implementation devote more resources to cross-border infrastructure with positive incentives to integration, including concessionary finance for projects that create positive regional returns 5

6 Contact information For any additional information, please do not hesitate to contact me. Andrew Mari: Utho Capital (Pty) Ltd Utho Minerals & Energy Cel: Phone: Fax: