financing_konza city 2012

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KONZA TECHNOLOGY CITY

FINANCING OPTIONS

August 2011

Magero Gumo

MBA. Wharton

8/16/2012 1



BACKGROUND

About Konza• Konza is set to be one the most modern cities in Africa,

competing economically and culturally with the best cities in

the world.

• The new city is centrally located with excellent transport and

communication links.

• Konza will offer all the benefits of a greenfield, ‘clean sheet’

site

• It is 60 km from the heart of Nairobi

• Adjacent to Nairobi-Mombasa Road A109• Next to Konza railway station within 4 kms

• Jomo Kenyatta International Airport 40 km from site

• 400Km from Mombasa and its ports;

8/16/2012 3



THE MASTER PLAN

The master-plan for the 5000 acre city is based on successful new townprojects around the world put together by an international team of expertsto ensure global competitiveness.

Land Uses

• Transport infrastructure and landscape

• BPO Techno Park • -

• Science Park

• University Campus

• Research Centers

• Open Spaces• Reserve Site

• Very High Density, High Density, Medium Density and Low DensityBuildings

8/16/2012 4



THE INVESTMENT OPPORTUNITY

• Konza is a great opportunity for businesses andinvestors.

• It offers probably the best location to dobusiness in Africa and one of the most sought

after international commercial investment

.

• The new city provides some of the most valuableand sought after real estate served by excellentcommunications and the state of the art ICTinfrastructure.

• All this is set within a high quality master-planned environment

8/16/2012 5



PHASING PLAN

• The city is designed to allow phased

development permitting rapid growth whilst

ensuring that the civic amenities and

infrastructure grow with the population’s needs.

• Phase 1

• Phase 2

• Phase 3

• Phase 4

8/16/2012 6



• Ring/radial structure better

for distributing traffic and

public transport

• CBD in central location

within site

• BPO/ ITES Park in two

locations – north and

south – better accessibility

• Wildlife corridors along

watercourses - Tourism

• Golf course to south along

Iviani River

• Central Park between CBD

& BPO Park (south)



BPO Technopark



Central Business District



Masterplan overview 02



KONZA TECHNOLOGY CITY AUTHORITY

• The city will be run under the KonzaTechnology City Authority (KTCA), aparastatal to be created.

• The creation of an agency to be in charge of the development of the city is key to

ensure the appropriate institutionalframework and funding of the projects are

properly coordinated• This will help see the continuity of the

project and non-interference.

8/16/2012 14



PROJECT OVERVIEW

Demand StudyLegal/

Regulatory

Due

• InfrastructureRequirements

• DevelopmentPhasing

• Land Use

• IncentiveRequirements

• InfrastructureRequirements

• DevelopmentPhasing

• Land Use

• IncentiveRequirements

Master Plan Transaction

Structure

Purpose: Develop a PPP project implementation structure.

15

Environmental

/Social

SEZFramework

Diligence

• Financing Costs

• Risk Analysis

• Financing Costs

• Risk Analysis

Financial

Model

• omm men s

•GoK

-Master Developer

-Tender Process

GoK Support



Government

Guarantees

in order to

access the

committed

funding

FUNDING CONSIDERATIONS

Policy andInstitutional

arrangement

for the KTCA

to ensure

adequate

financing

sustainability

Government

Support

Developing

Technical

Capability

Funding

Options for

the Projects



PPP CONCEPT

Smart partnership

arrangement between

Government andprivate sector entities

Characterized by the

sharing of

Reasons for

establishing such

partnership:

• Efficient desi n

for the purpose of

providing public

infrastructure,

community facilities

and related services.

, ,

responsibility and

reward between the

partners

construction,

operation and

maintenance of

projects

•

Enhanced services



Build-Operate-Transfer (BOT)

Build-Operate-Own (BOO)

Build-Lease-Transfer (BLT)

Build-Lease-Maintain-Transfer

Project Category Modes

New Projects

MODES OF PPP

Land SwapCorporatisation

Outright Sale

Lease (LOA)Management Contract (MC)

Existing Projects/

Activities



CONSIDERATIONS FOR PPP FINANCING

• Creation of an independent agency to

run the project on a business model–

KTCA

-

and future cash flows from leases and

royalties to strengthen the balance sheet

• Structuring different projects to attractmulti PPP arrangements.

8/16/2012 19



PRIVATE PLACEMENTS

• Identifying separate projects withcommercial attraction like hotels, schools,office buildings and selling the projects to

investors • This will generate immediate funds to

finance projects with less commercialattraction

• These can be marketed through roadshows and tenders

8/16/2012 20



CAPITAL MARKET FUNDING

• Infrastructure bonds

• Asset backed securities

• Straight vanilla bonds

• Pure equity and quasi equity issues

• Real Estate Investment Trusts

8/16/2012 21




Infrastructure bonds

• The Konza Technology City Authority canissue infrastructure bonds to finance specific

infrastructure projects • The infrastructure bonds will attract lower

interest payment due to the existing taxincentives (no withholding tax)

• The KTCA can seek government guaranteesat the initial years after commencingoperations

8/16/2012 22




Asset backed securities

• Can securitize future revenues like levies,

land rates, fees and royalties • s can e p anne a er ree years

when the projects have commenced to

determine the quality of eligible assets

• ABS attract tax incentives

• Can be used to raise long term funds

8/16/2012 23



Lenders Borrower; Individuals/Estate Developers

Loan

SECURITIZATION

SPV Investors

Periodic Cash Flows

Pass ThroughCertificates

Servicing Fees

OutstandingLoan sold

and

transfered

& Interest



ASSET BACKED SECURITIES

Future revenue streams

Special Purpose Vehicle (SPV)

takes title of the revenue streams

from the underlying assets

one payment from one source, once a month

Coupled with book based custody system

The cash flows passed through to the investors

in the form

of an asset backed security




Straight vanilla bonds

• These can by way of private placements of public issues

•history or secure credit enhancement for public issues

• The bonds can be issued in tranches tomatch project funding requirements andavoid huge interest payments

8/16/2012 26




Pure Equity and Quasi equity issues

• The KTCA or an SPV can float shares to

raise capital • n year one or wo e s ares can e so

to strategic investors to build public

confidence

• Can also issue preference shares or

convertible bonds

8/16/2012 27



KTCA FIRM MODEL

Value from

Operations

Value enerated Financial

Value from

investments

28

KTCA

DEBT andother

liabilities

EQUITY

Value to Equity

sustainability




Real Estate Investment Trusts

• Can structure investment trusts to finance

commercial and residential developments • s a rac ax exemp ons or corpora e

and withholding tax for issuers and

investors respectively

• Can be issued to the public

8/16/2012 29



OTHER FUNDING SOURCES

• Syndications and club lending

• Operating leases

• Internal funds generated from

o erations and commercialization of

assets

• Development partners – grants,

technical assistance

• Government direct funding

30



FUNDING USING SECTORAL VENTURE CAPITAL FUNDS

31



GETTING STARTED

1. Identify needs/Policy issues

2. Do a project/business plan

3. IFC Advisory Services

.

5. Documentation

6. Approvals

7. Issue placement8. Issue/Allotment

32



www.konzacit .co.ke

8/16/2012 G Bekko - HR/OD Consultant 33

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