An Executive ReportDecember 2012

The Gerset Development ProposalEritrea Sugar Company ESC

GERSET, Eritrea

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Contents

A. The Economic ProfileB. The LegacyC. The ChallengesD. The PropositionE. The StructureF. The CSR Initiative

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Eritrea

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The Economic Profile

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The Legacy

Wefri Warsay Yika'alo (WWY) or Warsay Yika'alo Program

A successful Government CommitmentOften compared to the Marshall Plan

A series of Government sponsored investments in economic, education, health, and transportation related infrastructure

A mixture of grants and loans from international organizations and from the Government of Eritrea

Practical transfer of skills is an important component of this program.

All planned 22 projects were completed except the construction of Keren Dam

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The Challenges

Demographics

Enthusiastic, Resilient and Young Population, with Competences

High Rates of Education, Healthcare and Physical Fitness

Low Urban Density and Facilities with Conventional Economic Sectors

Committed Government and Civic Service, Despite the Fierce Embargo

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The Challenges

Agriculture Production

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The Challenges

Agronomics & Food Security

Strategic Dams at Gerset, Fanko-Tsimue and Fanko-Rawi

Strategic Transit and Transportation Systems & Solutions

Formal Ambition towards Modern Farming and Agronomic Techniques

Strategic Need to Develop and Improve Agro Productivity for Domestic and Export Use

1.5 mln Capita are the Workforce for Rainfall based Agriculture

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The Challenges

Gash-Barka Region

Population of 567,000 or One Third of Eritreans

over 3.5 million Livestock

37,000 Square Kilometers or a Quarter of Eritrea

Rich in Marble, Minerals & Gold for 15% of GDP

The Breadbasket of Eritrea with 350,000 H. or 900,000 A.

Main Cities: Barentu, Agordat, Molki, Sebderat and Teseney

Life expectancy at birth is 59.5 years in 2008. Low Expenditure on health and Number of Physician

Illiteracy estimates as high as 70%. Student-teacher ratios are high: 54 to 1

2009 Real GDP $ 4.4 billion, and growth rate 3.6%

Nationally;

arable land of 565,000 hectares or 1,396,000 acres

Due to Droughts, Erosion and Deforestation; 70-80% of population depend on Food Aid

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The Challenges

Gerset Dam

20 Pivot Sprinklers are capable of watering 28 and 60 hectares

Reservoir of the Dam can accumulate 10,000 cubic meters

Furrowing and Installation of the Irrigation pipe systems

Leveling the land in blocks for smooth movement of machineries

Power supply runs from Alebu to Golij via Fanko-Tsimué and Gerset dams

Second Reservoir will hold 20,000 cubic meters

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Impressions

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The Proposition

Eritrea Sugar Company (ESC)

Government Commitment for land and Irrigation

Strategic Co-Generation of Electricity

Develop Strategic Sugar Industry

Co-Produce of Strategic Subsidiaries

Spearhead Development of Gash-Barka Region

Finance and Support Regional CSR Initiatives

Corporate & Capacity Building

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The Proposition

Gerset Sugar Project (GSP)

Sugarcane plantation on 5,000 to 10,000 Hectares

Co-Generation of 14MW (2-3MW for Plant use)

Annual 2,500 to 5,000 TCD of Sugar

Land & Irrigation Provided by Government

Investment Structure as per Feasibility Plan

CSR Programs at 10% of Projects Value

Project Management

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The Proposition

Gerset Development Initiative (GDI)

VOCATIONALVocational High School

Vocational Training Programs

EMPLOYMENTPriorities and Opportunities to

Local Human Resources

HOUSINGContributions to Local Housing

Improvement Program

URBANISMDeveloping a Local Integrated

Community Center

YOUTHSponsoring Sport, Camping and

Campaigning Activities

EDUCATIONSupport Local Schools

Support Local Teachers

HEALTHCAREDeveloping a Comprehensive

Local Healthcare Center

INFRASTRUCTUREContributions to Local Grids and

Networking

Development Management

Assets

Operations

Liabilities

No AssetsNo Title DeedsGov Approval for 5000 Hectares

No OrganizationNo Operations

No Direct Liabilities

Scope2,5000 TCD of Sugar Plant5,000 Hectares Sugarcane Plantation14 MW of Co-Generation

Transfer?

Corporate?

Engagement?

Farming?Methanol?Waste Water?

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Status 2012

Analysis, Risk & Actions

ESC

GSP

Developer

Operator

Recovery Plan

No Practical DeliverablesTraded Assets in Recovery Agreement

No Confined Role

Ivory Capital Took over liabilities for US$ 10 mln+

Government Approval on ProposalCommitment to provide 5,000 Hectares

Penalties?

Procurement?

Jurisdiction?

2nd Party?

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Investment 2012

Status, Sectors & Action

ESC

EngagementInvestment

Operation

Sugar Farming OperatorSugar Processing Operator

Investment & Development PlanOperating Policies & Guidelines

Sugarcane FarmingSugar Plant and Subsidiaries

Commitment

Corporate ActivationProduction & Processing

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GSP Project GDI DevelopmentESC Corporate

Project PlanningFeasibility Review Development Planning

Compliance Report 2012Project Plan

Resources Management

ESC Audit Report 2012Investment Structure

Engagement Management

Partnership

Development/Impact InvestorEPC for Grids

Deliveries

CSR Programs

National Alignment ReportDevelopment Plan

Communication Management

Orientation

Comprehensive Plan

Engagement

Investment

Operation

ESC Associated DeveloperSugar Farming & Processing OperatorDevelopment/Impact Investor

Strategy & Feasibility StudyInvestment & Development PlanOperating Policies & Guidelines

Sugarcane FarmingSugar Plant and SubsidiariesCSR Programs

CommitmentCorporate ActivationProduction & Processing Corporate Social Contribution

RRM &Parties?

InvestmentModel?

Corporate Model?

ComprehensiveAudit?

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Recovery Plan

Domain, Goals & Actions

Commitments

ESC Corporate & Capacity Building

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GSP Production & Processing

Corporate Social Contribution Plan

Year -2 Year -1 Year 1 Year 2 Year 3 Years 4-30

Corporate Structure, Policies & Guidelines

Corporate Staffing,

Training & Liaison

Procurement of Developers, Operators & Suppliers

EPC of Farms &Plants

Farming

Sugar Production

Electricity, Methanol & Waste Water Treatment

Operations

Marketing & Sales

CSR Programs

EPC of Grids

Initial Engagement

Scope of Initial Engagement

ESC Corporate & Capacity Building

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GSP Production & Processing

Corporate Social Contribution Plan

H1/Year -2 H2/Year -1 H2/Year 1

OrganizationStrategy & BD

Finance

LogisticsEngineering

Quality

Procurement of Contractors, Operators & Suppliers

EPC of Plants

Farming Operations & Production

Sugar Production

Company Operations

Marketing & Sales Operations

Implementing CSR Programs

EPC of Grids (Electricity, Ethanol, Potable Water)

H1/Year 1H1/Year -1H2/Year -2

HRLegal

Procurement

SalesMarketing

Internal Audit

EPC of Farms

Planning CSR Programs

Kick Off

Project ConsortiumGov Company

CSR Initiatives

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The Structure

Operating System

(IDM) Investment & Development Mgr

Investor(s)

Full ExitSurrender

Back to Public

Partial ExitDesign &

Build Parties

Partnership

Long Term Operations

30 Y

ears

3 Ye

ars

Laun

ch

Operator(s)

EPC Contractor(s)

RecoveryProjects &Operations

Assets

Equity

Equity

Supplies

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The CSR Initiatives

Integrated Structures

CSR FrameworkPartnership Framework

Gov Liaison Co

Gov Ownership

Special Purpose Vehicle

PPP Product/Service

Asset Based Value

Partnership Form

Operating Company

Local Authority

CSR Initiatives

CSR Programs

Development Targets

Local Development Plans

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Gerset Development Proposal

References

Interim Country Strategy Paper for Eritrea, 2009-2011

Sugar industry in Eritrea: Business Report 2012

Sugar Engineers.com

FEASIBILITY STUDY REPORT for 10 000 TCD CAPACITY SUGAR FACTORY PROJECTS prepared by THE FEDERAL MINISTERY OF AGRICULTURE INVESTMENT DEVELOPMENT AGENCY (IDeA) Sudan

India-Eritrea Relations, Ministry of Foreign Relations, India

UNICEF HUMANITARIAN ACTION

Wefri Warsay Yika'alo

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Gerset Development Proposal

Thank You..!