The he B Blende nded F d Fina nanc nce R Roundt oundtabl ble - PowerPoint PPT Presentation

The he B Blende nded F d Fina nanc nce R Roundt oundtabl ble A FIT Report

Alex S x Sarac BCLP BCLP – Lo London Ble Blended Fin inance Co Conference

Berwin Be rwin, L , Lei eighton, , Pa Paisner – Ble Blended Fin inance Co Confe fere rence Convened with global development thought leaders and financiers to highlight MCC’s leading role within the Blended Finance arena and to broaden understanding of our work and impact. Highlights Over 75 senior officials from the private Berwin Leighton Paisner , London sector, development institutions, and 14 November 2017 Participants regional development banks along with The Venue global development thought leaders and financiers BLP Law, Dalberg Actionable, informed strategies for Partners unlocking capital flows at MCCC are Interactive and action-oriented . Discussions underdevelopment Outcome focused on sharing experiences, lessons and best Dialogue lead to a better understanding of practices in using development resources to the needs of private capital by mobilize private capital flows into projects with development partners Format development outcomes 3

“Billions to Trillions” through Blended Finance $2-3 Trillion SDG Funding Gap: ◦ 80% of this for infrastructure related to water, sanitation, transportation, power, public health and other much-needed public services. Global Capital Flows: ◦ Only a fraction of worldwide assets from banks, pension funds, insurers, foundations and companies are invested in sectors with development impact. ◦ Despite emerging and frontier market contributions to global GDP, they receive only a fraction of global capital flows because of risk and market inefficiencies. Mobilizing private capital towards development outcomes at scale requires a blended finance ecosystem with catalytic intermediaries and bankable projects

Infrastructure investments are also impacted by market risks Despite high returns and low default rates, investors still see emerging markets infrastructure as subject to downside risks • Political • Regulatory • Access to Capital: • Currency: projects collect revenues Risk of not being able Macro in local currency but debt repayment to secure financing Finance Risk is in foreign currency Risk • Credit/Counterparty: The risk of • Construction/ Operational default from borrowers on debt • Off-take: being unable to repayments secure long-term • Demand: Risk around commercial contractual commitment for Commercial Infrastructure viability and sales purchase of a resource. Risk Risk • Liquidity: The inability to exit/sell an asset when desired

6 Ag Agenda 8:00 am – 5:00 pm Session 1 Session 2 Why are blended finance principles needed? Or How can blended finance be used to get deals to Perspectives on Blended Finance Principles closure? An Analysis of Survey findings Moderator : Alexander Sarac , BLP Partner, Moderators : Michael Cupit (E&Y) and Christopher Edgerton Projects, Energy & Infrastructure Finance Warburton (Lions Head) Panelists : Session 3 • Chris Clubb (Convergence) Has Blended Finance worked? Learning though Experience, • Paul Horrocks (OECD) Lessons and Best Practices • Joyita Mukherjee (IFC) Moderator : Soren Andreasen (EDFI) • Colin Buckley (CDC) • Kay Parplies ( European Commission) Panelists: • Lisbet Peters (d.Capital) • Philippe Valahu (Private Infrastructure Development Group) • Peter Sullivan (Citibank) • Las Perera ( GuarantCo ) • Scot Mackin (Denham Capital) • Ana Hajduka (Africa GreenCo) • Isdert Boersma (FMO)

7 Africa Trade Insurance Agency IFC Agence française de développement (AFD) JICA AIIM Lion's Head Global Partners Allianz Global Investors McKinsey & Company Attendees AMEA Power Mott Macdonald Arup MUFG Development Finance Atkins Acuity Nedbank Institutions Aviva Investors OECD International Development Bechtel Overseas Private Investment Corporation Agencies CDC Palladium Infrastructure Funds Citi Private Infrastructure Development Group Convergence Finance Royal BAM Group Private Equity Cross Boundary SECO, Switzerland Foundations D Captial SIDA Industry Experts Dalberg Standard Chartered Bank Deloitte StandardBank Denham Capital Tanzania Development Bank Department for International Development The Bank of Tokyo-Mitsubishi EDFI USAID - Power Africa European Commission Wilberforce Chambers EY FMO Guarantco

Alexa xande nder D Dixon, S xon, Sr. D . Director or a and nd Jason B on Baue uer, D , Director or

Wh Why Blen ended ed Fi Finan ance ce Global Sustainable Development Global Investment Gap by Sector annual funding gap: Power - $ 530 B • • $ 2 T • Transport - $ 260 B 3% GDP Water & Sanitation - $260 B • • 14% annual savings Agriculture - $ 260 B • • 1.1 % of capital market • value Blended finance tools and instruments can be deployed improve the risk-return profile of projects with development impact to Port attract commercial funding and close the investment funding gap Airport Improved Project with Blended risk-return B Finance Commercial Viability profile Project without Improved development – TA, A Blended Finance bankable pipeline, 9 MCC Investment Portfolio Project with Development Impact Adapted from McKinsey

Th The e Wo World ld of Blen lended ed Fin Finan ance ce Blended Finance is the strategic use of development finance for the mobilization of additional finance towards sustainable development in developing countries By the numbers…. How it works… 17 Investing in projects Concessional OECD DAC Members in sectors with Commercial engaged in Blended development Capital Finance impact: Public & Blended Finance 16 Private Power • Transactions Transport • Structures Development Water and • Blended Finance facilities Tools Capital Mobilizing 7 Sanitation launched from 2000 – 2016 Public & Private Concessional / 4. non-concessional Historic average leverage Financing Sources Use of Finance Financing Structures 7 ratio of blended finance transactions Adapted from OECD 10

OECD Principles Alignment with MCC MCC Tools and Portfolio Blended Finance Instruments Blended Anchor Blended Finance use MCC’s core mission: Reducing and Vehicles poverty through economic to a Development Rationale Finance growth Innovation Grants and Grant Design Blended Finance to MCC Compacts: Principles Facilities • Identifies constraints to Mobilize Commercial Public Private Partnerships growth Finance Viability Gap Financing Target barriers to investment • The Development Technical Assistance Expands pipeline of • Assistance bankable projects Committee of the • Aligns private capital with OECD, a development priorities committee of bi- Enabling Environment and Tailor Blended Finance to MCC’s unique model increases lateral donors in Sector Reforms partner country capacity and Local Context which the US is a Investment Climate Reforms catalyzes results by incentivizing Utility Reform and Turnaround member, outlined good policies and reform the Blended Encourage Effective MCC provides a platform for Innovation Grants and Grant Finance Principles mission aligned development Facilities Partnering in Blended at the Roundtable partners to make investments Public Private Partnerships Finance at scale into vetted projects. Viability Gap Financing Monitor Blended Finance MCC monitors and tracks Quarterly Progress Reports progress throughout compact Evaluations for Transparency and lifetime M&E Portfolio Impact 11

Bl Blende nded F d Fina nanc nce: By D By Design gn MCC is uniquely positioned within the USG, finance sector and wider develop community to play a more catalytic role in the strategic use of development finance to mobilize private capital flows to our partner countries and views MCC as a Builder, Catalyst and Dealmaker for blended finance transactions Strategically invest in public infrastructure with our partner country. Create enabling environments and improved investment climates through policy and institutional reforms Support regulatory reforms necessary to unlock capital and strengthen local capital markets Builders Provide strategic, financial and technical advisory to create pipelines of investable opportunities. Crowd in private capital to advance compact goals or test innovative solutions Manage, Mitigate and Share risk associated with investing in new markets and sectors Unlock investment and growth opportunities for U.S. companies in MCC’s partner countries Catalysts Provide strategic grant capital to crowd in commercial finance Offer pathways to scale and capital to create markets for innovations and proven business models. Bring transactions and financially viable PPP projects to market that meet international standards Deal Makers 12