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 our core sectors |

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

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DBSA primary focus area 1 2 3 4 5 Maintain / Build Plan Plan Prepare Finance Prepare improve  Municipal  Project identification Provide vanilla and  Managing the  Supporting the assessments  Feasibility boutique financing design and maintenance and/or  Infrastructure plans assessments opportunities construction of key improvement of key  Advisory role  Technical assistance  Debt projects in the infrastructure infrastructure  Financial structuring  Mezzanine Finance education, health projects planning  Project Preparation  Limited non and housing sectors –  Project funds recourse lending  Lead arranger Management support South Africa South Africa  National and  National and South Africa  Under resourced  Municipalities  Municipalities provincial provincial municipalities  SOE  SOE government government  PPP  PPP departments departments  Private sector  Private sector  Municipalities  Municipalities R est of Africa R est of Africa  SOE  SOE  Public  Public – Private – Private Partnerships Partnerships  Sovereigns  Sovereigns | It is of strategic importance because it allows the Bank to offer an Through integrating across the value chain, DBSA is able drive infrastructure delivery in an effective and timely manner 4

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 |

Unknown value Known value Number and value of projects in PIDA PAP lists ▪ Most DFIs in Africa # currently participate in later stages of the project life cycle PIDA PAP is a set of large, priority infrastructure projects across Africa ▪ A growing number of DFIs are increasingly expanding 111 their scope of operations and venturing into project preparation 66 ▪ PIDA PAP lists 139 projects, of which 95 % by value are 17 45 11 in concept and pre - feasibility stage and 55% Concept ( Pre) feasibility Structuring are so ill - defined no capital value has been estimated 1 ETC 113 3 4 USD Bn |

1 Estimated total cost; extrapolated proportionately where values are unknown 5 SOURCE : PIDA PAP list |

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

1 Estimated project development and preparation costs USD Bn per annum 10.0 African priority Why this is not addressed at projects require scale today 4.7 ~USD 400Mn per ~ 2 - 3 annum (USD ▪ Commercial vehicles focus on 0.4 100 Mn in SADC ) assets/ sectors where Africa SSA SADC PIDA commercial returns are good PAP ▪ Most PPFs only solve for one part of the equation (funding), … yet decreased or for only part of the project disbursements due to lack of Increased Commitments… lifecycle (technical assistance) bankable projects Infrastructure Commitments, % of committed funds disbursed USD Bn ▪ No credible/ independent entity with active long - term interest in 56 vs. supporting governments’ 48 39 38 infrastructure development 2009 2010 2009 2010 |

1 Estimated at 5% of total estimated cost (ETC) 6 SOURCE: McKinsey MGI; World Bank; ICA; PIDA PAP |

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 2013 as a specialised and dedicated Unit within the DBSA Established 1 2 ▪ To bankability prepare sustainable priority projects within DBSA’s mandate to Purpose ▪ To provide project preparation facilities and skills to prepare bankable projects Our core services are: ‒ Funding of PP activities; Services 3 ‒ Mobilising advisors to prepare bankable projects ‒ Facilitating and managing project preparation activities ▪ South Africa; ▪ SADC; Footprint 4 ▪ Selected African countries outside SADC ( Nigeria, Kenya, Tanzania, Ghana, Ethiopia and DRC) | 8

PPU unit provides a comprehensive project developing solution to its clients

Enabling Project Pre - Bankable Project environment Definition feasibility Feasibility structuring Deal origination  PPU covers the entire cycle of project preparation  It maintains a balanced portfolio of projects at different stages of preparation • Actively originating deals by: - Identifying project opportunities from a project developer/sponsor perspective - Define project concept and scope Key • Engage with clients and obtain a mandate to act as project developer / sponsor / activities owner • Programmatic approach in developing projects to be role - out for more than one client | 9

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 Geographic  Africa: PIDA

 Core sectors Transport ‒ ‒ Water and sanitation ‒ Energy Sectors ‒ ICT  Secondary sectors (SA only) Social ‒

 Municipalities  SOCs  Government Departments Customers  Private companies (projects with a public good) | 15

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

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 is provided on commercial terms – PP funding expect recovery of PP funding invested as well as a return for the risk taken (PP funding provided is not a grant) Key project preparation principles role 3. The DBSA would aim to obtain a Mandated Lead Arranger on a competitive basis of the 4. The DBSA would aim to participate in the debt funding project on a competitive basis 11 |

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

Type of funding Funding partners  Project preparation own  Joint funding with other funding partners (e.g. Meridiam Capital) R100m p.a DBSA 1   Based on cost recovery and Gautrain and Transnet (only in sponsored return (self - sustaining relation to their own projects) model)  KfW  Project preparation funding R200m a PPDF  European Union  Grants  European Union  Project preparation grants &  ( participating DFIs: KfW, direct capital grants with b IIPSA R1.8bn DBSA, AFD, EIB) loans  Grants   Project preparation funding AFD R50m PPFS c  Grants rd 2 3 party funding Global  P roject preparation grants d Environment  Capital grants 1 Variable Facility (GEF)  Concession loans  Interest rate subsidies Green Climate  Guarantees e Fund (GCF)  On project by project basis:  Electra, Africa50, InfraCo, Other Project 1 ‒ Equity 2 Variable f Harith – Progeny Prep facilities ‒ Mezzanine Grants ‒ |

1 Based on individual projects, 2 DBSA is assisting with mobilizing seed capital from KfW 6 |

PPU project selection criteria 1 7 Sector / strategic fit Potential Investment Value 2 6 Development Cost recovery and Impact return 5 3 Institutional capacity of National / regional the project sponsor priority 4 Co - funding | 13

PPU is working on a number of initiatives with strategic partners Gautrain extension Independent Power Producer Program Window and expansions  RE IPP Expedited Bid  Small IPP  Coal baseload IPP  Gas IPP Develop Student IIPSA SADC PPDF Accommodation Funding Models R1.7 bn fund value R100 m fund value |

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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 2 3 213 80 0 2 0 3 26 83 54 11 0 118 11 1 Rest of Africa 57 131 South Africa 61 Energy Water Transport ICT Social Total # of projects in 13 9 6 1 1 30 active preparation |

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

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