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Investor Presentation
The African Development Bank Group
May 2014
Overview of the Bank Group ----- 3
Financial Profile of the African Development Bank ----- 30
Capital Market Activities ----- 43
Appendix ----- 57
2
4
Table of Contents
1
3
2
3
Overview of the Bank Group 1
Africa is a continent of contrast, rich in natural resources yet its people are among the poorest in the world. The image of Africa that gets projected in the world is that of a continent with disease, hunger, corruption and the need for aid beyond foreseeable future. But, there is another story that is less told which acknowledges the challenges faced by the continent but also recognizes the progress made in terms of more children going to school, less war, growing quest for better governance and an expanding middle class. The African Development Bank is part of that story.
The African Development Bank Group
Africa’s premier development financial institution
The AfDB Group: three constituent institutions, separate legally and financially, with a common goal…
• Board of Governors: • Highest decision making body, • Composed of Ministers of Finance
and Ministers of Cooperation of the Bank’s member countries
• Decisions by both Boards require two third majority or 70% should any member require so
African Development Bank (“AfDB”) • Established in 1964 • 78 member countries • Authorized capital: US$ 103 billion • Resources raised from capital markets • 0% risk weighting under Basel II • Level 1 under Basel III
African Development Fund (“ADF”) • Concessional financing, established in
1972 • Financed by 26 countries participants
and 4 regional donors • Subscription: US$ 35 billion • Focus on low income countries • Replenished every 3 years
Nigeria Trust Fund (“NTF”) • Established in 1976 by Nigeria • Targeted at the Bank’s needier
countries • Maturing in 2018 • Total resources: US$ 242 million
…focused on combating poverty, and improving living conditions on the continent
Governance and Oversight
• Board of Directors : • 20 Executive Directors elected by
the Board of Governors • Oversees the general operations of
the Bank
4
AfDB, the keystone of the Bank Group
PARTNER OF CHOICE
• Increased operations and leadership of continent-wide initiatives for greater regional integration and sustainable development
• Leveraging scarce resources
• Voice of Africa on development issues
• High level panel on Fragile States
STRONG FINANCIAL STANCE
• Increased capacity to deliver on our mandate
• Careful balance between maximizing development effectiveness and maintaining our long term financial soundness
AAA RATING DRIVERS
• Strong liquidity and capital position • Franchise value
• Strong commitment from shareholders • Preferred creditor status
• Prudent financial management and policies
5
Africa’s own triple A rated institution
AfDB’s robust capitalisation, ample liquidity buffers and sound
risk-management framework help to offset the existing risks that
the AfDB carries on its balance sheet and creates substantial
headroom in risk-bearing capacity to further expand its lending.
AfDB’s capitalisation is extremely strong, and is one of the key
factors supporting its ratings. The equity to asset ratio stood at
25.2% at end-2012. The ratio of usable capital to required capital
ratio, at 16.2x at end-2012, is also higher than for most peers.
The ratings mainly reflect the strong support the Bank enjoys
from African and non-African member countries; its solid
financial base; its prudent financial and risk management
policies; and its status as a "preferred creditor“.
30 September 2013
10 July 2013 16 August 2013
AAA/Stable/A-1+ Aaa/Stable/P-1
Aaa/Stable AAA/Stable/F1+
6
19 December 2013
The African Development Bank (AFDB) benefits from a solid
liquidity and capital position, along with wide support from its
member countries, including 'AAA' rated sovereigns.
Global partnership for the development of Africa
Africa
Middle East
Asia
Americas
Argentina 0.1% Brazil 0.5% Canada 3.8% U.S.A 6.5%
Algeria 4.2% Angola 1.2% Benin 0.2% Botswana 1.1% Burkina Faso 0.4% Burundi 0.2% Cameroon 1.1% Cape Verde 0.1% Cent.Afr.Rep. 0.1% Chad 0.1% Comoros 0.02% Congo 0.5% Cote D'ivoire 3.7% Dem.Rep.Congo 1.0% Djibouti 0.03% Egypt 5.4% Eq.Guinea 0.2% Eritrea 0.04% Ethiopia 1.6% Gabon 1.2% Gambia 0.2% Ghana 2.3% Guinea 0.4% Guinea Bissau 0.04% Kenya 1.4% Lesotho 0.1% Liberia 0.2%
China 1.1% India 0.2% Japan 5.5% Korea 0.5%
Kuwait 0.5% Saudi Arabia 0.2% Turkey 0.1%
Europe
Austria 0.5% Belgium 0.6% Denmark 1.2% Finland 0.5% France 3.7% Germany 4.1% Italy 2.4% Netherlands 0.9% Norway 1.2% Portugal 0.2% Spain 1.1% Sweden 1.5% Switzerland 1.5% U.K. 1.7%
Libya 4.0% Madagascar 0.7% Malawi 0.3% Mali 0.4% Mauritania 0.1% Mauritius 0.7% Morocco 3.5% Mozambique 0.6% Namibia 0.3% Niger 0.3% Nigeria 9.2% Rwanda 0.1% Sao Tome & P. 0.1% Senegal 1.1% Seychelles 0.04% Sierra Leone 0.2% Somalia 0.04% South Africa 4.8% Sudan 0.4% Swaziland 0.1% Tanzania 0.8% Togo 0.2% Tunisia 1.4% Uganda 0.5% Zambia 1.3% Zimbabwe 2.0%
7
Note: Data as of 31 January 2014
G-7 Shareholding: 28%
In October 2013, the Republic of Turkey became the 78th member
of the AfDB and the 26th participant in ADF
4,978 12,830
20,311
60,265
2,712
27
248
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Paid-in Capital AAA CallableCapital
AA+ to A-Callable Capital
Other CallableCapital
31-Mar-14 Remaining subscription expected
Overwhelming support for a tripling of the capital
Capital Structure of the Bank
Capacity to meet increased level of future demand and
support the business growth plan
200% capital increase with 6% paid-in
portion raising the capital to around USD
100 billion
Reinforce the Bank’s franchise value, key
prudential ratios and AAA credit rating
Callable capital is the commitment by each shareholder to make additional capital available to
the institution in case of financial distress
There has never been a call on the capital of the Bank
(in USD million)
Demonstrated strong shareholders support
76 213 574 1,684 16,311
8,563
66,059
Initial1963
GCI-I 1974 GCI-II1976
GCI-III1981
GCI-IV1987
GCI-V1998
GCI-VI2010
(in USD million)
Additional special capital increases made to admit new members
The Bank’s General Capital Increase (GCI)
8
The Bank Group addresses the diverse needs of the continent
Preserving the long-term financial integrity of the AfDB
Viable enterprises and multinational projects, additionality and development outcome • Direct loans • Lines of credits • Equity participation • Guarantees
Self-sustaining, export oriented project, located in an ADF-eligible country
ADF Concessional Financing 37 low-income countries eligible to loans and grants
Blend Countries
Countries eligible for AfDB and ADF Funding
• Job creation • Government revenues • Financial return • Foreign currency earnings
Additionality and Development Outcome Assessment-Core indicators
Enclave Finance
Private Sector Operations
AfDB Sovereign Operations 15 middle-income countries eligible to receive AfDB funding Criteria: • GNI per capita • Country’s creditworthiness
9
Financing solutions to Africa’s challenges
Infrastructure that unlocks the growth and development potential of Africa
remains key
* A year of exceptional demand for Bank Group resources due to the global financial crisis ** Including loans, grants, equity investments, emergency operations, HIPC debt relief, loan reallocations and guarantee, Fragile States Facility
Focusing on interventions aligned to Africa’s priorities
Promoting social & human development by focusing on skills development and science & technology for job creation
Multisector operations which broadly cover public sector management and
poverty reducing budget support, bear closely on the success of other
interventions
Providing resources to financial intermediaries
Continuing interest in rural development and actions to combat poverty through increased approvals for agriculture and
rural development
Delivering vital resources for scaling up access to safe water and sanitation
Transport 32.2%
Energy 16.0%
Multisector 12.6%
Agriculture 12.0%
Social 9.4%
Water Supply & Sanitation
8.4%
Finance 8.1%
Communication 1.0%
Environment
0.3%
2,783
8,785
3,975 5,664
3,197 2,821
2,565
3,805
2,243
2812
2,905 3,495
-
2,000
4,000
6,000
8,000
10,000
12,000
2008 2009* 2010 2011 2012 2013***
ADB Approvals ** ADF Approvals **
Africa’s preferred financial partner
(in USD million)
5,348
12,590
6,218
8,476
6,316
10
2013 approvals
6,102
*** Provisional
Powering the infrastructure that drives growth
Water USD 452 million
Energy USD 1.37 billion
Africa’s Priority Action Program (2012-2020)
• Africa’s infrastructure financing requirements, mostly for power and
energy, in the USD trillions in the longer term
• About 30 countries affected by chronic power problems
• Transportation costs increase the price of African goods by 75%
• Poor infrastructure depresses productivity in fragile states by an
estimated 40%.
• The continent invests only 4% of GDP on infrastructure, compared
with 14% in China
Africa’s infrastructure needs remain substantial Infrastructure development as a key enabler of
regional integration
USD 2.7 billion
• Promoting regional economic integration
• Reduction in energy costs and increasing access
• Reducing transport costs
• Enhancing water and food security
• Boosting ICT services and connectivity
Innovative financing Projects
Transformational infrastructure connecting African roads, railways, oil and gas pipelines, power networks, and ICT
Program for Infrastructure Development in Africa (PIDA) estimated at USD 360 billion by 2040
• 51 immediately actionable programs, including the
40,000 MW Inga power plant in DRC, promoting
regional integration
• Africa50 Fund will bring additional resources and capacity to
the continent
11
Investing in people: one billion opportunities
AfDB supports universities and regional centers of excellence
USD 807 million approved in 2012 focusing on skills and entrepreneurship in higher education, science and
technology, in close partnership with the productive sectors and using modern technologies
Ghana Malawi Kenya
Uganda Tunisia
Contributing to Africa’s education over 2010-2012
• Over 4 million students and scholars reached
• 4,501 classrooms and educational support facilities
constructed/rehabilitated
• Over 10 million textbooks and teaching materials supplied
• Over 56,000 teachers and other staff recruited/trained
• Over 656,000 students newly enrolled
20 to 25% unemployment across Africa vs. 9%
worldwide
Youth account for about 60% of the unemployed
Number of university graduates in Sub-Saharan Africa more than tripled (1999 to 2009) but funding increased more slowly
hindering educational quality
Most of underemployed young are in low productivity household enterprises or the
informal economy
Building skills and raising employability more pertinent than ever
25% of the 25-34 with higher education is unemployed;
one-fifth is employed in the informal sector
Job-creating growth
Skills development
Development of safety nets to
protect against economic and social shocks
AfDB’s Human Capital Strategy for Africa to transform teaching, learning, and health services for one billion Africans (2013-2017)
Giving voice to all citizens for improved quality of public services and efficiency of public spending
12
Strengthening accountability and transparency
Strengthening public financial management systems
Promotion of sound macroeconomic management
Governance of natural resources
USD 750 million approved in 2012 for 42 operations across 22 countries
Restoration of Fiscal Stability and Social Protection budget support programme (USD 40 million)
• Alleviating foreign exchange shortages
• Promote fiscal and macro-economic stability
• Protect social spending
• Macroeconomic management improved: low budget deficits and realistic and stable exchange rates
• Tax revenue has risen from 10.5% to 14.7% of GDP
• Time to start a business halved & time for contract enforcement fallen by 50 days
• Support to RMCs to improve natural resource governance across value chain, including EITI in 8 countries in 2012
Sound climate for business and investment
Sustaining Malawi’s reforms to stabilise the economy
Program based operations
Institutional support program
Analytical and advisory services
Quality of governance critical to development
Complex commercial transaction
negotiations
Capacity building
Combating vulture funds
USD 5.23 million approved in 2012 across 11 projects in Burkina Faso, Djibouti, DRC, Ghana, Guinea, Kenya, Tunisia
and Zambia
Hosted by the AfDB
13
Sowing the seeds for productivity and food security
Contributing to Africa’s agriculture sector (2010-2012) • 4,937 rural facilities constructed/rehabilitated • Over 1.5 million livestock provided/vaccinated • Over 2.8 million plants introduced • 4,581 community-based projects executed
Response to the Food Crisis in the Sahel Programme
• Targeting 800,000 small farmers who provide 90% of the food needs in the region
• USD 351 million programme to restore food security covering 12 countries
USD 587 million approved in 2012 for 18 operations covering 16 countries
Livelihood interventions
Climate change adaptation
Building rural infrastructure
Disaster risk reduction measures
Agriculture employs 65-70% of the African workforce
Strengthening capacity for
the delivery of agricultural
services
Rehabilitation of agricultural
infrastructure
Construction of access and feeder
roads
Market infrastructure and storage facilities
Support to climate change adaptation
measures
Drought Resilience and Sustainable Livelihoods Programme in the Horn of Africa
First phase in 2013 to focus on Djibouti, Ethiopia, and Kenya
Food security
Improved water control &
distribution systems
Increased productivity &
income for agro-pastoralists
Improved road networks
Development of agro-industry
& market infrastructure
Enhanced regional
cooperation & coordination
Accounts for roughly a third of the continent’s GDP
Women make up more than half of Africa’s farmers and produce up to 90%
of the continent’s food
Promoting agricultural production a way to drive inclusive growth and
reduce poverty
Africa is the only continent where per capita food production has declined over the past 30 years
14
Rural Water Supply and Sanitation Initiative
Addressing Africa’s water and sanitation needs
USD 452 million approved in 2012 to scale up access to safe water and sanitation, promoting innovative technologies, and supporting knowledge management activities in RMCs
The Africa Water Vision for 2025
Strengthening governance
of water resources
Improving water wisdom
Meeting urgent water needs
Strengthening the financial base for the desired water
future
USD 4 million grant from the African Water Facility for water provision in the Darfur region
• Provided water supply to 56 million people and sanitation access to 41 million people since 2003
• Accelerate access to drinking water supply and sanitation in rural Africa to attain the African Water Vision of 2025 and the MDG targets
• 6 projects approved in 2012 for a total amount of USD 83 million across the Gambia, Chad, Liberia, CAR, Djibouti and Mauritania
• Initiative of the African Ministers’ Council on Water, administered by the Bank
• Established to help countries achieve the objectives of the Africa Water Vision of 2025
• 75 operations approved amounting to USD 118 million since 2006
• 6 projects approved in 2012 for a total amount of USD 12 million
African Water Facility
Equitable and sustainable use and management of water resources
15
US Treasury Awards for Development Impact
16 AfDB is the first multilateral development bank to receive recognition for two projects in the same year
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• Created an innovative referral and counter-referral system through which the country could begin paying more attention to GBV
• Raised awareness of GBV for over 1.5 million community members.
• Established baseline data and indicators on gender equality (access to education, employment and health, GBV data, etc.)
• Rehabilitated and equipped the gynecological and obstetrical departments of two regional hospital centers, and several health centers
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• Halved the cost to transport produce to major towns and halved the journey time
• Reduced post-harvest losses by approximately 20%, especially for perishables such as cabbage, tomatoes, pineapples, and watermelons
• Farm gate price increases of staple products (maize, Milk, bananas) demonstrate the success of the programme
Helped the lives of victims of Gender Based Violence (GBV) through USD 31 million grant
USD 45 million support to increasing agricultural productivity and ensuring markets function
At the apex of development initiatives on the continent
Making Finance
Work for Africa
Connect Africa Initiative to bridge gaps
in ICT infrastructure
Trade Finance Initiative
Investment Climate Facility
Africa Water Facility
Multi Donor Water
Partnership Program
African Financing
Partnership
Rural Water Supply &
Sanitation Initiative
Debt Relief HIPC, MDRI
Fragile States Facility
NEPAD
Infrastructure Project
Preparation Facility
Infrastructure Consortium For Africa
Extractive Industries
Transparency Initiative
17
Two objectives to support transformation
Three areas of special emphasis
At the heart of Africa’s transformation
Inclusive growth
Five core operational priorities:
Transition to green growth
Age Gender Geography
Building resilience
Managing natural
resources
Sustainable infrastructure
Fragile States
Agriculture & Food Security
• Infrastructure development
• Regional integration
• Private sector development
• Governance
• Skills & technology
Gender
A continuum & regional approach
Supporting value chains
Economic empowerment, legal & property rights
18
AfDB Green Bond: Eligible projects
Greenfield Renewable Energy Generation (e.g. solar, wind, geothermal, and ocean power)
Biosphere conservation projects (reduce emissions from deforestation and degradation of ecosystems)
Solid Waste Management (e.g. incineration of waste, landfill gas capture and landfill gas combustion)
Demand-side Brownfield and Greenfield Energy Efficiency (e.g. energy efficiency improvements in lighting and equipment; retrofit of transmission lines, substations or distribution systems to reduce technical losses)
Vehicle energy efficiency fleet retrofit or urban transport modal change
Water Supply and Access (e.g. water saving measures such as introduction of less water intensive crops or preservation of soil moisture and fertility)
Urban Development (e.g. rehabilitation and upgrade of urban water drainage systems in areas vulnerable to frequency and/or severity of flash floods and storm surges brought by climate change)
Industrial Processes (reduce GHG emissions from industrial processes improvements and cleaner production)
Fugitive emissions and carbon capture (e.g. carbon capture and storage, reduction of gas flaring or methane fugitive emissions in the oil and gas industry, coal mine methane capture)
19
Morocco Africa’s largest Concentrated Solar Power Plant
Ouarzazate I Concentrated Solar Power (CSP) Project
AfDB financing: USD 240 million
With the 160 MW CSP Plant: • Annual GHG reductions of 0.250 MT
CO2e per year • Creation of 800 jobs between 2012
and 2014 and 50 permanent jobs thereafter
• Increase in the share of renewable energies in Morocco’s energy supply by 2020
• Trade balance improved
Key expected results: • 160 MW of CSP capacity (by end 2014) • Curb CO2 emissions by 6 million tons
20
South Africa Eskom Sere Wind Farm – tapping into vast wind potential
Eskom Western Cape Province Wind Energy Facility
AfDB financing: USD 235 million • The purpose of the Eskom wind power
program is to scale up the wind power program from the current level of 100MW to 800MW over 5 years and to 2,000MW by 2020
• With the 100 MW Wind Plant: • Annual GHG reductions of 0.240 MT
CO2e per year • Creation of 1500 jobs during
construction • Enhance power supply and energy
security • Development of the first utility-scale
wind power plant in South Africa
Key expected results: • 100 MW of Wind capacity • Curb CO2 emissions by 4.8 million tons
21
Morocco ONE Integrated Wind/Hydro Energy Program
ONE Integrated Wind/Hydro Programme
AfDB financing: USD 450 million • The purpose of the program is to construct
three wind farms of 100-300MW capacity and two hydro facilities to supply base-load power
• With the program: • Annual GHG reductions of 3.2 MT
CO2e per year • Creation of 4000 jobs during
construction and 350 permanent jobs • Achieve the large scale
commercialization of wind energy in Morocco
• The project will ultimately contribute to a more diversified energy sector and greatly reduced CO2 emissions
Key expected results: • 750 MW of Wind capacity • Curb CO2 emissions by 65 million tons • 86,000 new rural household connections
22
Zambia Itezhi Tezhi Hydro Generation Project – innovative PPP structure
Itezhi Tezhi Hydro Project
AfDB financing: USD 35 million • The objective of the project is to design,
construction and operation of a 120 MW independent power plant through a concession agreement under a public-private partnership (PPP).
• With the 120 MW hydro plant: • Annual GHG reductions of 0.360 MT
CO2e per year • Creation of 120 permanent jobs • 5% increase in electricity access
• The project will reduce poverty through the supply of household, commercial and industrial electricity and create an enabling environment for business
Key expected results: • 120 MW of Hydro capacity • Curb CO2 emissions by 14.4 million tons
23
Cape Verde Wind power drives public-private collaboration in Cape Verde
Cabeólica Wind Power Project
AfDB financing: EUR 15 million • The purpose of this project is to drive up
the share of renewable energy in the national energy mix
• With the 25.5 MW 4 Wind plants: • Annual GHG reductions of 0.85 MT
CO2e per year • Creation of 80 jobs during
construction and 10 permanent jobs • Making up the first RE public private
partnership in the Cape Verdean infrastructure sector
• Help achieve government objective of sourcing 50% of total energy generation from renewable sources by 2020
Key expected results: • 25.5 MW of Wind capacity • Curb CO2 emissions by 2.1 million tons
24
Third Party Assurance
“A clear impression of an institution that is well aware of the challenges posed by climate change as well
as other environmental and social concerns that may be associated with investments projects. In
particular we are pleased with the consciousness shown towards the external impacts of projects both
across space and time”
CICERO, 1st September 2013
25
An independent research institute, the Center for International Climate and Environmental Research (CICERO) based in Oslo, has provided a second opinion on the Bank’s green bond framework and its approach to climate financing
Green Bond framework: Project evaluation & selection
26 Green Bond Project Portfolio
Overall screening and selection
of projects (phase 1)
• Energy, Environment and Climate Change Department with Treasury Department evaluate and select projects for the green bond portfolio according to the Bank’s green bond framework
All projects
Joint MDB Mitigation/Adaptation Climate
Finance Tracking principles
AfDB’s detailed Methodology for Tracking Climate Mitigation and Adaptation Finance
Bank’s Environmental Strategy permeates design of
all projects
• Energy, Environment and Climate Change Department with operational departments evaluate and select climate change projects according to the Bank’s climate finance tracking methodology
Phase 1
Phase 2
Application of green bond framework (phase 2)
• An amount equal to the net proceeds of the bonds will be allocated within the treasury’s liquidity portfolio, to a sub-portfolio, that will be linked to the AfDB’s lending operations in the fields of climate change adaptation and mitigation (“eligible projects”)
• So long as the bonds are outstanding, the balance of this sub-portfolio will be reduced, at the end of each semester, under the Bank’s debt allocation framework, by amounts matching the disbursements made during the semester in respect of eligible projects
Green Bond framework: Allocation of proceeds
27
Green Bond framework: Reporting
Progress status report on the selection and implementation of the projects which are part of the green bond portfolio (e.g. information on implementation status, disbursement status and other relevant indicators as they are collected as part of the Bank’s project monitoring procedures)
Key information about the AfDB’s Green Bond Program and Framework, including project selection criteria
Key documents related to AfDB’s Green Bond Program and links to other relevant Bank documents such as the Long-Term Strategy and the Environment Policy
To enable investors to follow the implementation of AfDB’s Green Bond Program, a dedicated website has been established which includes, among other things:
28
http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/green-bond-program/
2 Financial Profile of the African Development Bank
The financial position of the AfDB is very strong. Thanks to its solid capitalization, ample liquidity buffers and prudent risk-management framework the institution has the capacity to absorb potential shocks emanating from the turbulent operating environment. The Bank has substantial headroom in risk- bearing capacity to further expand its lending. Continued financial and operational prudence will remain key.
29
The African Development Bank
(in USD million) 2008 2009 2010 2011 2012 2013
Assets 19,363 26,940 29,483 31,107 32,605 32,335
Loans 8,987 11,658 12,596 14,210 16,928 17,842
Investments 7,048 11,620 11,448 11,653 9,971 9,372
Borrowings 10,331 16,587 18,450 19,810 20,408 19,939
Equity 7,178 7,433 7,423 7,494 8,207 8,980
Paid-in Capital net of CEAS* 3,365 3,431 3,377 3,601 4,108 4,581
Reserves 3,813 4,002 4,046 3,894 4,100 4,400
Income before distributions 469 362 329 253 301 278
Subscribed Capital 33,524 34,203 33,600 57,300 100,230 100,424
AfDB Summary Financial Information
* Cumulative Exchange Adjustment on Subscriptions
Note: Data converted from UA (SDR) to USD at period-end exchange rates of each year
30
Safeguarding the sustainability of operations
Optimize utilization of risk capital while supporting the Bank's AAA rating
Risk Class AfDB Internal Rating
Moody’s Equivalent
Sovereign Risk Charges
Non-Sovereign Risk Charges
Senior secured Unsecured
Very Low Risk
1+ A1 and above 0.6% 1.7% 2.0%
1 A2 0.8% 2.3% 2.7%
1- A3 1.5% 4.4% 5.1%
2+ Baa1 2.4% 6.9% 7.9%
2 Baa2 3.3% 9.4% 10.9%
2- Baa3 4.9% 15.0% 17.3%
Low Risk
3+ Ba1 10.8% 21.6% 25.0%
3 Ba2 13.0% 25.6% 29.6%
3- Ba3 15.5% 29.3% 33.8%
Moderate Risk
4+ B1 18.5% 33.1% 38.2%
4 B2 20.2% 35.0% 40.4%
4- 22.1% 38.3% 44.1%
5+ B3 49.3% 42.7% 49.3%
5 55.2% 47.8% 55.2%
High Risk
5- Caa1 60.4% 52.4% 60.4%
6+ 65.8% 57.0% 65.8%
6 Caa2 100.0% 61.6% 71.1%
6- 100.0% 65.8% 76.0%
Very High Risk
7 Caa3 100.0% 71.2% 82.2%
8 100.0% 72.0% 83.1%
9 Ca 100.0% 100.0% 100.0%
10 C 100.0% 100.0% 100.0%
Credit risks related to lending activities are
managed through integrated policies,
guidelines and procedures, and is
based on a systematic assessment of the
credit mapped to an internal rating scale
31
Careful management of development-related exposure
• Non-sovereign risk rating derived on the basis of several pre-
determined critical factors including overall financial strength,
industry outlook, competitive position, management strength
and host country risk rating
• WARR of 3.58 at the end of December 2013
Sovereign Portfolio risk profile
0%
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013
very low risk low risk moderate risk high risk very high risk
0%
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013
very low risk low risk moderate risk high risk very high risk
Non-Sovereign Portfolio risk profile
Note: In 2011, the Bank changed from a 10 point rating scale to a 22 point scale that allowed more granularity
• Sovereign risk credit rating derived from an assessment of
macroeconomic performance, debt sustainability, socio-
political factors, business environment and the Bank’s
portfolio performance
• WARR of 2.73 at the end of December 2013
32
Expanded capacity to assume core business risks
Growing capital base …
(in USD million)
Capital usage focused on development activities
33
2008 20092010
20112012
2013
3,814 4,002 4,047 3,893 4,108 4,581
3,365 3,431 3,377 3,600 4,100 4,400
Paid-in capital Reserves
7,433 7,424 7,494 8,207 8,981
(in USD million)
8,818
3,383
3,159
949
788 420
80 276 - 239
Risk Capital Sovereign LoanRisk
Non-SovereignLoan Risk
Equity Risk Treasury Risk Operational Risk Benfit Plan Risk Diversification Available RiskCapital
7,179
7,933
9,928 10,213 11,728
13,225 14,077
963
2,519 2,769
3,219
4,193 4,654
2.8 2.6 2.3
2.7 2.7 3.0
2008 2009 2010 2011 2012 2013
Sovereign Portfolio Non-Sovereign Portfolio
Weighted Average Risk Rating
8,896
12,447 12,983
14,947
17,418 18,731
Target rating of 3 to 4 *
(in USD million)
* Equivalent to Moody’s Ba1 to B2
…allowing for greater support to Africa
Safeguarding stakeholders interests
2008 2009 20102011
20122013
41% 60%
58% 60% 58% 62%
2008 2009 20102011
20122013
60%
86% 84%
55% 50%
48%
Strong capitalization Conservative leverage
Prudential Limit (100%)
Risk Capital Utilization Rate = Σ ((Exposure) x (Risk capital charge)) / Total risk capital
Usable Capital = Σ (Paid-in capital, Reserves, Callable capital of non-borrowing countries rated A- and above)
Risk Capital Utilization Rate Debt to Usable Capital
Prudential Limit (100%)
Annual paid-in capital from GCI-6 will range from USD 467 million to USD 72 million from 2014 to 2023 34
Financial policies that mitigate non-core risks
• Mitigate counterparty credit risk through minimum credit ratings and exposure limits and collateral exchange agreements for derivatives
• Match the currency composition of assets with that of liabilities and hedge the net asset position to minimize currency translation risk
• Prohibited from taking direct FX exposure
• Protect the Bank’s net interest margin from fluctuations in interest rates
• Matching the characteristics of assets with liabilities
• Minimizing liquidity risk by holding one year of liquid resources at all times
• COSO internal framework to regularly evaluate the effectiveness and efficiencies of the internal controls of significant business operations
Counterparty Credit Risk Currency Risk
Interest Rate Risk Liquidity Risk
Operational Risk
35
5% 1% 4%
90%
0%
20%
40%
60%
80%
100%
• Our investment philosophy: capital preservation, liquidity and reasonable returns
• Investment strategy adapted to market conditions to strengthen credit quality and improve liquidity profile of investment portfolio while limiting volatility of returns
• Strong performance in 2013
Prudence and performance in the midst of financial turmoil
As of 31 December 2013
Fair value portfolio: USD 4.6 billion
Amortized cost portfolio: USD 4.8 billion
Liquid assets to meet operational needs of the Bank
6% 8%
30%
51%
5%
0%
20%
40%
60%
Prudent investment strategy
Longer term assets to stabilize Net Interest Margin
USD 50%
EUR 36%
GBP 12%
Other 2%
36
Treasury investments aligned with ALM guidelines
As of 31 December 2013
As of 31 December 2013
Investment portfolio exposure
Defensive asset mix targeting top quality investments
52%
43%
5%
0%
20%
40%
60%
AAA AA A and below
AfDB’s exposure by country
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
AAA AA A BBB+ and below
(in USD million)
37
As of 31 December 2013
As of 31 December 2013
Building Africa, maintaining financial strength
Allocating income
Ensuring financial sustainability and resilience to shock
Guiding principles of net income allocation
• 52% of allocable income retained in reserves
for 2012 against 46% in 2011
• Goal is to maintain risk capital utilization rate below
100% limit over the 10-year planning horizon
• First priority to reserves
• Distribution to fulfill mandatory commitments:
ADF USD 54 million and DRC USD 96 million
• Surplus account with clear criteria for prioritization,
use limited to high impact development initiatives
123 141 169 137 177
251 190 159 158
150
37 44 36 13
411 375 364
295 339
2008 2009 2010 2011 2012
Allocable income
Reserves Development Initiatives Surplus Account Allocable Income
(in USD million)
Building up reserves while supporting development initiatives
ADF
Fragile States Facility
African Water Facility
Africa Food Crisis Response
Special Relief fund Investment
Climate Facility
NEPAD African Legal
Support Facility
African technical assistance centers
Africa Capacity Building Foundation
Dem. Rep. of Congo Debt Relief
Distribution to initiatives with the highest development impact, consistent with the Bank’s strategic objectives.
38
AfDB
(Aaa/AAA)
ADB
(Aaa/AAA)
IADB
(Aaa/AAA)
IBRD
(AAA/Aaa)
Shar
eho
lder
s’
Sup
po
rt
Average rating of shareholders A- A+ A- A
Average rating of key shareholders A AA A AA
Share of 'AAA'-'AA' callable capital (%) 28.7 47.1 42.8 48.0
'AAA'-'AA' callable capital /debt (%) 130.1 113.5 73.2 62.2
Cap
ital
isat
ion
Equity to asset (%) 25.2 13.2 22.0 10.8
Paid-in to subscribed capital (%) 7.4 5 4 6.0
Debt to equity (%) 248.75 396.25 321.3 406.3
Ris
k
Average rating of loans & guarantees BB+ BBB- BB BBB-
Impaired loans/gross loans (%) 1.17 0.04 0.4 0.3
Share of non-sovereign exposure (%) 24.86 11.43 6.5 0.0
Equity stakes/(loans + equity stakes) (%) 3.82 1.76 0.0 0.0
Five largest exposure/total loans (%) 64.37 80.25 66.6 44.8
Share of 'AAA'-'AA' treasury assets (%) 88.0 49.5 82.0 78.5
Financial ratios compare favorably to peers
39 Source: Fitch (16 August 2013)
Financial ratios compare favorably to peers (contd.)
40
Source: Moody’s (30 September 2013)
Liquid Assets (Cash + Investments) as a % of Total Assets (as of December 2012)
Usable Capital + Callable Capital of Aaa/Aa Members a % of Risk Assets (as of December 2012)
3 Capital Market Activities
41
The African Development Bank
Financing development through bond issuance
Funding in line with operations
Raising cost effective funding for the benefit of African nations
Capital market resources within and outside the continent to fulfill the Bank’s mandate
Leveraging its AAA rating to attract cost effective resources to support Bank operations
2014 borrowing program of USD 4.7 billion
42
2010 2011 2012 2013 2014*
2,770
3,772 3,844
5,596
2,698
2,011
(in USD million)
Actual Borrowing Limit
* Amount raised as of 30 April 2014
Tapping into diversified funding sources
Swapped to meet disbursements and for asset/liability management purposes
Public Domestic
Issue 16.3% Global
61.1%
Private Placement
6.8%
African Currency
Linked 2.1%
Uridashi 4.6%
Green Bond 9.0%
African Domestic
Issue 0.1%
2013 issuance by market segment
43
2013 issuance by currency
AUD 16.3%
BRL 4.1%
CLP 1.5%
GHS 2.1%
MXN 1.6%
TRY 0.1%
UGX 0.1%
USD 74.3%
Consistent presence in the US dollar global benchmark market
AfDB bonds, safety with yield
USD 2.175 billion 0.875% due March 2018
Distribution by investor type
Asset Managers 7%
Banks 23%
Central Bank / OIs* 67%
Corporates 3%
Africa Americas Asia Europe Middle East
11%
29%
41%
14%
5%
• Priced at 20.45 bps over US Treasuries • Latest re-opening at 12.1 bps over US Treasuries
*Official Institutions
44
Distribution by region
USD 1 billion 0.875% due May 2017
Distribution by investor type
Asset Managers 19%
Banks 14%
Central Bank / OIs* 67%
Africa Americas Asia Europe Middle East
4%
32%
23%
37%
4%
• Priced at 22.85 bps over US Treasuries
Distribution by region
Outstanding Global benchmarks • US$ 1.125 billion due May 2014 • US$ 1 billion due Mar 2016 • US$ 1.25 billion due Sep 2016 • US$ 1.7 billion due Mar 2017
• US$ 1 billion due May 2017 • US$ 2.175 billion due Mar 2018 • US$ 1 billion due October 2018
Inaugural syndicated US dollar Green Bond in 2013
45
USD 500 million 0.75% Green Bond due October 2016
Americas Asia EMEA
52%
9%
39%
Distribution by region
Oversubscribed with 84% bought by investors motivated by the green format including: • Third Swedish National Pension Fund • AP4 • BlackRock • California State Teachers’ Retirement System
(CalSTRS) • Calvert Investment Management • Nordea Investment Management • Pictet Asset Management • Praxis Intermediate Income Fund • State Street Global Advisors (SSgA) participating in
buying the bond for their High Quality Green Bond Fund
• TIAA-CREF • Trillium Asset Management
• Priced at 15.5 bps over US Treasuries and MS+5 bps
Examples of eligible projects
• Morocco: Africa’s largest Concentrated Solar Power Plant • South Africa: Eskom Sere Wind Farm – tapping into vast wind
potential • Morocco: ONE Integrated Wind/Hydro Energy Program • Zambia: Itezhi-Tezhi Hydro Generation Project – innovative PPP
structure • Cape Verde: Wind power drives public-private collaboration in
Cape Verde
• In February 2014, the Bank launched its second Green Bond
o SEK 1 billion 5-year FRN o Priced at 3m Stibor flat
• In March 2014, the Bank launched its third Green Bond o SEK 1 billion 5-year fixed-rate note o Priced at MS flat
Growing presence in the Australian Kangaroo market
46
Largest ever AfDB Kangaroo issue AUD 1,000 million 5.25% due March 2022
Insurance Companies
15%
Central Banks/Ois
1%
Asset Managers
60%
Banks 24%
March 2012
Longest ever AfDB Kangaroo issue AUD 600 million 4.75% due March 2024
Insurance Companies
39%
Asset Managers
58%
Banks 3%
August 2013
Asia Japan Australia Europe Americas
52%
17% 23%
1% 7%
Japan Australia Europe Americas
46.9% 46.1%
0.3% 6.7%
Distribution by region Distribution by region
AUD is the Bank’s second funding currency
Distribution by investor type Distribution by investor type
Outstanding Kangaroo benchmarks • A$500 million due Jan 2016 • A$500 million due Jan 2018 • A$100 million FRN due May 2018
• A$250 million due Feb 2019 • A$1,000 million due Mar 2022 • A$525 million due Mar 2024
Bank’s first sterling deal since 1991
47
GBP 250 million 1.125% due December 2016
Central Bank/OIs
34%
Asset Managers
10%
Banks 48%
Institutions/Private Fund
6% Corporate
2%
Africa Americas Asia Europe UK/Ireland
2% 10% 10% 5%
73%
Distribution by region Distribution by investor type
• 3-year sterling benchmark bond
• Launched in January 2014 for an amount of GBP 250 million
• Priced at UKT 4% Sep 2016 + 35bps
o Tap by an addition GBP 100 million in April 2014
o Priced at UKT 4% Sep 2016 +
34bps
Satisfying individual Japanese investors’ appetite for Socially Responsible Investments
48
In line with our core operational priorities
An amount equal to the net proceeds are directed to finance projects in the respective fields on a ‘best-efforts’ basis
AUD 63mn due Nov 2014 (Water bond)
BRL 515mn due Sep 2016 (Education)
ZAR 22.6mn due Mar 2017
(Education)
TRY 128mn due Mar 2015
(Education)
BRL 37mn due 2017
(Clean Energy)
AUD 10mn due 2020
(Clean Energy)
BRL 2.8mn due Mar 2017
(Education)
BRL 17mn due Mar 2018
(Education)
A natural issuer of African currency-linked bonds
49 Nearly USD 200 million issued since 2012 in Nigerian Naira, Uganda Shilling and Ghanaian Cedi
• Favourable growth story and macroeconomic fundamentals
• Triple-A rating enables the Bank to be an issuer of choice for emerging market investors
• Providing visibility to African countries among international investors
• Investors looking into Africa for opportunities
Strong strategic interest
Selected AfDB African currency-linked transactions
January 2014
NGN 1.63 Billion 10.85% due February 2015
April 2012
NGN 2.36 Billion 10.5% due April 2014
March 2013
GHS 68.25 Million due March 2018
December 2012
UGX 34.892 Billion 10.0% due Dec 2017
Key drivers
Prior transactions in African currencies
TZS
BWP
ZMK
KES
Multi-pronged approach to developing African capital markets
50
• Establishing local bond issuance programs
• Targeting selected African capital markets
The success of the Bank’s experience in Uganda sets the stage for further local market issuance in 2013
• ISDA+ Master Agreement signed with the International Finance
Corporation to facilitate local currency lending and bond issuance in Africa
• Enables bilateral collaboration on local currency issuance, enhances local currency funding capacity to support development projects
+ International Swaps and Derivatives Association
Major breakthrough in the capital markets of Uganda
Exploring domestic African capital markets
Expanding the Bank’s African lending currencies
Partnering with sister institutions
Ghana Kenya Nigeria
Tanzania Zambia
NGN
XOF
ZAR
XAF
GHS
UGX
ZMW
TZS
EGP
KES
Ugandan Shilling designated as one of the Bank’s lending currencies in September 2011
Fully placed domestically with
50% oversubscription
Bond proceeds kept in local currency to fund a domestic mortgage lender
Established a UGX 125 billion Medium Term Note program
Issued a 10 year, UGX 12.5 billion bond in July 2012, with coupon pegged at 85% of Uganda 2-year Treasury bond yield and to be
re-priced at 2-year intervals
Positioning closer to stakeholders
Demand for field presence is growing = Regional Resource Center
Japan
Tunisia (TRA)
Egypt
Uganda
Malawi
Ghana
South Africa
Madagascar
Gabon
Mali
Nigeria
Tanzania
Zambia
Algeria
Ethiopia
Sudan
Kenya
Chad
Angola
Zimbabwe
Burundi
Togo CAR
Ivory Coast (HQ)
South Sudan
Mauritius Mozambique
Liberia Cameroon
Burkina Faso
Senegal
Sierra Leone
Rwanda DRC
Morocco
• Presence in 37 countries • 38% of operations staff
work from the field • 50% of projects managed
by field offices
Decentralization with delegation & safeguards
Opening of Customized Liaison Office in Mauritius and Asia External Representation Office in Tokyo
Increased field presence in Benin, Guinea (Conakry), Guinea Bissau,
Mauritania, and Sao Tome and Principe
• Better integration and oversight • Proactivity and responsiveness • Reduced procurement turn-
around time • Better utilization of resources • Reduced costs of doing business
51
One Bank directing its strength and capabilities towards Africa
52
Re-affirmed AAA rating
Strengthened risk-bearing capacity & resources level
Capacity to adapt and swiftly address emerging challenges in line with core priorities
Building on expertise and achievements to meet the needs of clients
Providing valuable policy advice and technical assistance to support
development efforts
A catalyst for development finance and solutions
Setting the continent on the path to greener, more inclusive growth, cutting across national borders and
led by a vibrant private sector
Africa’s Preferred Partner
The trusted partner for Africa’s development
53
“…the best advocate for Africa in achieving the MDGs.” Her Excellency Ellen Johnson Sirleaf, President of Liberia, 2013
“African Development Bank has become the darling of all of us in Africa.”
His Excellency Olusegun Obasanjo, Former President of Nigeria, 2012
“Nous sommes confiants que cette institution saura, grâce à la mobilisation de toutes ses compétences, préserver ses acquis et assurer son avenir avec plus d'optimisme et avec davantage de
rayonnement à l'échelle continentale et internationale.” His Majesty Mohammed VI, King of Morocco, 2012 Her Excellency
Ellen Johnson Sirleaf President of Liberia
His Excellency Olusegun Obasanjo
Former President of Nigeria
“AfDB has been Africa’s dependable partner in development since its establishment in 1964.”
His Excellency Jakaya Mrisho Kikwete, President of Tanzania, 2012
His Excellency Jakaya Mrisho Kikwete
President of Tanzania
His Majesty
Mohammed VI King of Morocco
www.afdb.org
[email protected] Investor Contact: [email protected]
+(216) 71 10 39 00 +(216) 71 35 19 33
More information on the Bank Group is available at www.afdb.org
• Financial and Operational Analysis
• Documentation for Debt Programs
• Rating Agency Reports
• Financial Products for Borrowers
• Annual Report
afdb_acc AfDB_Group African
Development Bank Group
54
Appendix 4
55
AfDB: Income statement (UA million)
1 UA = 1 SDR = 1.54027 USD (2008) = 1.56769 USD (2009) = 1.54003 USD (2010) = 1.53527 USD (2011) = 1.53692 USD (2012) = 1.54000 USD (2013)
As of 31 December 2013 2012 2011 2010 2009 2008
Operational Income and Expenses
Income from Loans 335.01 351.16 314.92 293.36 288.24 352.28
Income from Investments and Related Derivatives 126.45 197.65 168.85 219.22 222.96 202.88
Income from Others Debt Securities 3.95 4.83 5.41 6.74 7.68 9.29
Total Income from Loans and Investments 465.41 553.64 489.18 519.32 518.88 564.45
Interest and Amortized Issuance Costs (302.99) (356.41) (316.82) (303.04) (306.32) (251.83)
Net Interest on Borrowing-Related Derivatives 111.85 139.16 112.16 126.27 73.28 (65.79)
Unrealized Gains/(Losses) on Fair-Valued Borrowings and Related Derivatives
92.50 (30.45) (13.00) (27.61) 17.38 12.43
Unrealized Gains/(Losses) on Non Fair-Valued Borrowings and Others (58.39) 20.28 9.96 (13.33) (20.30) (16.68)
Provision for Impairment on Loan Principal and Charges Receivable (41.14) (29.69) (17.68) (26.76) (11.29) 163.28
Provision for Impairment on Equity Investments 0.76 (0.05) (0.15) (0.90) (2.32) (18.46)
Provision for Impairment on Investments 9.19 0.29 6.39 18.58 3.39 (38.13)
Translation (Losses)/Gains 13.33 (2.27) (27.95) 4.87 19.63 (9.17)
Other Income 12.46 15.29 4.46 (1.72) 7.34 18.65
Net Operational Income 302.98 309.79 246.55 295.66 299.67 358.75
Administrative Expenses (110.97) (104.64) (79.50) (75.00) (63.06) (46.78)
Depreciation – Property, Equipment and Intangible Assets (6.70) (4.59) (4.47) (4.59) (4.68) (5.20)
Sundry (Expenses)/Income (4.98) (1.94) 1.93 (2.41) (0.77) (2.11)
Total Other Expenses (122.65) (111.17) (82.04) (82.00) (68.51) (54.09)
Income Before Distributions Approved by the Board of Governors 180.33 195.72 164.51 213.66 231.16 304.66
Distributions of Income Approved by the Board of Governors (107.50) (110.00) (113.00) (146.37) (162.68) (257.30)
Net Income for the year 72.83 88.62 51.51 67.29 68.48 47.36 56
AfDB: Balance sheet highlights (UA million)
1 UA = 1 SDR = 1.54027 USD (2008) = 1.56769 USD (2009) = 1.54003 USD (2010) = 1.53527 USD (2011) = 1.53692 USD (2012) = 1.54000 USD (2013)
As of 31 December 2013 2012 2011 2010 2009 2008
Assets
Due from Banks 954.13 881.45 344.16 395.72 318.83 592.64
Demand Obligations 3.80 3.80 3.80 3.80 3.80 3.80
Treasury Investments 6,085.45 6,487.51 7,590.47 7,433.53 7,412.25 4,575.76
Derivative Assets 985.96 1,558.33 1,696.68 1,421.48 764.00 736.09
Non-Negotiable Instruments on Account of Capital 1.20 1.97 3.04 4.62 8.19 11.86
Accounts Receivable 843.86 762.67 914.85 1,341.66 924.16 649.01
Outstanding Loans 11,585.84 11,014.31 9,373.52 8,293.01 7,538.20 5,834.62
Hedged Loans- Fair Value Adjustment 32.49 86.85 49.87 - - -
Accumulated Provision for Impairment on Loans (145.14) (128.51) (118.03) (114.21) (101.92) (102.64)
Equity Participations, Net 525.01 438.56 309.76 272.24 234.48 188.78
Other Debt Securities 82.90 76.54 79.99 79.75 70.81 68.80
Other Assets 41.22 31.06 13.34 12.69 11.89 12.23
Total Assets 20,996.72 21,214.55 20,261.45 19,144.29 17,184.69 12,570.95
Liabilities, Capital and Reserves
Accounts Payable 1,246.11 2,083.07 1,974.68 2,015.04 1,385.68 843.12
Derivative Liabilities 971.85 512.60 502.29 328.30 477.12 360.30
Borrowings 12,947.44 13,278.80 12,902.96 11,980.56 10,580.64 6,707.28
Capital Subscriptions Paid 3,147.08 2,839.48 2,505.97 2,355.68 2,350.26 2,345.81
Cumulative Exchange Adjustment on Subscriptions (172.65) (166.82) (160.63) (162.57) (161.97) (161.03)
Reserves 2,856.88 2,667.44 2,536.18 2,627.28 2,552.96 2,475.47
Total Liabilities, Capital and Reserves 20,996.72 21,214.55 20,261.45 19,144.29 17,184.69 12,570.95
57
Disclaimer
This presentation has been prepared by the African Development Bank (“AfDB”) for information purposes only. Any opinions expressed in this presentation reflect the judgment of AfDB at the date and time hereof and are subject to change without notice and AfDB has no obligation to inform any recipient when opinions or information in this presentation change. The AfDB makes no representation, warranty or assurance of any kind, express or implied, as to the accuracy or completeness of any of the information contained herein. This presentation is not an offer for sale, or a solicitation of an offer to buy, any notes or other securities of AfDB. It does not take into account the particular investment objectives, financial situations, or needs of individual investors. The price and value of the investments referred to in this presentation may fluctuate. Past performance is not a guide to future performance and future returns are not guaranteed. Each recipient of this presentation is deemed to acknowledge that this presentation is a proprietary document of AfDB and by receipt hereof agrees to treat it as confidential and not disclose it, or permit disclosure of it, to third parties without the prior written consent of the AfDB. All content (including, without limitation, the graphics, icons, and overall appearance of the presentation and its content) are the property of the AfDB. The AfDB does not waive any of its proprietary rights therein including, but not limited to, copyrights, trademarks and other intellectual property rights.
58