R.M. Gaillard Lead Officer Infrastructure and

PPP’s

HYDRO 2006, September 2006

AfDB and the Dams & Hydropower sector in Africa AfDB and the Dams & Hydropower sector in Africa

2 HYDRO 2006

The electricity sector in Africa

3 HYDRO 2006

Electricity in Africa

4 HYDRO 2006

Hydropower potential in Africa

Practicable Hydropower potential

Europe16%

Asia29%

Africa19%

North America7%

Latin America27%

Oceania2%

Developed Potential

Europe 51%

Asia 22%Africa 8%

North America 80%

Latin America 23%

Oceania 34%

Region Practicable Developed hydropower

  Hydropower 1990 2000 2020

  TWh/a TWh/a

% TWh/a % TWh/a %

Europe 1670 745 45%

845 51%

1080 65%

Asia 3050 390 13%

670 22%

1890 62%

Africa 2000 57 3% 160 8% 1240 62%

North America

775 587 76%

620 80%

645 83%

Latin America

2825 418 15%

650 23%

1550 55%

Oceania 160 43 27%

55 34%

95 59%

The World 10480 2240

21%

3000 29%

6500 62%

5 HYDRO 2006

Impact of High Crude Oil Prices

These recent years, the drastic increase of oil prices has resulted in several effects

Contribution to the global (continental wise) economic growth mainly due to the revenues cashed by oil producing African countries.

Increase in the energy bill for land locked countries

For theses countries additional burden on the public finance impeding investments in various sectors

Raising interest for renewable energies

6 HYDRO 2006

The Challenges of Hydropower Development in Africa

Capital intensive

The governments and the public sector cannot alone mobilize significant amount of funds

Long and costly development phase

Preliminary surveys, investigations and development studies require large amount of seed money

Risks

Political and market risks are perceived as high

Natural risks are not properly allocated

7 HYDRO 2006

Solution to be Explored

Public Private Partnerships (PPP’s)

A contractual arrangements which bundles financing and operation/maintenance of traditionally government owned assets or traditionally delivered public services

Government sets policy and identifies needs

Private sector companies compete to fulfill that needs

Government enforces regulations and contracts

Risks are transferred to the party best suited to manage them

8 HYDRO 2006

PPP Approach and its Requirements

Strong support and political will from the host country government

Existence of skills and capacities on both sides to handle complex transactions

Existence of a business and institutional environment enough conducive to attract private players

9 HYDRO 2006

AfDB Activities in the Hydropower Sector

Public Sector Window Bumbuna hydropower scheme in Sierra

Leone (co financing of the project completion)

OMVG Development program (Financing of the detailed FS)

Grand INGA (co-financing for the FS to be performed soon)

Rusumo Falls scheme (Rwanda, Tanzania, Burundi, co-financing of studies for the T line)

Private sector Window AES Sonel Investment Program in

Cameroun (Bank participation 60 Mio Euros)

Bujagali Hydropower Scheme in Uganda (Bank participation 85 Mio $ + financing of the TLine)

OMVG Development program (Financing the Consultant for assistance to realization of projects under PPP. Approx 1.5 Mio $)

Memvele hydropower scheme in Cameroun. (Member of the potential Lenders Group)

Mini hydro plants in Madagascar and Eastern Africa

10 HYDRO 2006

AfDB roles and products

Roles

Catalyst role

Technical assistance and project preparation

Advisory services

Financing tools

Equity participation

Senior Loans

Guarantees

11 HYDRO 2006

AfDB roles

Catalyst

To provide comfort to the sponsors and other stakeholders

The leverage effect

Technical assistance

For project « last mile » preparation phase

For capacity reinforcement of the host government

Advisory services during the project appraisal and the due diligence phases

12 HYDRO 2006

Financing Tools

Equity participation

Senior Loans Various hard currencies (US$, Euro, JPY and ZAR) with possibilities in

some local currencies Interest rates: floating, fixed or variable Loan duration: up to 15 years for private borrowers Grace period: dependent on the project features and time frame. (up to

5 years) Fees: appraisal fee, commitment fee, front end fee …

Guarantees Partial credit Partial risk

13 HYDRO 2006

Organisation of AFDB

Public sector window (With sovereign guarantee)

Borrower/Beneficiary: Government

Project/sector must be included in the Country Strategy Paper

Private sector window (Without sovereign guarantee)

Borrower/beneficiary: Private Developer, the Project Company. (or public companies presenting some specific characteristics)

14 HYDRO 2006

How to work with the AfDB

Criteria’s for project eligibility

The borrower must be established in a RMC

Project size : Min 10 Mios $

AfDB not the largest single lender (Limited to 1/3 rd of the project cost)

Introduction of direct requests/enquiries to the Bank

15 HYDRO 2006

Typical Internal Process for a Senior Loan

Concept review• Review of information

memorandum

• Analysis of project context

Letter of Interest

Operations Committee

Investment Committee

Negotiation• Legal review (advisor)

• Term – sheet negotiation: milestones, security package

Term sheet Approval• Final presentation to the

board

Board approval

Loan agreement

Project Appraisal• Detailed review of project

• Technical review

• Risk assessment

Investment proposal

16 HYDRO 2006

As a Conclusion and Road Map for Africa

OUTCOMES OF AFRICAN MINISTERIAL CONFERENCE ON HYDROPOWER ANDSUSTAINABLE DEVELOPMENT

JOHANNESBURG, SOUTH AFRICA6 - 9 MARCH 2006

“ Commit to working together (ministers of water and energy) to unlock the hydropower potential of Africa as a major renewable energy option to promote sustainable development, regional integration, water and energy security, and poverty eradication in Africa.”

17 HYDRO 2006

Contacts at the AfDB

Infrastructure Department (OINF)

R.M Gaillard, Lead Officer Infrastructure and PPP’s

Tel: +216 71 10 21 32

Fax: + 216 71 33 26 95

Email: r.gaillard@afdb.org

Web site: www.afdb.org

Private sector Department (OPSM)