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Hela Cheikhrouhou Manager, Private Sector Infrastructure Finance
Africa Carbon Forum, Nairobi, March 2010
African projects and programs:
Developing enhanced relationships between private
sector project developers and financial institutions
• The African Development Bank (AfDB) has extensive experience of working with Private Sector Project Developers and other Financial Institutions to structure project finance deals, including in the renewable energy sector.
• This includes sectors such as hydro power, solar, wind energy and cogeneration
• AfDB has track record helping local sponsors get interested European Sovereigns (i) finance the Project Validation documents for CDM (ii) commit to buy the carbon credits at a fair market price.
• AfDB does not buy carbon credits but is interested to know about the potential buyers as it can facilitate contacts with local project developers.
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Key Bottleneck--For Local project sponsors, preparing CDM proposals is an uphill battle.
Complicated access rules of the CDM.
– Limited expertise of project developers and little external support in the area.
– Long time period taken for validation of project proposals.
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• Leveraging financing: A key role is to leverage financing from other sources, providing comfort to investors on the financial viability of projects.
Project structuring by AfDB:• AfDB by mandate has appetite for greenfield project
finance, and can provide competitively priced long maturity loans, both hard currencies and where possible in local currency. AfDB leverages its AAA balance sheet.
• AfDB can offer guarantee instruments to mitigate risk.• Africa Financing Partnership is a platform for DFIs active
in Africa to work jointly. This allows for timely process to financial closing.
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• AfDB offers the A-B Loan structure where it extends the benefit of its Preferred Creditor Status to interested international commercial lenders.
• AfDB nurtures/invests in a portfolio of Private Equity Funds, which in turn can provide much-needed equity to help project developers reach financial closing.
• AfDB encourages local project developers to approach it at early stage. We provide guidance and advice to help along the project preparation as per best standards in project finance.
• On a targeted basis there can be grant support, and when feasible financing can be provided to Governments to help with sovereign project/project components.
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Providing a complete package:
• Financing via both Public and Private Sector Windows: This helps achieve synergies between the Government and Private sector in countries and makes the financing of Public Private Partnerships easier.
• The AfDB is able to provide financing for both small and large projects.
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The 250MW Bujagali Hydroelectric Power Project, a catalyst for Power Sector Reform
Uganda• Project Cost USD 736 M• ADB loan USD 110 M
ADB roles– Project Structuring– Long-term Lender
Benefits– Independent power project (IPP)– Expand the supply for electricity– Reduce generation cost– Long-term socio economic benefits
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The 15MW Sahanivotry Small Hydroelectric Power Project, a catalyst for Power Sector in Madagascar
Project Cost
• Project Cost USD 13 M
• ADB loan USD 6 M
ADB roles
– Project Structuring
– Long-term Lender
Benefits
– Independent power project (IPP)
– Expand the supply for electricity
– Reduce generation cost
– Long-term socio economic benefits
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The 9MW Buseruka Small Hydroelectric Power Project, a catalyst for Power Sector in Uganda
Project Cost
• Project Cost USD 26 mn
• ADB loan USD 9 mn
ADB roles
– Project Structuring
– Long-term Lender
Benefits
– Independent power project (IPP)
– Connection of rural population
– Reduce generation cost
– Long-term socio economic benefits
Additional slides
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Africa’s Energy resource Potential
Energy resources Potential Environmental Impact/climate change
Crude Oil Moderate Has an impact on environment
Natural Gas high Friendly
Hard coal high Has impact on environment
Hydro Electric Very high Friendly
Geothermal high Friendly
Wind high Friendly
Solar Very high Friendly
Cogen Moderate Friendly
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Africa’s Energy resources
Energy production in Africa is around 9,5% of the world output; but consumes …. only 3%.
Energy resourcesPercentage
%Comments
Crude Oil 12.1 Of the world Crude oil Production
Natural Gas Out 6,6
Hard coal 4,7 of the world’s hard coal
Hydro Electric 3,1
The exploitation of RE resources is still very low and is to be increased
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Description Figures Comments
Generation Capacity 66 GW
if South Africa were excluded, falls to 28GW in total for over 45 countries Coverage Less than Poland
current economic growth rates
5% per year
Just to sustain this growth level would require annual expansion in generation capacity of 4GW, whereas at present barely 1GW is being added
Access to electricity in 2005
24% of the population of
SSA
compared to close to 54% in South Asia and close to 90% in East Asia, the Middle East and Latin America
African countries contribute around 5% of GHG global emissions.
Highlights Energy supply AfricaHigh Need for Investment in the sector
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Clean Energy Investments at the AfDB
Technology CapacityInvestmen
t Comments
MW US$ mn
Biofuel NA 242Projects currently under preparation
Cogeneration 410 649Identified by the Cogeneration program
Geothermal 600 1360 Studies to be undertaken
Hydro 283 385 Small hydro only
Solar (CSP) 900+200 560Identified incl. North Africa CSP program (900MW)
Wind 921 1860identified but excl. Morocco & South Africa
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Way forward
Africa needs to continue it investments programs in particular
in the Energy sector – with Focus on Clean Investments:
New Credit facility put in place by the AfDB
Assistance to Low Income Countries (LIC) with concessional
resources
Support Private Sector investments in Africa
Technical assistance to RMC to increase their clean
investment
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In Summary
• Opportunity for lucrative investment in Africa expanding rapidly.
• Investment climate improving, but remains challenging with region and sector specific knowledge critical.
• The Infrastructure Finance Team is a partner that provides the key expertise required to assist investors/project sponsors achieve business success in Africa whilst harnessing sustainable development.
