February 27th 2019, Lisbon

PROJECT F INANCE IN AFRICA

Brunno Maradei

European Investment Bank

Financing Investment in Africa

Conventional Financing

Loan(s)

Project Finance

▪ Off Balance Sheet Loan

▪ Non Recourse to the Sponsors

▪ Creditworthiness depends on generated cash

flows by the project and its structure

▪ Risk sharing between participants

Bank(s) – Commercial

or DFI

Private Company

(Borrower)

Bank(s) – Commercial

or DFI

Project Company

(Borrower)

Loan(s)

Equity

▪ On Balance Sheet Loan

▪ Recourse to borrower assets

▪ Creditworthiness depends on strength and

balance sheet of the Company or (sub)Sovereign

Entity

Design, build, operate, finance the projects Design, build, operate, finance the projects

Public entity (Borrower)

Loan(s)

OR

Public entity

(grantor)

Private

Company

(Sponsor)

PPP agreement

Conventional financing vs. Project financing

2 European Investment Bank

▪ The project's credit risk profile must be acceptable. Sponsors shall be qualified.Credit risk

▪ Manufacturing and distribution of arms, munitions and military equipment, tobacco

manufacturing and distribution, gambling, detention infrastructure as well as sectors that

are ethically compromised and considered to present a significant reputational risk.

Excluded Sectors

▪ EIB finances up to 50% of senior debt with a minimum EIB loan size of about EUR 25/30m

or equivalent (smaller loans on an exceptional basis)Financing

Project

The investment project must

▪ be eligible under the mandate objectives

▪ be technically sound and be financially viable

▪ be fair for the (private) Promoter, the Government and the EIB

▪ show and acceptable economic return

▪ comply with the principles and standards adopted by the EIB in the social and

environmental fields, and the EIB procurement guidelines (available on the EIB website)

Development of the local

private sector: SMEs,

midcaps, larger corporates

Development of social and

economic infrastructure

Climate change adaptation

and mitigation

Eligibility criteria

3 European Investment Bank

▪ Certification of a project's quality due to extensive due diligence for EIB participation Signaling Effect

▪ Long maturities, up to 20 years for a project financing (depending on the economic life

of the project, its risk profile and the tail with the concession agreement) + grace period

on capital repayments (covering the implementation period)

Maturities

▪ EIB sector and product expertise acquired over 50 years of activity in and outside of

Europe; in-house engineers and socio-environmental reportsExpertise

▪ Competitive interest rates (EIB's AAA funding advantage and not-for-profit institution)Pricing

▪ Attracting other lenders due to quality of EIB due diligenceCatalyst Effect

▪ Diversification of funding sources: complementary to short/medium term general

purpose / working capital financing provided by commercial banks and other IFIs.Funding

▪ Possibility of political risk carve-outs: if the EIB exposure is guaranteed by a non-

onshore/non-local entity, the EIB can cover political risks

Political Risk Carve-Outs

Added value of EIB funding in PF

▪ Excellent access to foreign currencyCurrency

▪ Position of preferred lender status as a supra-national lending operationCreditor’s status

4 European Investment Bank

Financing

Request

Concept

Approval

Management

Committee

Board

Approval

Credit

Approval *

Pre-AppraisalEligibilityFeasibility

ComprehensiveAppraisal

+ Key Terms

NegotiationLoan

Documentation

Mandate

Letter

Loan

Signature

* for Project Finance Operations

EIB project approval process

5 European Investment Bank

PPP/PF signatures in Africa (MENA and SSA) by country and sector since 2003

Example of EIB financing in the renewable energy sector in Africa

EIB PPP/Project Finance lending in Africa

Project Costs => EUR 613 million

Private Partner => SPV owned by Aldwych

Public Offtaker => KPLC

Role of the EIB => largest lender with 15-year EUR 200m loan:

- EUR 100m EKF-covered tranche;

- EUR 50m full project risk retained by EIB

- EUR 50m guaranteed for commercial risk by two RSA

commercial banks (the latter keeping political risks)

8%1%

19%

22%

50%

Transport

Conventionnal

Energy

Industry

Renewable Energy

Oil&Gas850

500

280

270

100

92

0 100 200 300 400 500 600 700 800 900

Egypt

Algeria

Tunisia

Kenya

Namibia

Uganda Largest lending amounts in Africa (in M EUR) since 2003

EIB financed the first large-scale renewable

energy IPP in Africa in 2014

Lake Turkana wind farm project

20 PF / PPP transactions, 14 countries, 2.46bn EUR lending volume for 10.8bn EUR of investments

6 European Investment Bank

54MW SainhandWind

Wind Energy

EUR 47 million

16 year Loan

Mongolia

African Energy Guarantee Facility

EUR 50 million

Innovative guarantee

Sub Saharan Africa

117MW TafilaWind

Wind Energy

EUR 90 million17 year Loan

Jordan

50MW CSP KHI Concentrated Solar

Energy

EUR 50 million19 year Loan

South Africa

310MW Lake Turkana

Wind Energy

EUR 225 million

15 year LoanKenya

Senegal River Valley Rice

Agriculture

EUR 15 million10 year Loan

Senegal

Nachtigal HPP

Hydro Power

EUR 50 million

18 year Loan

Cameroon

1.1 GW Don Jose & Villanueva Solar

Solar PV

USD 87 million18 year Loan

Mexico

34MW Scaling Solar Zambia

IPP Solar PV

USD 12 million

18 year Loan

Zambia

2x40MW Radiant & EldosolIPP Solar PV

USD 50 million18 year Loan

Kenya

Project Finance – recent operations

7 European Investment Bank

Amount USD 11.75m

Country Zambia

Status Signed

Description

Construction and operation of a 34MW PV plant under the World Bank’s Scaling Solar Programme. The EIB is the largest

commercial senior debt provider.

The project benefits from a 25-year PPA tendered through the first Scaling Solar auction process in Zambia, guaranteed and fixed

offtake price of c.78.4 USD/MWh with the 100% state owned utility ZESCO.

Zambia was the first country adopting the Scaling Solar Programme which aims at standardizing the solar PV procurement process

for power plants in developing countries, thus reducing transaction costs and increasing competition.

The competitive auction attracted over 40 bidders, yielding the lowest solar power tariffs in Africa at the time.

SCALING SOLAR PV ZAMBIA

Project example

8 European Investment Bank

Amount USD 60m

Country Kenya

Status Signed

Description

Construction and operation of 2 x 40MW solar PV plants developed by IPPs under the feed-in tariff in Kenya.

Each PV plant was financed on a stand-alone-basis under a PF structure with separate project and financing documents

despite sharing a 60% owner shareholder.

The projects have signed separate take-or-pay 20 year PPAs with state owned KPLC for the entire electrical output.

In addition to its role as financier, the EIB also led negotiations with GoK and KPLC, amending the PPAs and obtaining a number of

improvements that led to a more robust project structure.

EIB’s leveraged on its access to the EU Member States funded Investment Facility under the Cotonou Agreement to provide the

project with highly attractive terms for the project.

2 SOLAR IPPS IN KENYA

Project example

9 European Investment Bank

Amount EUR 50m

Country Cameroon

Status Signed

Description

The EUR 1,260m project consists in the development, construction and operation of a 420MW hydropower plant in Cameroon under

a PPP framework. When built, it will be the largest power generating asset in Cameroon.

High developmental impact: i) 30% power supply increase, ii) tariff amongst the lowest in SSA and; iii) estimated to enable

c.0.33% annual GDP growth increase.

The project, sponsored by EDF and IFC, signed a 35yr take-or-pay PPA with the privatized utility ENEO. ENEO’s credit risk is back-

stopped by a guarantee from the GoC under committing on-going payments under the PPA and termination payments.

The project is funded through a DFI tranche and a Local Currency tranche. The EIB has committed EUR 50m 18 year 6 year grace

loan.

NACHTIGAL HYDROPOWER PLANT

Project example

10 European Investment Bank

Amount EUR 47m

Country Mongolia

Status Signed, under construction

Description

Total project cost of EUR 120m.

55 MW Sainshand wind farm is being built 460 km south-east of Ulaanbaatar in the Gobi Desert. It will deliver up to 55 MW of clean

energy. From 2019 the project will make a significant contribution to reducing Mongolia’s carbon emissions and cater for an

expected increase in power demand in the country.

SAINSHAND WIND FARM PROJECT

Project example

11 European Investment Bank

Amount USD 87m

Country Mexico

Status Signed, operational

Description

The 1,088MW project consists in the construction of 3 solar PV plants located in the Guanajuato and Coahuila States in Mexico. The

Villanueva PV plant (Coahuila) was the largest PV plant in the America’s at the time of its construction.

The energy output will be sold to a subsidiary of Comisión Federal de Electricidad under three 20 year take-or-pay PPA (one for

each project), covering the sale of energy during 15 years and green certificates during 2o years.

The solar plants tendered under the first Mexican renewable energy auction, carried out in March 2015 and will support Mexico’s

national target of 35% by 2024.

The EIB has acted as a co-lender. Senior debt will be provided on a pro-rata basis between all lenders.

MEXICO FIRST RENEWABLE ENERGY AUCTION SOLAR PV

Project example

12 European Investment Bank

Amount EUR 50m

Country Regional – Sub Saharan Africa

Status Signed

Description

The AEGF consists of a first-in-kind guarantee to support an EU based reinsurer, Munich Re in the provision of political and

(sub)sovereign risk insurance.

Through local partners, Munich Re will create a portfolio with reinsurance exposure of USD 1bn.

Operation initiated by the EIB and forms part of the Bank's response under the UN initiative Sustainable Energy for All (SE4All).

The operation will allow Munich Re to scale up its reinsurance exposure to the SSA energy sector though local partners.

Munich Re will take the first loss related to the facility with second loss covered by EIB and the IFC.

AFRICA ENERGY GUARANTEE FACILITY

Guarantee example

13 European Investment Bank

European Investment Bank 14