Financing Power Projects in Africa

Transcription

1 Financing Power Projects in Africa Jeannot Boussougouth Senior Manager: Power and Infrastructure Standard Bank 13 September 2012 Dar es Salaam, Tanzania

2 Contents 1 Section Page 1. Introduction 2 2. Standard Bank 4 3. Our African Infrastructure Understanding Business and Financing Challenges Requirements for Successful Private Sector Participation Potential Financial Structure 22

3 Private and confidential Section: 1 Introduction

4 Introduction 3 Standard Bank is the largest bank in Africa We are present in 18 countries across Africa (especially Sub-Saharan Africa) Our market capitalisation is USD $22.77bn (April 2012) and our Total Assets are USD $178.04bn (HY2011) We are 20% owned by ICBC (the world s largest bank) In most African countries, Standard Bank operates as an integrated corporate and investment bank The purpose of today s presentation is for : To exchange views as to key growth countries in Africa To exchange views as to key growth sectors in Africa To outline strategic considerations and opportunities relevant to an African infrastructure project pipeline To agree action points and next steps to progress the mutual relationship

5 Private and confidential Section: 2 Standard Bank

6 Standard Bank Natural Partner in Africa 5 Key points On-the-ground presence in 18 African countries Overview Most comprehensive network in Sub-Saharan Africa On-the-ground presence in 18 African countries Nearly 150 years of experience in Africa Largest bank in Africa Over 40,000 employees in Africa Unrivalled knowledge of sub- Saharan Africa through on ground presence Over 8,000 bank branches headquartered in Johannesburg Growth on the continent is a key strategic focus area Investment banking presence across the region and in key markets strengthened by some acquisitions: IBTC Chartered Bank, Nigeria CFC Bank, Kenya Recent banking license awarded - Angola Standard Bank Strong product teams in Johannesburg, Lagos, Nairobi and London Angola (33.3 million) Botswana (1.8 million) Lesotho (1.7 million) Malawi (12.8 million) Nigeria (154.7 million) South Africa (47.4 million) Uganda (27.6 million) Zambia (14.6 million) DRC (63.6 million) Mauritius (1.2 million) South Sudan (10.6 million) Zimbabwe (13.1 million) Ghana (23.1 million) Mozambique (20.3 million) Swaziland (1.1 million) Kenya (34.7 million) Namibia (2.1 million) Tanzania (37.8 million)

7 Standard Bank Recent Accolades 6 Key points Select Recent Accolades Global Finance: Best Investment Bank in Africa (2011) The Banker: Best Investment Bank in Africa (2011) Euromoney: Best Investment Bank in Africa (2010) Best Investment Bank in Africa (2011, 2009) Best Investment Bank in South Africa (2011, 2009) Best Investment Bank in Nigeria (2009) Best Debt House in Africa (2011) Best Debt Bank in Africa (2011,2009) Best Emerging Markets Bank in DRC, Namibia, South Africa and Uganda (2011) Best Overall Bank for Cash Management in Africa (2009, 2010) Best Bank for Payments and Collections in Africa (2009, 2010) Best CLS-Linked Bank Offering (2009) Best Foreign Exchange Provider in South Africa (2009) Best Investment Bank in Africa (2010, 2009) Best Investment Bank in Nigeria (2010) Best Bank in South Africa (2010, 2009) Best Equity House in Africa (2009) Lakatabu Expansion - Africa Industrial Deal of the Year (2009) MTN Uganda - Africa Telecoms Deal of the Year. (2009) Zain - Middle East Telecoms Deal of the Year (2009) Carbon Finance Deal of the Year for Camco- Standard Bank Structured Carbon Credits Transaction (2009) Ranked 94 out of 1,000 top world banks by Tier 1 capital (2011) Bank of the Year in Africa (2011) Best Bank in Africa (2010) Best Bank in Lesotho, Malawi, South Africa, Uganda and Zimbabwe (2010) Best Investment Bank from Africa (2009) Deal of the Year Africa: Bonds (2010) Deal of the Year Africa: Capital Raising (2010) Deal of the Year Africa: Structured Finance (2010) African Bank of the Year (2009, 2008) Bank of the Year, South Africa (2009, 2008) Best Investment Bank from Africa (2009, 2008) Best Bank in Botswana, Lesotho, Malawi, Swaziland, Tanzania (2009) Deal of the Year for the Ruashi Copper Mining Project in DRC (2008) Deal of the Year - Botswana for National Development Bank BWP100 million 11.25% notes due 2017 (2008) Deal of the Year - DRC for the Ruashi Copper Mining Project (2008) Deal of the Year - Finland for Talvivaara Nickel Project US$320m debt facility (2008) Deal of the Year - Germany for Kreditanstalt fur Wiederaufbau NGN28.7 billion 8.5% notes due by 2011 (2008) Deal of the Year - Tanzania Electricity Supply Limited TZS300 billion syndicated loan (2008) Deal of the Year - Zambia Sugar Project (2008) Deal of the Year (South Africa) for the 20% investment by ICBC in Standard Bank (2008) Deal of the Year Award - Bahrain for Arcapita Bank US$1.1b syndicated Murabaha facility (2008) Most innovative in Trade and Project Finance (2008) Investment Bank of the Year, Africa (2009) Best Issuing House in Africa (awarded to Stanbic IBTC Bank) (2008) Deal of the Year - ICBC 20% acquisition of Standard Bank (2008) Best Investment Bank in Africa (2009, 2008) Best Investment Bank in Nigeria (awarded to Stanbic IBTC Bank) (2009) Best Natural Resources Deal in EMEA: Kayelekera Uranium project (2009) Best Oil and Gas Deal in Africa: Oando (2009) Best Project Finance Deal in Africa: Botswana Power Corporation (2009) Best Project Finance House in Africa (2009) Best Africa Investment Bank (2009) Best Africa Research Team (2009) Infrastructure Deal of the Year for Gautrain (2008)

8 Selected Energy Credentials 7 Financial Advisory and/or Debt Arranging Ongoing Mphanda Nkuwa Hydropower Project, Mozambique Standard Bank is mandated as the Financial Advisor to the Mphanda Nkuwa consortium (consisting of Electricidade de Moçambique, Camargo Corrêa Moçambique lda and Energia Capital) on the development of 1,500MW hydro electric project in Mozambique Ongoing Forest Petroleum, South Africa Standard Bank is mandated as Financial Adviser to Forest Petroleum on the development and financing of a 545MW CCGT IPP using natural gas from the offshore Ibhubesi gas field 2009 Morupule B Power Project, Botswana The US$1.6bn coal-fired Morupule B Power Project in Botswana. Standard Bank was mandated as Joint Lead Arrangers (with ICBC) and Hedge Provider for 20 year USD 825m Term Loan Facility and US$140m Bridge Facility 2009 Eskom Kusile Project (6*800MW), South Africa Standard Bank acted as the Mandated Lead Arranger in the Kusile Boilers contract. Standard Bank acted with 4 international banks in funding the 705m contract over 12 years. Export Credit was also arranged with Euler Hermes (German ECA) over the foreign content of the contract with Hitachi Power Europe Ongoing Just Energy, South Africa Financial Advisor to Oxfam s energy subsidiary, Just Energy, to develop [37]MW of wind farms in the Eastern Cape Ongoing CGNPC, South Africa Financial Advisor to China Guangdong Nuclear Power Corporation ( CGNPC ), China s largest Nuclear Energy company, in support of their bid to build South Africa s potential nuclear power programme Ongoing - Khanyisa IPP, South Africa Standard Bank is mandated as the Financial Advisor to Anglo American s 450MW discard coal-fired IPP

9 Selected Energy Credentials (Contd ) 8 Financial Advisory and/or Debt Arranging Ongoing Biotherm Energy, South Africa MLA to Biotherm Energy on its 4 wind farms and 2 PV projects Ongoing Enel/Built Africa/Power Company, South Africa FA and MLA to Enel /Built Africa/the Power Company on their multiple PV projects Ongoing Scatec Solar, South Africa Sole MLA to Scatec Solar on its various Solar PV projects in the Northern and Eastern Capes Ongoing Oelsner Group Wind Farms, South Africa Standard Bank mandated FA and MLA to Oelsner Groups on two wind farms in the Western Cape Ongoing African Clean Energy Developments, South Africa MLA for African Clean Energy Development ( ACED ) to develop 3 wind farms [300]MW in the Eastern Cape Ongoing SARGE/Gestamp/Shanduka, South Africa Project / Equity FA, MLA and Carbon Credits provider to SARGE/Gestamp/Shanduka s 75MW wind farm Ongoing SunEdison, South Africa MLA to SunEdison in connection with the development of its [300]MW multiple solar PV projects Ongoing Solar Capital, South Africa FA and MLA for the 75MW De Aar PV project in the Northern Cape Ongoing CEC, Zambia Standard Bank mandated FA and MLA to CEC on its 40MW Kabompo Gorge Hydroelectric Power Station Ongoing SARGE/Elecnor, South Africa Project / Equity Financial Adviser, MLA and Carbon Credits provider to SARGE/Elecnor on their 27MW PV project

10 Selected Energy Credentials (Contd ) 9 Financial Advisory and/or Debt Arranging Ongoing SARGE, South Africa FA, MLA and Carbon Credits provider to SARGE s 140MW wind and 75MW PV projects Ongoing Solar Reserve, South Africa FA to Solar Reserve on its multiple Solar CSP plants, using molten salt storage technology, each totalling [80-100]MW, in South Africa Ongoing Gitson Energy, Kenya MLA and FA to Gitson Energy s [300MW] Wind Power Project in Bubisa, Kenya Ongoing Aeolus, Kenya MLA to Aeolus Kenya Ltd on a 60MW wind farm project Ongoing Aldwych International, Kenya Joint Lead Arranger for long-term financing to Aldwych International for the 300MW Lake Turkana Wind Project valued at US$760m Ongoing Basil Read Energy, South Africa Mandated as MLA to BRE and Metrowind s [27]MW wind farm near Port Elizabeth in the Eastern Cape Ongoing Astrum Energy & Basil Read Energy, South Africa Standard Bank has been mandated as MLA to Astrum Energy and Basil Read Energy s [60]MW solar PV in the Western Cape Ongoing Lanco, South Africa MLA to Lanco on its 3 PV power projects [combined 130]MW Ongoing Renova, South Africa MLA to Renova on its 5 PV projects [combined 35]MW

11 Private and confidential Section: 3 Our African Infrastructure Understanding

12 African Infrastructure Context 11 Key points Inadequate infrastructure is cited as a key constraint to investment and growth SSA requires $93bn/year in infrastructure investment to meet MDG African Context Positive correlation between infrastructure expenditure and GDP growth Inadequate infrastructure is cited as a key constraint to investment and growth (ADB, 2007) The provision of quality infrastructure is a necessary element of any strategy for economic integration and sustainable development in Africa $93bn/year in infrastructure investment required in SSA in order to meet MDG, (or around 15% of GDP) 15 countries in Africa are land-locked, with 40% of the continent s population being estimated to live in these countries; hence Table 1: Overall Infrastructure Spending Needs for SSA ICT 21.9 Irrigation Power Transport WSS Better policy frameworks to attract investment required Efficient cross-border transportation is vital for their economic development Opportunity 1: Potentially high economic returns to investment in infrastructure, but requires better policy frameworks to attract investment and align economic returns with investor risks/returns Opportunity 2: Although investment currently dominated by public sector, there s a strong shift towards private sector (IPP, PPP, Corporate etc.).

13 Private and confidential Section: 4 Business and Financing Challenges

14 Business and Financing Challenges 13 Key points High opportunity costs of insufficient electricity supply Key Issues Opportunity Costs of insufficient electricity supply/electrification High Cost of Unserved Energy Reality Check: the real developmental costs of delayed decisions!!.. Greater certainty in future tariffs is paramount New Generation Planning A complete financial model not a shopping list of projects Should include interest during construction (IDC) As an indicator to politicians, regulators and consumers about what realities we face Greater certainty in future tariffs is key to funding new investments today Effective domestic wheeling framework needed Greater support to credit ratings of utilities (key to tapping current EM liquidity) Effective Domestic Wheeling framework Framework must be standardised and transparent for all arrangements Pricing and risk sharing should facilitate wheeling not prevent it

15 Business and Financing Challenges 14 Key points Effective risk allocating approach Key Issues (Contd...) Leveraging credit quality private off-takers Allocating risk to those that are able to best manage it Creating a domestic industrial/mining offtaker group. e.g. Zambia s CEC Energy Innovative commodity risk management (commodity price indexation in loan terms) Unrivalled knowledge of sub- Saharan Africa through on ground presence Allowing more private players on regional power pools (e.g. SAPP) Cross-border PPAs Chicken and Egg situation (smaller countries can t build large projects alone) Mozambique s Mpanda Nkuwa 1,500MW hydro project would benefit entire region but needs Eskom Challenge: STE line and Mpanda Nkuwa require back-to-back contracts Strong product teams in Johannesburg, Lagos, Nairobi and London Could a Mozambique coal IPP sign a private PPA with mine in SA or Zambia? Integrated Mining/ Power projects Reality check: new mining investment is key to our economies over next 20 years Using Diesel Generators cost GDP and jobs New quality creditors for power projects: Commodity Buyers

16 Private and confidential Section: 5 Requirements for successful private sector participation

17 Key Requirements 16 Key points Finalise the enabling framework Overview Finalise the enabling framework to allow and facilitate private sector participation in the power sector E.g. In SA s IPPPP Market requires a bankable PPA (which allows for the appropriate risk allocation between the private sector and the buyer (SOEs or any Integrated System Operators)). This should include such items as: A balanced liability regime Bankable PPA are required Appropriate protections for the generation companies for risks not within their control A stablisation clause for changes of law Fair termination events for buyer and seller Appropriate termination compensation regime Government support required to stand behind buyer Clauses allowing for restructuring which may affect the buyer (e.g. unbundling of the Public utility) Government support required to stand behind buyer, in order to provide comfort to private sector (developers, equity participants, lenders, etc.) that PPA availability payments will be made accordingly and termination provisions are fair (and termination payments will be funded)

18 Key Requirements (Contd ) 17 Key points Need for independent offtaker / buyers Overview (Contd...) Market is looking for independent offtaker / buyer Independent buyer is seen as key by private sector Independent systems operator has been a successful model in other jurisdictions, seen by the market in a favourable light ISO has been a successful model

19 Key Requirements (Contd ) 18 Key points PPA 101 The PPA grants the concession and sets the tariff. It is the primary document that the SBO would focus on. To some extent all the others are secondary Grants the concession Grants the concession - gives the project the right to exist, and the right to generate electricity. Term typically years from completion of construction Ownership BOO or BOT Sale and purchase of capacity Sale and purchase of Net Electricals Generator (IPP) paid on the availability of net dependable power capacity irrespective of despatch sufficient to cover debt service, equity return and fixed O&M Variable O&M costs recovered through the sale of the net electrical energy dispatched Procurer (SBO) takes price and despatch risk Take or Pay Indexation Tariff payments may be indexed for inflation and movements in Foreign Exchange rates Procurer may take inflation and forex movements risk The responsibilities will be split Specifications and Performance Standards of the Plant PPA sets out the responsibility of the Generator to build by a given date a plant to very precisely documented specifications, operating standards and designs Generator / EPC Contractor takes the responsibility and risk of building the plant to the requirements of the Procurer Performance criteria Revenue Write Down provisions for non- Performance PPA includes provisions to reduce the payments payable to the Generator if the tested dependable capacity at any time or the actual availability [or the heat rate] is worse then the levels the Generator is contracted to provide Generator takes performance risk Delay LD s for late commissioning Delay LDs payable for late commissioning payable by Generator/ EPC Contractor Generator takes risk of late commissioning

20 Key Requirements (Contd ) 19 Key points PPA 101 (Contd...) The responsibilities will be split (Contd ) Third party responsibilities Water and Power Transmission interconnections Supply of Gas / Coal / Fuel Generator would seek to make it an obligations of the Procurer to design build and commission all required water and transmission linkages by an agreed date and prior to scheduled testing In many markets, the Generator would seek to make it an obligation of the Procurer to supply Gas / Coal / Fuel (ie energy conversion) Procurer takes responsibility for providing Water and Power Interconnections The PPA sets out provisions for the Procurer to keep the Generator whole and / or pay compensation if such facilities are late Procurer takes risk of fuel supply and pays deemed commissioning if fuel is not available Generator takes efficiency risk through an incentive penalty regime Permits Generator may take fuel / hydrology risk assuming satisfactory pricing and supply PPA allocates responsibility for obtaining risks permits Split between Procurer and Generator Natural Force Majeure PPA sets out provisions in relation to relief of liability and the provision of insurance (both damage and business interruption) to mitigate Natural Force Majeure Risk Insurance (Lightening, fire, earthquake, accidents, explosions, epidemics etc.) Force majeure / political events Political Force Majeure There are certain risks which are uninsurable, political in nature and which Generators will not accept and need to be taken by the Procurer (Act of war, blockade, boycott, rebellion, civil commotion, Change in Law and / or unjustified failure to renew permits) Procurer Risk Payments of deemed commissioning [or termination buyout if prolonged] or tariff adjustments to compensate for additional costs or revenue losses

21 Key Requirements (Contd ) 20 Key points PPA 101 (Contd...) The responsibilities will be split (Contd ) Termination Termination The Agreement will stipulate the Events of Default, cure periods and the termination regime In the event of termination due to Procurer default, the Procurer is obligated on request to purchase the plant for an agreed sum that covers debt and probably an equity return In the event of termination due to Generator Default, the Procurer has the right but not the obligation to purchase the plant but for a lesser sum covering only debt Credit Support In the event of termination due to Procurer Default and a purchase price being payable then lenders may seek some form of backstop credit support in respect of the payment to be made, typically in the form of a payment guarantee It is a matter of commercial negotiation as to whether SBO would be required to provide such a backstop. It may be possible to structure without

22 Key Requirements (Contd ) 21 Key points Availability payment structure Tariff structure integral component of PPA A number of different tariff structures are feasible Availability payment structure as the most commonly used structure The RFP for an IPP tender will specify the tariff structure which bidders must adhere to and will form the basis of payments to / from the Project Company (Generator) and the offtaker (Procurer) Each bidder will be invited to bid a number of Charge Rates Bidders would have to target LEC Occasionally charge rates can be firmly fixed and bidders would have to target LEC (Levelised Electricity Cost) based on an Asset Value (Brownfield) Lower charge rates however may not always equate to better value for money for the procurement Authority Base capacity component Fixed O&M component Fuel adjustment payment Variable O&M payment Capacity Payment Output Payment Payments typically split between Capacity and Output Service Payment For an availability driven tariff, payments will typically be split between Capacity and Output Capacity Payments are designed for recovery of all the fixed costs of the plant, including debt service, taxation, equity return and fixed O&M costs. Typically deductions for non-availability and / or poor plant performance would be netted off against these capacity payments Outputs Payments recover the variable operating costs of the plant and may also include an adjustment for fuel consumption

23 Private and confidential Section: 6 Potential Financing Structure

24 Financing Structure 23 Potential Financing Structure Leveraging credit quality of end-users Mines Smelter or Steel mill Commodity offtakers Unlocks the Chicken/Egg problem Facilitates investment in interdependent power, port and mining infrastructure at same time PPP basis Utility/Single Buyer PPA IPP Discard coal Sale of coal to local industry and smelters Mine or SmelterCo Private sector partnerships with public electricity, rail and port utilities But reduces investment, guarantee and operations burden on utilities/treasury Standard Bank can facilitate: Advisory Bring in foreign partners Debt Funding Commodity Risk Management Coal Mine Co Security of supply for Coking Coal Offtaker Commodity Offtaker RailCo PortCo

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