Project preparation is one of DBSAs competitive advantages within - - PowerPoint PPT Presentation

STRATEGIES FOR FINANCING INFRASTRUCTURE: DBSA APPROACH TO PROJECT PREPARATION

Thabo Rakoloti: Project Preparation Specialist 23 November 2016

|

Role of PPU within DBSA PPU solution offering Key achievements

|

Project preparation is one of DBSA’s competitive advantages within

• ur core sectors

|

Integrated infrastructure solution provider Early state risk taker Tenor & developmental returns Smart partnerships DBSA value proposition

|

3

|

It is of strategic importance because it allows the Bank to offer an

4

Plan Prepare Plan Prepare 1 2 Finance 3 Build 4 Maintain / improve 5

• Project identification
• Feasibility

assessments

• Technical assistance
• Financial structuring
• Project Preparation

funds

• Lead arranger

Provide vanilla and boutique financing

• pportunities
• Debt
• Mezzanine Finance
• Limited non

– recourse lending

• Managing the

design and construction of key projects in the education, health and housing sectors

• Project

Management support

• National and

provincial government departments

• Municipalities

South Africa

• Municipalities
• SOE
• PPP
• Private sector

R est of Africa

• SOE
• Public

– Private Partnerships

• Sovereigns
• Supporting the

maintenance and/or improvement of key infrastructure projects

• National and

provincial government departments

• Municipalities

Through integrating across the value chain, DBSA is able drive infrastructure delivery in an effective and timely manner

DBSA primary focus area

South Africa

• Municipalities
• SOE
• PPP
• Private sector

R est of Africa

• SOE
• Public

– Private Partnerships

• Sovereigns
• Municipal

assessments

• Infrastructure plans
• Advisory role

infrastructure planning South Africa

• Under resourced

municipalities

|

integrated value propositions along the infrastructure value chain

|

Africa has infrastructure funding needs of ~$120bn with ~95% of the initiatives still in concept & pre-feasibility development stage

|

113 3 4 Number and value of projects in PIDA PAP lists

▪ PIDA PAP lists 139 projects,

• f which

% by value are 95 in concept and pre

• feasibility stage

and 55% are so ill

• defined no capital

value has been estimated

▪ Most DFIs in Africa

currently participate in later stages

• f

the project life cycle

▪ A growing number of DFIs

are increasingly expanding their scope of operations and venturing into project preparation # USD Bn 45 66 111 Structuring ( Pre) feasibility 17 Concept 11

Known value Unknown value

ETC

1

PIDA PAP is a set of large, priority infrastructure projects across Africa

|

1 Estimated total cost; extrapolated proportionately where values are unknown SOURCE: PIDA PAP list

5

|

To move potentially impactful projects to bankable stage requires increase in project preparation investments

|

Why this is not addressed at scale today ~ 2

• 3

4.7 0.4 10.0 Estimated project development and preparation costs

1

USD Bn per annum Africa SSA SADC PIDA PAP 56 2010 2009 39 2010 2009 38 48 vs. Increased Commitments… Infrastructure Commitments, USD Bn … yet decreased disbursements due to lack of bankable projects % of committed funds disbursed African priority projects require ~USD 400Mn per annum (USD Mn in SADC 100 )

▪ Commercial vehicles focus on

assets/ sectors where commercial returns are good

▪ Most PPFs only solve for one

part of the equation (funding),

• r for only part of the project

lifecycle (technical assistance)

▪ No credible/ independent entity

with active long

• term interest in

supporting governments’ infrastructure development

|

1 Estimated at 5% of total estimated cost (ETC) SOURCE: McKinsey MGI; World Bank; ICA; PIDA PAP

6

|

Role of PPU within DBSA PPU solution offering Key achievements

The DBSA’s Project Preparation Unit (PPU) was created in 2013 to identify and prepare projects to bankability stage

|

Services Our core services are: ‒ Funding of PP activities; ‒ Mobilising advisors to prepare bankable projects ‒ Facilitating and managing project preparation activities 3 Footprint ▪ South Africa; ▪ SADC; ▪ Selected African countries outside SADC ( Nigeria, Kenya, Tanzania, Ghana, Ethiopia and DRC) 4 Established as a specialised and dedicated Unit within the DBSA 2013 1 Purpose ▪ To prepare sustainable priority projects within DBSA’s mandate to bankability ▪ To provide project preparation facilities and skills to prepare bankable projects 2

8

PPU unit provides a comprehensive project developing solution to its clients

|

9

Enabling environment Pre

• feasibility

Bankable Feasibility Project Definition

Project structuring

Deal origination Key activities

• Actively originating deals by:
• Identifying project opportunities from a project developer/sponsor perspective
• Define project concept and scope
• Engage with clients and obtain a mandate to act as project developer / sponsor /
• wner
• Programmatic approach in developing projects to be role
• ut for more than one

client

• PPU covers the entire cycle of project preparation
• It maintains a balanced portfolio of projects at different stages of

preparation

Where the Project Preparation Unit plays is guided by the DBSA mandate

• South Africa: NDP and sectoral plans e.g. IRP
• SADC: Regional Infrastructure Master Plan
• Africa: PIDA

Geographic

Sectors

• Core sectors

‒ Transport ‒ Water and sanitation ‒ Energy ‒ ICT

• Secondary sectors (SA only)

‒ Social

• Municipalities
• SOCs
• Government Departments
• Private companies (projects with a public good)

|15

Customers

|

PPU’s project preparation principles are guided by the DBSA’s strategic

• bjectives

|

11

• 1. The

principle of co - funding shall apply – sponsors are required to contribute towards the funding of the PP activities and stages

• 2. The DBSA’s

PP funding is provided on commercial terms – expect recovery of PP funding invested as well as a return for the risk taken (PP funding provided is not a grant)

• 3. The DBSA would aim to obtain a

Mandated Lead Arranger role

• n a competitive basis
• 4. The DBSA would aim to participate in the

debt funding

• f the

project on a competitive basis Key project preparation principles

|

PPU leverage DBSA’s strategic partners to sources 3rd party funding for project preparation

| Funding partners DBSA sponsored 1 3

rd

party funding 2 Type of funding

• Project preparation
• wn

funding

• Based on cost recovery and

return (self

• sustaining

model)

• Joint funding with other

partners (e.g. Meridiam Capital)

• Gautrain and Transnet (only in

relation to their own projects)

• Project preparation funding
• Grants
• KfW
• European Union

PPDF a IIPSA b PPFS c

• Project preparation grants &

direct capital grants with loans

• Grants
• Project preparation funding
• Grants
• European Union
• participating DFIs: KfW,

( DBSA, AFD, EIB)

• AFD

Global Environment Facility (GEF) d

• P

roject preparation grants

• Capital grants
• Concession loans
• Interest rate subsidies
• Guarantees

Green Climate Fund (GCF) e

R100m p.a R200m R1.8bn R50m Variable

1

Other Project Prep facilities f

• On project by project basis:

‒ Equity ‒ Mezzanine ‒ Grants

• Electra, Africa50, InfraCo,

Harith – Progeny

2

Variable

1

|

1 Based on individual projects, 2 DBSA is assisting with mobilizing seed capital from KfW

6

|

PPU project selection criteria

13

Sector / strategic fit Co

• funding

Development Impact Institutional capacity of the project sponsor 1 2 4 5 Cost recovery and return 6 Potential Investment Value 7 National / regional priority 3

|

PPU is working on a number of initiatives with strategic partners

Independent Power Producer Program

• RE IPP Expedited

Bid Window

• Small IPP
• Coal baseload

IPP

• Gas IPP

Gautrain extension and expansions IIPSA R1.7 bn fund value SADC PPDF R100 m fund value Develop Student Accommodation Funding Models

|

14

|

Role of PPU within DBSA PPU solution offering Key achievements

|

PPU’s pipeline projects has grown significantly over the last 12 months to a potential investment value of ~R213 billion

Investment values per sector

| Value , R billion 54 11 131 61 83 26 57 3 2 2 Social 3 Water 80 118 213 Transport Total ICT Energy 11 Rest of Africa

1

South Africa 13 9 6 1 30 # of projects in active preparation 1

|

1 Total investment values for projects outside of South Africa assumed a R15/US$ exchange rate 8

Regional composition of PPU projects – 72% of the potential funding

• pportunities are within South Africa

Assessment of Regional Split Potential DBSA Participation (R x million) Regional % Split Within South Africa 30 873 72% ERRs Approved - Due Diligence Stage 6 195 Appraisals Approved - Active Preparation Stage / Handed over to Lending 24 678 Within SADC (Excl SA) 8 006 28% 67% ERRs Approved - Due Diligence Stage 2 697 Appraisals Approved - Active Preparation Stage / Handed over to Lending 5 308 Outside SADC 3 978 33% ERRs Approved - Due Diligence Stage 1 547 Appraisals Approved - Active Preparation Stage / Handed over to Lending 243 TOTAL 42 857 72 % 19 % 9 %

Regional Split (%)

Within South Africa Within SADC (Excl SA) Outside SADC

Number of projects by sector and regional location Water Transport Energy ICT Social Total Inside SA 9 2 5 1 1 18 Rest of Africa

• 4

8

• 12

TOTAL 9 6 13 1 1 30 |

1

| 18

Mohale Rakgate General Manager: Project Preparation Unit mohaler@dbsa.org (+ 27) 11 313 3179

CONTACT DETAILS