Financing Power Projects in Africa

Jeannot Boussougouth
Senior Manager: Energy, Utilities and Infrastructure
Investment Banking Coverage
Jeannot.Boussougouth@standardbank.co.za
Standard Bank

1 July 2011

UNECA 2011, Addis Ababa

Contents 1

Section Page

1. Introduction 2

2. Standard Bank 4

2.1 Natural partner in Africa 5

2.2 Recent Accolades 6

2.3 Selected Infrastructure Credentials 7

3. Our African Infrastructure Understanding 10

4. Business and Financing Challenges 13

5. Requirements for Successful Private Sector Participation 16

6. Potential Financial Structure 23

7. Standard Banks Value Proposition 25

8. Case Study: Morupule B Coal Power Plant Financing 34

Private and confidential
Section: 1
Introduction
Introduction 3

Standard Bank is the largest bank in Africa

We are present in 17 countries across Africa (especially Sub-Saharan Africa)

Our current market capitalisation is USD 24.77billion (11 January 2011) and our Total Assets are USD 182.6 billion (June 2010 Interims)
We are 20% owned by ICBC (the worlds largest bank)
In most African countries, Standard Bank operates as an integrated corporate and investment bank

The purpose of todays presentation is to :

Introduce Standard Bank to the audience in terms of our offering, capabilities and strengths in Africa

Highlight business and financing challenges in the African power space

Highlight Standard Banks proposed financing solutions, including ECAs
Highlight some of the most attractive power projects in Africa
Private and confidential
Section: 2
Standard Bank
 Standard Bank: Natural partner in Africa 5

Key points Most comprehensive network in Sub-Saharan Africa

On-the-ground
presence in 17 On-the-ground presence in 17 African countries
African countries

Nearly 150 years of experience in Africa

Largest bank in Africa

Over 40,000 employees in Africa

Over 8,000 bank branches headquartered in
Unrivalled Johannesburg
knowledge of sub-
Growth on the continent is a key strategic focus area
Saharan Africa
through on ground
Investment banking presence across the region and in key
presence
markets strengthened by recent acquisitions:

IBTC Chartered Bank, Nigeria

CFC Bank, Kenya
Recent banking licence awarded - Angola Standard Bank
Strong product
teams in Angola (33.3 million) Lesotho (1.7 million) Nigeria (154.7 million) Zambia (14.6 million)
Johannesburg,
Lagos, Nairobi and Botswana (1.8 million) Malawi (12.8 million) South Africa (47.4 million) Zimbabwe (13.1 million)
London DRC (63.6 million) Mauritius (1.2 million) Swaziland (1.1 million)

Ghana (23.1 million) Mozambique (20.3 million) Tanzania (37.8 million)

Kenya (34.7 million) Namibia (2.1 million) Uganda (27.6 million)

 Recent Accolades
Key points
Euromoney: Best The Banker 2010, 2009, 2008
Deal of the Year Africa: Bonds (2010)
Investment Bank in
Deal of the Year Africa: Capital Raising (2010)
Africa (2010)
Deal of the Year Africa: Structured Finance
(2010)
African Bank of the Year (2009, 2008)
Bank of the Year, South Africa (2009, 2008)
Best Investment Bank from Africa (2009, 2008)
Best Bank in Botswana, Lesotho, Malawi,
Swaziland , Tanzania (2009)
Deal of the Year for the Ruashi Copper Mining
Project in DRC (2008)
African Banker: Deal of the Year - Botswana for National
Development Bank BWP100 million 11.25%
Investment Bank of
notes due 2017 (2008)
the Year, Africa
Deal of the Year - DRC for the Ruashi Copper
(2009) Mining Project (2008)
Deal of the Year - Finland for Talvivaara Nickel
Project US$320m debt facility (2008)
Deal of the Year - Germany for Kreditanstalt fur
Wiederaufbau NGN28.7 billion 8.5% notes due by
2011 (2008)
Deal of the Year - Tanzania Electricity Supply
Limited TZS300 billion syndicated loan (2008)
Deal of the Year - Zambia Sugar Project (2008)
Deal of the Year (South Africa) for the 20%
Africa Investor: Best investment by ICBC in Standard Bank (2008)
Africa investment Deal of the Year Award - Bahrain for Arcapita
Bank (2009) Bank US$1.1b syndicated Murabaha facility
(2008)
Most innovative in Trade and Project Finance
(2008)
Ranked No 1 in sub-saharan Africa and No 106 in
The Banker Top 1000 World Banks (2008)
Standard Bank has won various awards that demonstrate our capabilities across the entire range of advisory and funding services in Africa
African Banker 2009, 2008
Euromoney 2010, 2009
Best Investment Bank in Africa (2010)
Best Investment Bank in Nigeria (2010)
Best Bank in South Africa (2010)
Best Equity House in Africa (2009)
Lakatabu Expansion - Africa Industrial Deal of the
Year (2009)
MTN Uganda - Africa Telecoms Deal of the Year.
(2009)
Zain - Middle East Telecoms Deal of the Year
(2009)
Global Finance Magazine 2009
Africa Investor 2009
Best Africa Investment Bank (2009)
Best Africa Research Team (2009)
Infrastructure Deal of the Year for Gautrain (2008)
EMEAFinance 2009, 2008
Environmental Finance Magazine - 2009
Carbon Finance Deal of the Year for Camco-
Standard Bank Structured Carbon Credits
Transaction (2009)
6
Investment Bank of the Year, Africa (2009)
Best Issuing House in Africa (awarded to Stanbic
IBTC Bank) (2008)
Deal of the Year - ICBC 20% acquisition of
Standard Bank (2008)
Best Debt Bank in Africa (2009)
Best Foreign Exchange Provider in South Africa
(2009)
Best Investment Bank in Africa (2009)
Best Investment Bank in Nigeria (2009)
Best Investment Bank in South Africa (2009)
Best Investment Bank in Africa (2009, 2008)
Best Investment Bank in Nigeria (awarded to
Stanbic IBTC Bank) (2009)
Best Natural Resources Deal in EMEA:
Kayelekera Uranium project (2009)
Best Oil and Gas Deal in Africa: Oando (2009)
Best Project Finance Deal in Africa: Botswana
Power Corporation (2009)
Best Project Finance House in Africa (2009)
Recent Energy, Power & Renewables Credentials (1/3) 7

Ongoing Scatec Solar, South Africa

Standard Bank has been mandated as Sole Financial Arranger and Underwriter, and BEE funding provider to Scatec Solar
on its various Solar PV project in the Northern Cape and Eastern Cape provinces of South Africa
Ongoing Solar Reserve, South Africa
Standard Bank has been mandated as financial advisor to Solar Reserve on its Solar CSP plants, using molten salt storage
technology, totalling [80-100]MW, in South Africa
Ongoing Confidential, Africa
Standard Bank has been mandated for a confidential Equity raise in Africa
Ongoing The Power Company/Built Africa, South Africa
Mandated as financial advisor for The Power Company/Built Africa [20]MW Solar PV Project, over several South African sites
Ongoing Gitson Energy, Kenya
Mandated lead arranger & financial advisor for Gitson Energys [300MW] Wind Power Project in Bubisa, Kenya
Ongoing Solar Capital, South Africa
Standard Bank has been mandated as financial advisor and main lead arranger for Solar Capital on its five Solar PV plants in
the Northern Cape
Ongoing African Clean Energy Developments, South Africa
Standard Bank has been mandated as main lead arranger for African Clean Energy Development (ACED) to develop a
[400MW] wind farm in cookhouse in the Eastern Cape
Ongoing CGNPC, South Africa
Standard Bank has been mandated as a financial advisor to China Guangdong Nuclear Power Corporation (CGNPC),
Chinas largest Nuclear Energy company, in support of their bid to build South Africas potential nuclear power programme
Ongoing Just Energy, South Africa
Financial Advisor to Oxfams energy subsidiary, Just Energy, to develop [74MW] of wind farms in the Eastern Cape
Ongoing Italgest, South Africa
Standard Bank has been mandated as Financial Advisor to Italgest on its [100 MW] Solar PV project.
Recent Energy, Power & Renewables Credentials (1/2) 8

Ongoing BHP Billiton, DRC

Mandated Transaction Advisor to BHP Billiton SA (Pty) Limited on the INGA 3 hydro-electric project concept study in the
Democratic Republic of Congo.
Ongoing Mphanda Nkuwa Hydropower Project, Mozambique
Financial advisor to the Mphanda Nkuwa consortium on the development of 1500 MW hydro electric project in Mozambique
Ongoing Anglo American, South Africa
Standard Bank has been mandated as the Financial Advisor to Anglo Americans [450MW] discard coal-fired IPP near
Witbank
Ongoing SARGE, South Africa
Standard Bank has been mandated as the sole Project and Equity Raising Financial Advisor and Lead Arranger to the
SARGE 50 MW, Solar PV project in the Northern Cape, as well as 216 MW of wind projects
Ongoing Forest Oil Corporation, South Africa
Standard Bank has been mandated as Financial Adviser to Forest Oil Corporation in connection with the development of an
integrated [750-800 MW] natural gas to power project
Ongoing - Oelsner Group Wind Farms , South Africa
Standard Bank mandated Financial Advisor and Lead Arranger to Oelsner Groups two wind farms being Kerrifontein
(20.8MW) and Langefontein (50MW)
Ongoing Confidential , South Africa
Standard Bank has been mandated as the sole Project and Equity Raising Financial Advisor and Lead Arranger to a SA
renewable energy company on a multiple wind farm project
Ongoing Volta River Authority, Ghana
Standard bank has been mandated as Financial advisor to VRA on the expansion of the Takoradi power plant
Ongoing - Aldwych International, Kenya
Joint Lead Arranger for long-term financing to Aldwych International for the 300MW Lake Turkana Wind Project valued at
US$760m
Ongoing - Gulf Power, Kenya
Co-lead Arranger of the Greenfield 84MW Athi River HFO power plant developed by Gulf Energy
Standard Bank Recent Energy, Power & Renewables Credentials (3/3) 9

Ongoing redcap, South Africa

Standard Bank has been mandated as the Lead Arranger for the Kouga Wind Farm project
Ongoing - AMD Energia, South Africa

Standard Bank has been mandated as the Lead Arranger for Alt-Es multiple solar PV projects
Ongoing Confidential, Africa

Standard Bank has been mandated as the Buyside Financial Adviser for the purchase of a power station
Ongoing Confidential, Africa

Standard Bank has been mandated as the Sellside Financial Adviser for the sale of a power station
Ongoing Aeolus, Kenya

Standard Bank has been mandated as the Financial Advisor and Lead Arranger to Aeolus Kenya Ltd on a 60MW wind farm project
Ongoing Electromaxx, Uganda
Sole Lead Arranger of the expansion from 25MW to 50MW of the Electromaxx HFO power plant facility
2010 Companhia Moambicana de Hidrocarbonetos, S.A. (CMH), Mozambique
Standard Bank acted as FA and lead arranger to Companhia Moambicana de Hidrocarbonetos, S.A. for the funding of its share of the
project costs for the expansion of the Central Processing Facility at the Pande and Temane fields reservoirs near Bazaruto
2009 - Mmamabula Energy Project, Botswana
Mandated by CIC Energy for a 1200 MW coal fired power plant, coal mine and related infrastructure in Mmamabula, Botswana. Project
size of US$5 billion and mandated as co-lead arrangers for the ECIC covered ZAR tranche as well as the ZAR commercial facility.
2009 Eskom, South Africa
Standard Bank acted as the Mandated Lead Arranger in the Kusile Boilers contract. Standard Bank acted with 4 international banks in
funding the Euro 705 million contract over 12 years. Export Credit was also arranged with Euler Hermes (German ECA) over the
foreign content of the contract with Hitachi Power Europe.
 Private and confidential
Section: 3
Our African Infrastructure Understanding
African Infrastructure Context 11

Key points African Context

Positive correlation between infrastructure expenditure and GDP Table 1: Overall Infrastructure Spending Needs for SSA
Inadequate growth (Economic Research (Aschauer, 1989; Munnell, 1990) )
infrastructure is _e.g. through increased productivity, reduced logistics costs etc.
cited as a key
constraint to Conversely, inadequate infrastructure is cited as a key constraint to
investment and
growth investment and growth (ADB, 2007)

Therefore, the provision of quality infrastructure is a necessary

element of any strategy for economic integration and sustainable
development in Africa

SSA requires SSA requires $93bn/year in infrastructure investment to meet MDG,

$93bn/year in (or around 15% of GDP)
infrastructure
investment to meet 15 countries in Africa are land-locked, with 40% of the continents
MDG
population estimated to live in these countries

Hence efficient cross-border transportation is vital for their

economic development

However, the cost of trucking increases in Africa by between 684%

- 1560% due to poor road conditions, with 40% of food produced in
Better policy
rural Africa degrading due to the lack of roads and bridges (Council
frameworks to
attract investment for Scientific & Industrial Research (CSIR))
required
Opportunity 1: Potentially high economic returns to investment in
infrastructure, but requires better policy frameworks to attract
investment and align economic returns with investor risks/returns

Opportunity 2: Although investment currently dominated by public

sector, theres a strong shift towards private sector (IPP, PPP,
Corporate etc.).
African Infrastructure Characteristics 12

Key points African Infrastructure Characteristics

Context:
On-the-ground
presence in 17 Investing in African power / infrastructure is not usually for the marginal player more a specialist activity so less subject to
African countries boom and bust

Project lead times will likely take longer than the credit crunch/global recession, e.g. often 3 years plus

Developer Perspective:

Some cut backs in capital expenditure (e.g. focus on lower risk markets) but reduced bank financing capacity is a larger issue

Financing Perspective:
Ability of African
banks to raise USD
Ability of African banks to raise USD has been dramatically affected, hence a focus on local currency financings which caps
dramatically
affected project size

Current turmoil in the global credit markets has impacted on closings and increased borrowing costs. However, few clients have
walked away with more club deals seen. Limitation on banks liquidity/capacity BUT project finance less affected than most debt
financing classes

Flight to ECAs and DFIs across all markets, not just Africa. Follow on question is their ultimate African appetite given competing
liquidity demands
Flight to ECAs and
Supplier Perspective:
DFIs across all
markets
Recent softening of forward-looking equipment prices but no dramatic plummet. Note most bail-outs encourage infrastructure
spending
 Private and confidential
Section: 4
Business and Financing Challenges
Business and Financing Challenges 14

Key points Key Issues

Opportunity Costs of insufficient electricity supply/electrification

High opportunity costs
of insufficient
electricity supply Cost of Unserved Energy: $1.50/kWh (IRP 2010), $10/kWh (Dept of Energy)

Small Diesel Generator: $1/kWh plus

OCGT Diesel turbines: 30c 50c/kWh peaking power

Subsistence charcoal: destruction of our forests

Greater certainty in Reality Check: the real developmental costs of delayed decisions!!...
future tariffs is
paramount New Generation Planning

A complete financial model not a shopping list of projects

Should include interest during construction (IDC)

As an indicator to politicians, regulators and consumers about what realities we face

Effective domestic
Greater certainty in future tariffs is key to funding new investments today
wheeling framework
needed Greater support to credit ratings of utilities (key to tapping current EM liquidity)

Effective Domestic Wheeling framework

Framework must be standardised and transparent for all arrangements

Pricing and risk sharing should facilitate wheeling not prevent it

Business and Financing Challenges 15

Key points Key Issues (Contd...)

Leveraging credit quality private off-takers

Effective risk
allocating approach
Allocating risk to those that are able to best manage it

Creating a domestic industrial/mining offtaker group. e.g. CEC Energy

Innovative commodity risk management (commodity price indexation in loan terms)

Allowing more private players on regional power pools (e.g. SAPP)

Unrivalled Enables smaller countries to reduce burden on their utilities/Treasury

knowledge of sub-
Saharan Africa Cross-border PPAs
through on ground
presence Chicken and Egg situation (smaller countries cant build large projects alone)

Mozambiques Mpanda Nkuwa 1,500MW hydro project would benefit entire region but needs Eskom

Challenge: CESUL line and Mpanda Nkuwa require back-to-back contracts

Strong product
Could a Mozambique coal IPP sign a private PPA with mine in SA or Zambia?
teams in
Integrated Mining/ Power projects
Johannesburg,
Lagos, Nairobi and
London Reality check: new mining investment is key to our economies over next 20 years

Using Diesel Generators cost GDP and jobs

New quality creditors for power projects: Commodity Buyers

 Private and confidential
Section: 5
Requirements for successful private sector participation
Key Requirements 17

Key points Overview

Finalise the enabling framework to allow and facilitate private sector participation in the power sector
Finalise the enabling
framework
E.g. In SA. New Generation Regulations of August 2009 is a positive step, but market requires more clarity on
process (amongst several other issues)

Rules on Selection Criteria for Renewable Energy Projects

Market requires a bankable PPA (which allows for the appropriate risk allocation between the private sector and the buyer
(SOEs or any Integrated System Operators)). This should include such items as:

Bankable PPA are A balanced liability regime

required
Appropriate protections for the generation companies for risks not within their control

A stablisation clause for changes of law

Fair termination events for buyer and seller

Appropriate termination compensation regime

Government support Clauses allowing for restructuring which may affect the buyer (e.g. unbundling of the Public utility)
required to stand
behind buyer Government support required to stand behind buyer, in order to provide comfort to private sector (developers, equity
participants, lenders, etc.) that PPA availability payments will be made accordingly and termination provisions are fair (and
termination payments will be funded)

E.g. In SA, if buyer is Eskom, NT support for PPA required as Eskom is already highly leveraged. Further PPA-type
commitments could negatively impact on Eskoms balance sheet and current debt covenants. Risk that private
sector not prepared to enter into PPAs with Eskom without Government backstop
Key Requirements (Contd) 18

Key points Overview (Contd...)

Need for
If buyer is ISO, NT support required as will be newly formed company with no trading history. Private sector will
independent offtaker require Government backstop for new entity
/ buyers
Cash-flow timing risk monthly payments under PPAs versus collections from distribution companies
(municipalities), large industrial users and Eskom Distribution

Market is looking for independent offtaker / buyer e.g. Eskom is seen to be conflicted as a fellow generator and somewhat
higher risk creditworthiness

Independent buyer is seen as key by private sector

ISO has been a
successful model Independent systems operator has been a successful model in other jurisdictions, seen by the market in a favourable light
Key Requirements (Contd)
Key points PPA 101
The PPA grants the concession and sets the tariff. It is the primary document that the SBO would focus on. To some extent all
the others are secondary
Grants the concession
Ownership
Sale and purchase of
capacity
Sale and purchase of
Net Electricals
Indexation
The responsibilities will be split
Specifications and
Performance Standards
of the Plant
Revenue Write Down
Performance criteria provisions for non-
Performance
Delay LDs for late
commissioning
19
Grants the concession - gives the project the right to
exist, and the right to generate electricity. Term
typically 20-25 years from completion of construction
BOO or BOT
Generator (IPP) paid on the availability of net Procurer (SBO) takes price and despatch risk
dependable power capacity irrespective of despatch
Take or Pay
sufficient to cover debt service, equity return and fixed
O&M
Variable O&M costs recovered through the sale of the
net electrical energy dispatched
Tariff payments may be indexed for inflation and Procurer may take inflation and forex movements
movements in Foreign Exchange rates risk
PPA sets out the responsibility of the Generator to Generator / EPC Contractor takes the responsibility
build by a given date a plant to very precisely and risk of building the plant to the requirements of
documented specifications, operating standards and the Procurer
designs
PPA includes provisions to reduce the payments Generator takes performance risk
payable to the Generator if the tested dependable
capacity at any time or the actual availability [or the
heat rate] is worse then the levels the Generator is
contracted to provide
Delay LDs payable for late commissioning payable by Generator takes risk of late commissioning
Generator/ EPC Contractor
Key Requirements (Contd)
Key points PPA 101 (Contd...)
The responsibilities will be split (Contd)
Water and Power
Transmission
interconnections
Third party Supply of Gas / Coal / Fuel
responsibilities
Permits
Natural Force Majeure
Political Force Majeure
Force majeure /
political events
20
Generator would seek to make it an Procurer takes responsibility for providing Water and Power
obligations of the Procurer to design build Interconnections
and commission all required water and
The PPA sets out provisions for the Procurer to keep the
transmission linkages by an agreed date
Generator whole and / or pay compensation if such facilities
and prior to scheduled testing
are late
In many markets, the Generator would seek Procurer takes risk of fuel supply and pays deemed
to make it an obligation of the Procurer to commissioning if fuel is not available Generator takes
supply Gas / Coal / Fuel (ie energy efficiency risk through an incentive penalty regime
conversion)
Generator may take fuel / hydrology risk
assuming satisfactory pricing and supply
PPA allocates responsibility for obtaining Split between Procurer and Generator
risks
permits
PPA sets out provisions in relation to relief Insurance
of liability and the provision of insurance
(both damage and business interruption) to
mitigate Natural Force Majeure Risk
(Lightening, fire, earthquake, accidents,
explosions, epidemics etc.)
There are certain risks which are Procurer Risk
uninsurable, political in nature and which
Generators will not accept and need to be
taken by the Procurer Payments of deemed commissioning [or termination buyout
if prolonged] or tariff adjustments to compensate for
(Act of war, blockade, boycott, rebellion,
additional costs or revenue losses
civil commotion, Change in Law and / or
unjustified failure to renew permits)
Key Requirements (Contd) 21

Key points PPA 101 (Contd...)

The responsibilities will be split (Contd)

Water and Power Generator would seek to make it an Procurer takes responsibility for providing Water and Power
Transmission obligations of the Procurer to design build Interconnections
interconnections and commission all required water and
The PPA sets out provisions for the Procurer to keep the
transmission linkages by an agreed date
Generator whole and / or pay compensation if such facilities
and prior to scheduled testing
are late
Termination Supply of Gas / Coal / Fuel In many markets, the Generator would seek Procurer takes risk of fuel supply and pays deemed
to make it an obligation of the Procurer to commissioning if fuel is not available Generator takes
supply Gas / Coal / Fuel (ie energy efficiency risk through an incentive penalty regime
conversion)
Generator may take fuel / hydrology risk
assuming satisfactory pricing and supply
Permits PPA allocates responsibility for obtaining Split between Procurer and Generator
risks
permits

Termination The Agreement will stipulate the Events of
Default, cure periods and the termination
regime
In the event of termination due to Procurer default, the
Procurer is obligated on request to purchase the plant for an
agreed sum that covers debt and probably an equity return
In the event of termination due to Generator Default, the
Procurer has the right but not the obligation to purchase the
plant but for a lesser sum covering only debt

Credit Support In the event of termination due to Procurer It is a matter of commercial negotiation as to whether SBO
Default and a purchase price being payable would be required to provide such a backstop. It may be
Termination then lenders may seek some form of possible to structure without
backstop credit support in respect of the
payment to be made, typically in the form of
a payment guarantee
Key Requirements (Contd) 22

Key points Tariff structure integral component of PPA

A number of different tariff structures are feasible in this document we have focused on the most commonly used structure:
Availability payment
structure Availability payment structure

The RFP for an IPP tender will specify the tariff structure which bidders must adhere to and will form the basis of payments to /
from the Project Company (Generator) and the offtaker (Procurer)

Each bidder will be invited to bid a number of Charge Rates

Occasionally charge rates can be firmly fixed and bidders would have to target LEC (Levelised Electricity Cost)
based on an Asset Value (Brownfield)

Bidders would have Lower charge rates however may not always equate to better value for money for the procurement Authority
to target LEC
For an availability driven tariff, payments will typically be split between Capacity and Output

Capacity Payments are designed for recovery of all the fixed costs of the plant, including debt service, taxation,
equity return and fixed O&M costs. Typically deductions for non-availability and / or poor plant performance would
be netted off against these capacity payments

Outputs Payments recover the variable operating costs of the plant and may also include an adjustment for fuel
consumption

In the case of a merchant plant or Take or Pay agreement, the tariff structure is much simpler. Revenue = Plant Output (MWh)
Payments typically * Market Price (ZAR/MWh)
split between
Capacity and Output
Fuel adjustment
Base capacity component Fixed O&M component Variable O&M payment
payment

Capacity Payment Output Payment

Service Payment
 Private and confidential
Section: 6
Potential Financing Structure
Financing Structure 24

Potential Financing Structure

Mine or
Leveraging credit quality of end-users Utility/Single Buyer
SmelterCo
Mines

Smelter or Steel mill

PPA
Sale of coal to
Commodity offtakers
local industry
Unlocks the Chicken/Egg problem IPP and smelters

Facilitates investment in interdependent power, port and mining

infrastructure at same time
Discard coal
PPP basis

Private sector partnerships with public electricity, rail and port

utilities
Coal Mine Co RailCo
But reduces investment, guarantee and operations burden on
utilities/Treasury

Standard Bank can facilitate:

Security of supply
for Coking Coal
Advisory Offtaker
Bring in foreign partners
Commodity Offtaker PortCo
Debt Funding

Commodity Risk Management

 Private and confidential
Section 7:
Standard Banks Value Proposition
Standard Banks Value Proposition: Robust Project Advisory/Finance Services26

Our Project Advisory and Finance Services

A Standard Bank team of about 70 project f inance specialists (based in Johannesburg, Lagos, Nairobi, London, Beijing, and
Sao Paolo) provides advisory and arranging services to government and private sector clients on limited recourse projects
Strong
Our experts come f rom diverse disciplines, are knowledgeable in a variety of sectors and have an understanding of local
Multi-Disciplinary
regulatory f rameworks and f inancial market constraints
Team Structure
Our project f inance team is able to work closely with other areas of our banks to create customised solutions that draw on
sector and product expertise f rom across the banks

Standard Bank can act in any one or a combination of the capacities of financial advisor, arranger and underwriter of senior
debt, mezzanine debt and equity f or all large capital projects. Our project f inance services include:
Project evaluation and f easibility studies
Financial modelling and sensitivity analysis
Risk evaluation and risk mitigation strategies
Project Finance Advice on the structure of project contracts
Services
Taking an active role in negotiations
Financial structuring
Foreign exchange risk mitigation techniques
Arranging of multi-source f unding, including development f inance and export credit f inancing
Arranging and underwriting bank f inancing

We have established excellent relationships with development f inance institutions, multilaterals and major credit export
Excellent agencies having closed numerous project f inancings with them across a range of emerging markets
Relationships with
DFIs and ECAs Standard Bank Group is an Equator Principle Financial Institution, having adopted and integrated all 10 of the Equator
Principles which relate to Project Finance
Standard Banks Value Proposition: Experience with DFIs 27

Selected Experience with DFIs

Transaction Year Amount DFIs involved SB Role

EBRD, IFC, DEG, NIB, BSTDB,
Pulkovo Airport Expansion Project Current EUR1.2bn MLA and Bookrunner
EDB
EUR450m Mandated co-arranger
Lake Turkana Wind farm project, Kenya Current AfDB, DEG, FMO, Proparco
and lender

Petromax Power Project, Bulgaria Current Undisclosed EBRD Advisor, MLA

Nairobi Northern Corridor Concession, IFC, DEG, FMO, IDC, AfDB,

Current Undisclosed Advisor
Kenya PAIDF, EAIF
Guinea Allumina Project, Guinea Current US$2.8bn AfDB, EIB, IFC Advisor

Lekki-Eppe Expressway PPP 2008 US$300m AfDB Advisor and Lender

Monastir & Enfidha airport concessions, EIB, AfDB, IFC, OPEC, Arranger and
2008 562m
Tunisia PROPARCO Underwriter
Eleme Petrochemicals Company Ltd,
2007 US$125m IFC Arranger
INDORAMA Nigeria
Federal Grid Company, Russia 2007 RUB5.0bn EBRD Arranger

Empresa Nacional de Hidrocarbonetos de

2007 ZAR1.08bn EIB, MIGA Arranger
Moambique, Mozambique

Chelyabinsk Tube Plant,

2007 145m EBRD Arranger
Russia
RusHydro, Russia 2006 RUB6.3b EBRD Co-Arranger

Pervouralsk New Pipe Plant, Russia 2006 115m EBRD Arranger

Standard Banks Value Proposition: Experience with ECAs 28

Selected Experience Working with ECAs

Transaction Year Amount ECAs involved SB Role

Lake Turkana Wind farm project, Kenya Current EUR450m EKF, SACE Co-arranger and lender

Nord Stream Pipeline Project Current EUR3.9bn Hermes, SACE Arranger, lender

Kusile Power Project, South Africa Current Undisclosed Hermes TBC

Mmamabula, Botswana Current Undisclosed ECIC, China Exim MLA

El Boleo Project, Mexico Current US$1.2bn US Ex-Im, EDC, KDB Advisor, lender

Guinea Alumina Project, Current US$5.0bn COFACE, China Exim and ECIC Club participant and
Guinea arranger of ECIC tranche

Kolwezi Copper Cobalt Mine, DRC Current Undisclosed EDC, EFIC and ECIC Club participant and
arranger of ECIC tranche

Mozal Aluminium Project, Current Undisclosed COFACE Club participant and

Mozambique arranger of ECIC tranche

Federal Palace Hotel and Casino, 2008 US$167m ECIC Lead arranger and
Nigeria underwriter

Akwa Ibom Power Project, Nigeria 2006 US$60m US Exim, ECIC Club participant and
arranger of ECIC tranche

Empresa Nacional de Hidrocarbonetos de 2006 ZAR1.08bn ECIC Arranger

Moambique,
Mozambique

Sasol Natural Gas Project, Mozambique 2004 ZAR 2.5bn SACE and EFIC Lead Arranger and
underwritter

Kansahi Copper project, 2004 US$120m ECIC Arranger

Zambia
Standard Banks Value Proposition: Export Finance Solution (1/4) 29

Export Credit Agencies

An Export Credit Agency (ECA) is typically a government agency or parastatal organisation. Its goal is to promote its domestic
industries and to foster economic growth through the provision of financial support to exporters.

This is most often achieved by providing political and commercial insurance cover or loan guarantees to banks.

A financing solution incorporating an ECA represents one of the most attractive financing solutions where there is a cross-
border movement of capital goods and/or services.

Given the general decrease in available liquidity and risk appetite for emerging markets and emerging market assets, the
significance and importance of ECA supported funding has increased.

Advantages of an Export Finance structure

ECA backed funding is especially beneficial in transactions requiring a longer tenor, large amounts and for higher risk grade
countries.

Repayments can be stretched to match future cash flows, not country limit constraints

Lower interest rates and competitive USD funding, eg Libor + 2.50% for ECIC-backed financing from South Africa

Alternative source of funding (not tying up all credit lines with Standard Bank)
Standard Banks Value Proposition: Export Finance Solution (2/4) 30

Mechanics

If a client or its subsidiary is sourcing capital goods and services from a supplier in South Africa, Standard Bank can provide an
Export Finance backed term loan which is partly guaranteed by the ECIC.

A lending rate of LIBOR + 2.50% is payable by the Borrower under the South African Export Finance scheme and an ECIC
premium for political risk insurance and commercial risk insurance is also payable by the Borrower.

The ECIC premium (for the provision of political and commercial cover) may be payable up-front as a lump sum payment or
payable over the drawdown period or annualised over the tenor of the loan.

The premium is determined by a number of factors including country, tenor, drawdown schedule, repayment profile and the
security package relating to the loan.

Borrower USD term loan

Standard Bank
(plus hedging if
required)

exported equipment Insurance cover

Equipment supplier ECA

eg in South Africa eg ECIC from South Africa
Standard Banks Value Proposition: Export Finance Solution (3/4) 31

ECIC

The principal objectives of the ECIC are:

to facilitate and encourage South African export trade by underwriting bank loans and investments outside the country, in
order to enable foreign buyers to purchase capital goods and services from the Republic; and

to provide investment insurance to South African companies investing in assets offshore.

Unlike a number of other export credit agencies (such as EFIC for instance), ECIC does not lend directly to projects.

ECIC provides insurance cover (100% Political and 85% Commercial Risk cover) to Lenders that are signatories to their
Export Credit Support Agreement and Standard Bank provides the liquidity.

The ECIC have appetite for most countries in Africa and are mandated to cover countries around the world in general.

Their appetite both in terms of number of transactions supported as well as quantum of support per transaction differs
from country to country.

They are actively looking to diversify their insurance portfolio and are most keen on countries where they currently have
low levels of exposure.
Standard Banks Value Proposition: Export Finance Solution (4/4) 32

Criteria to qualify for ECIC support

Tied Export Programme

The ECIC will support projects (under their tied export program) where there is an export of capital goods and services
from South Africa.

ECIC will support 85% of the South African export contract (SA contract value) and will require the Borrower to make a
down payment of 15% of the SA contract value to the South African exporter.

The minimum ECIC requirement for South African content is 50% of the value of the South African export contract.

The ECIC provides insurance for credits of a minimum of 2 years and typically up to a maximum of 12 years (in the
recent past we have seen longer tenors).
Private and confidential
Section: 8
Case Study
Case Study: Morupule B Coal Power Plant Financing 34

Chinese partners: USD1.6bn coal-fired power plant, 600MW, built by Chinese contractor CNEEC, funding arranged by ICBC/Standard Bank

Cost effective: The all-in cost of the whole project was USD 2.91m per MW (compared to USD4.5m per MW for the Kusile plant in South Africa)

Single financial solution: Standard Bank and ICBC arranged a US$ 825mn loan for 20 yr, backed by a Botswana Ministry of Finance guarantee, Sinosure ECA 15
yr guarantee and the World Bank 15-20 yr guarantee. A US$ 140 mn bridge finance facility was provided by ICBC, guaranteed by Standard Bank. The BPC sells
power in Botswana Pula (BWP). Standard Bank swapped the BPCs floating USD exposure to a fixed BWP exposure for the whole 20-yr period.

Standard Banks expertise: Our local banking presence in Botswana, power sector expertise and deep relationships with Chinese partners allowed us to bring
together all the parties to present the Botswana Government with a single, quick and cost-effective solution to secure its domestic power supply.

Sinosure

World Bank Guarantee

Partial Credit 15 year Political/

Ministry of Commercial cover
Guarantee
Finance
16 20 year
Guarantee ICBC

$825 mn 20 year loan

Standard Bank BPC
Bridge

Currency and
Interest rate hedging
$140mn $140 mn
ICBC
Guarantee Bridge 9 month
Standard Bank
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