Africa cant miss the opportunity of mining related infrastructure ! - - PowerPoint PPT Presentation
Africa cant miss the opportunity of mining related infrastructure ! Can China help ? May 2014 Beijing Perrine Toledano @ CCSI SDSN Extractives Thematic Group Resource - driven countries have a huge funding gap that extractives
May 2014 – Beijing Perrine Toledano @ CCSI – SDSN Extractives Thematic Group
1 Source Reverse the curse: Maximizing the potential of resource-driven economies, McKinsey Global Institute, December 2013
Resource-driven countries need
Extractive industries will invest
US $ billion annually
Source: World Bank
, 2013
Infrastructure gap in a resource-driven country Onerous infrastructure development for mines
S h a r e d u s e a l l
s p a r a l l e l d e v e l
m e n t
b
h t h e m i n e a n d t h e h
t c
n t r y
Opportunities for: u Economies of scale u Economies of Scope u Developmental impacts
Country
Adequacy of National Supply Reliability of Supply Cost of Grid Power Extent of Trans. Infrastructure
Mines investment in self – supply power infrastructure 2000-2012: $1.3 billion 2013-2020: $1.4 - $ 3.3 billion Utility
Loss of large customers Loss of an opportunity to use the mines as anchor customers exhibiting economies of scale
Mines
Direct cost of self-supply is generally much higher (offset by continuous supply and consistent product quality)
Country
Weak utility Loss of exports and tax revenues Negative impact on GDP, and reduced employment opportunities
In Africa: Source: WB- VCC
Costs/benefits of a range of shared infrastructure projects 1= low, 2= medium, 3= high
While sharing is generally beneficial, the associated costs vary substantially between projects
SOURCE: Vale Columbia Center; McKinsey Global Institute analysis
3,0 2,0 1,5 2,5
Rail Port Pipelines Water Power Power Power Type of industry Bulk Bulk Gas Bulk Bulk Base Precious Number of projects assessed 7 4 1 1 2 2 2
Range of cost Average cost Range of benefit Average benefit
!
1 Source Reverse the curse: Maximizing the potential of resource-driven economies, McKinsey Global Institute, December 2013
between operators
between mining industry and
Extractive industries will invest
10
11
S Vale, main concessionaire
to finance:
S US$3.4bn railway
investment
S US$1bn port investment
S Corridor is already open
access and will continue to be under Vale:
S 4mtpa of 22mpta capacity
believed to be reserved for general cargo
S Passenger services to
continue running
S Reportedly, corridor design
allows capacity expansion
(up to 30 mtpa)
MOÇAMBIQUE* MALAWI*
Nacala*
504,2km(
E n t r e ( L a g
( ( Moa4ze( Cuamba( L i c h i n g a ( Nacala* Velha* Branch(Off(
~(262km( 79,1km( 98,6km( 138,5km( 62,5km(
2* 3* 4* 1*
CLN( CDN( CEAR( VLL( Name Shareholders Construction/Rehabilitation 80%(Vale(20%(CFM( 51%(SDCN((49%(CFM( 100%(Vale( 91,8((/((0((km( 0(((/(845,3(km( 0((/(98,6(km( 138,5(/(0(km( Total Distance 91,8((km( 911,3((Km( 138,5((Km( 797(((Km(
N a k a y a ( C a m b u l a t s i s s i (
29,3km( (~66km(( ~400km( ~298((km(
Fronteira( Makhanga(
Port Coal(Terminal( Exis4ng(Port( 51%(SDCN((49%(CFM( Corridor Distance 91,8(km( 583,3(Km( 98,6Km( 138,5((Km( U( U(
! Source: Vale
Resource-based African Development Strategy
RADS RADS
Anchor & “cluster” Stranded investment Stranded investment Anchor & “cluster” Agri-node & “cluster” feeder “TRUNK” Infrastructure: PPP
Idealised DC Configuration Idealised DC Configuration
Problem feeder Problem feeder “DENSIFICATION DENSIFICATION” ” Feeders often need Feeders often need to be funded thru to be funded thru’ ’ fiscus/grant fiscus/grant DC logistics “catchment”
Source: P. Jourdan
capacity-expansion?
logistic efficiency loss?
capacity of a regulatory body to supervise shared use?
profitable services?
20 40 60 80 100 120 140 1P Gas Reserves (bcm) 10000 20000 30000 40000 50000 Hyrdo Power Potentials (MWe)
have ¡national ¡power ¡systems ¡of ¡less ¡than ¡500 ¡ MW ¡ ¡
less ¡than ¡100 ¡MW. ¡ ¡
justify power plants large enough to exploit economies of scale whereas cheap and clean energy reserves are plentiful !
for power generation
Mines’ anchor demand can unlock the stalemate !
Source: World Bank
lines in disrepair
based grid : cost 0.18$/kwh but instead incur cost of diesel generation – 0.30$/kwh
loan to DRC’s utility to upgrade Inga 2’s electricity generation and transmission networks
utility bill credits + utility pays interest
clients, backbone for distribution lines
supply
Win – Win!
from 5 mines pumpint out 40-50 million liters/day of excess ground
water.
capacity about to serve half of the region’s water requirements.
plant for the wastewater of Arequipa city to meet its water needs and improve the water quality for downstream communities. How do you incentivize that? : “0 water discharge”, “Restricted access to water rights “ !
infrastructure
not build own infrastructure
a) Telecom adds capacity. b) Mine adds telecommunication capacity and leases to Telecom. b) Mine provides anchor demand for Telecom. a) Telecommunication capacity is added to required mining infrastructure at a lower cost (e.g. power, pipeline and railways).
Ownership model Service Arrangement
c) Government, Telecom and mining companies coordinate efforts and investments.
Example: Malaysia § Celcom and Petronas build fiber optic network along gas pipeline with spare capacity. Example: Brazil § In 2001 Vale wanted to partner with railroad partners and install fiber optic along 10,000km of rail lines and lease to Telecoms. Example: Mozambique:
service provider Vodacom.
tower (3,000 contracts).
Credible Utility
Strong Planning Framework Independent Regulator Sound and Clear Legal Framework
Maximise Infrastructure - Mine Synergies