DBSA APPROACH TO PROJECT PREPARATION

Mohale Rakgate: General Manager, Project Preparation Unit

18 May 2016

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Role of PPU within DBSA

PPU solution offering

Key achievements

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Project preparation is one of DBSA’s competitive advantages within

our core sectors

3

Integrated infrastructure

solution provider

Early state risk taker

Tenor & developmental

returns Smart partnerships

DBSA

value

proposition

| | 4

It is of strategic importance because it allows the Bank to offer an

integrated value propositions along the infrastructure value chain

Plan Prepare Plan Prepare

1 2

Finance

3

Build

4 Maintain /

improve

5

Project identification

Feasibility

assessments

Technical assistance

Financial structuring

Project Preparation

funds

Lead arranger

Provide vanilla and

boutique financing

opportunities

Debt

Mezzanine Finance

Limited non–

recourse lending

Managing the

design and

construction of key

projects in the

education, health

and housing sectors

Project

Management

support

National and

provincial

government

departments

Municipalities

South Africa

Municipalities

SOE

PPP

Private sector

Rest of Africa

SOE

Public–Private

Partnerships

Sovereigns

Supporting the

maintenance and/or

improvement of key

infrastructure

projects

National and

provincial

government

departments

Municipalities

Through integrating across the value chain, DBSA is able drive infrastructure delivery in an effective and

timely manner

DBSA primary focus area

Se

rvic

es

C

lie

nts

South Africa

Municipalities

SOE

PPP

Private sector

Rest of Africa

SOE

Public–Private

Partnerships

Sovereigns

Municipal

assessments

Infrastructure plans

Advisory role

infrastructure

planning

South Africa

Under resourced

municipalities

| |

Africa has infrastructure funding needs of ~$120bn with ~95% of the

initiatives still in concept & pre-feasibility development stage

113 3 4

Number and value of projects in PIDA PAP lists

▪ PIDA PAP lists 139 projects,

of which 95% by value are

in concept and pre-

feasibility stage and 55%

are so ill-defined no capital

value has been estimated

▪ Most DFIs in Africa

currently participate in later

stages of the project life

cycle

▪ A growing number of DFIs

are increasingly expanding

their scope of operations

and venturing into project

preparation

#

USD Bn

45

66

111

Structuring (Pre) feasibility

17

Concept

11

Known value Unknown value

SOURCE: PIDA PAP list

1 Estimated total cost; extrapolated proportionately where values are unknown

ETC1

PIDA PAP is a set of large, priority

infrastructure projects across Africa

5

| |

To move potentially impactful projects to bankable stage requires

increase in project preparation investments

6

Why this is not addressed at

scale today ~ 2-3

4.7

0.4

10.0

Estimated project development and preparation costs1

USD Bn per annum

SOURCE: McKinsey MGI; World Bank; ICA; PIDA PAP

Africa SSA SADC PIDA

PAP

56

2010 2009

39

2010 2009

38 48 vs.

Increased Commitments…

Infrastructure Commitments,

USD Bn

… yet decreased

disbursements due to lack of

bankable projects

% of committed funds disbursed

African priority

projects require

~USD 400Mn per

annum (USD

100Mn in SADC) ▪ Commercial vehicles focus on

assets/ sectors where

commercial returns are good

▪ Most PPFs only solve for one

part of the equation (funding),

or for only part of the project

lifecycle (technical assistance)

▪ No credible/ independent entity

with active long-term interest in

supporting governments’

infrastructure development

1 Estimated at 5% of total estimated cost (ETC)

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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

Services

Our core services are:

‒ Funding of PP activities;

‒ Mobilising advisors to prepare bankable projects

‒ Facilitating and managing project preparation activities

3

Footprint

▪ South Africa;

▪ SADC;

▪ Selected African countries outside SADC (Nigeria, Kenya, Tanzania, Ghana, Ethiopia

and DRC)

4

Established 2013 as a specialised and dedicated Unit within the DBSA

1

Purpose ▪ To prepare sustainable priority projects within DBSA’s mandate to bankability

▪ To provide project preparation facilities and skills to prepare bankable projects

2

8

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PPU unit provides a comprehensive project developing solution to its

clients

9

Enabling

environment

Pre-

feasibility

Bankable

Feasibility

Project

Definition Project

structuring

Deal origination

Key

activities

• Actively originating deals by:

- Identifying project opportunities from a project developer/sponsor perspective

- Define project concept and scope

• Engage with clients and obtain a mandate to act as project developer / sponsor /

owner

• Programmatic approach in developing projects to be role-out for more than one

client

PPU covers the entire cycle of project preparation

It maintains a balanced portfolio of projects at different stages of preparation

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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

Africa: PIDA

15

Geographic

Sectors

Customers

Municipalities

SOCs

Government Departments

Private companies (projects with a public good)

Core sectors

‒ Transport

‒ Water and sanitation

‒ Energy

‒ ICT

Secondary sectors (SA only)

‒ Social

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

objectives

11

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 PP funding is provided on commercial terms –

expect recovery of PP funding invested as well as a return for

the risk taken (PP funding provided is not a grant)

3. The DBSA would aim to obtain a Mandated Lead Arranger role

on a competitive basis

4. The DBSA would aim to participate in the debt funding of the

project on a competitive basis

Key project

preparation

principles

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PPU leverage DBSA’s strategic partners to sources 3rd party funding

for project preparation

Funding partners

DBSA

sponsored 1

3rd party

funding

2

Type of funding

Project preparation own

funding

Based on cost recovery and

return (self-sustaining

model)

Joint funding with other

partners (e.g. Meridiam Capital)

Gautrain and Transnet (only in

relation to their own projects)

Project preparation funding

Grants

KfW

European Union PPDF a

IIPSA b

PPFS c

Project preparation grants &

direct capital grants with

loans

Grants

Project preparation funding

Grants

European Union

(participating DFIs: KfW,

DBSA, AFD, EIB)

AFD

6

Global

Environment

Facility (GEF)

d Project preparation grants

Capital grants

Concession loans

Interest rate subsidies

Guarantees Green Climate

Fund (GCF) e

R100m p.a

R200m

R1.8bn

R50m

Variable1

Other Project

Prep facilities f

On project by project basis:

‒ Equity

‒ Mezzanine

‒ Grants

Electra, Africa50, InfraCo,

Harith – Progeny2 Variable1

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

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PPU project selection criteria

13

Sector / strategic fit

Co-funding

Development

Impact

Institutional capacity of

the project sponsor

1

2

4

5

Cost recovery and

return

6

Potential Investment

Value

7

National / regional

priority

3

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PPU is working on a number of initiatives with strategic partners

14

Independent Power Producer Program

RE IPP Expedited Bid Window

Small IPP

Coal baseload IPP

Gas IPP

IIPSA

R1.7 bn fund value

Gautrain extension

and expansions

SADC PPDF

R100 m

fund value

Develop Student

Accommodation

Funding Models

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Role of PPU within DBSA

PPU solution offering

Key achievements

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PPU’s pipeline projects has grown significantly over the last 12 months

to a potential investment value of ~R213 billion

8

Value, R billion

Investment values per sector

54

11

131

61

83

26

57

3

2

2

Social

3

Water

80

118

213

Transport Total ICT

0

Energy

0

11

0

Rest of Africa1

South Africa

1 Total investment values for projects outside of South Africa assumed a R15/US$ exchange rate

13 9 6 1 30 # of projects in

active preparation 1

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Regional composition of PPU projects – 72% of the potential funding

opportunities are within South Africa

1

7

Assessment of Regional Split Potential

DBSA

Participation

(R x million)

Regional %

Split

Within South Africa 30 873 72%

ERRs Approved - Due Diligence Stage 6 195

Appraisals Approved - Active Preparation

Stage / Handed over to Lending

24 678

Within SADC (Excl SA) 8 006 28% 67%

ERRs Approved - Due Diligence Stage 2 697

Appraisals Approved - Active Preparation

Stage / Handed over to Lending

5 308

Outside SADC 3 978 33%

ERRs Approved - Due Diligence Stage 1 547

Appraisals Approved - Active Preparation

Stage / Handed over to Lending

243

TOTAL 42 857

72%

19%

9%

Regional Split (%)

Within South Africa

Within SADC (Excl SA)

Outside SADC

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

Number of projects by sector and regional location

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Mohale Rakgate

General Manager: Project Preparation Unit

MohaleR@dbsa.org

(+27) 11 313 3179

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