Financial Products Presentation

The African Development Bank

April 2018

Overview of the Bank Group 2-4

Menu of Financial Products 5

Loans 6-10

Syndications & Co-financing 11-13

Guarantees 14-17

Direct Equity /Quasi Equity 18

Trade Finance Program 19

Special Funds 20

Table of Contents

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Africa’s premier development financial institution

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African Development Bank (AfDB)

• Established in 1964• 80 member countries• Authorized capital: USD 93 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 27 State participants and 4 regional donors

• Subscription: USD 41 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: USD 242 million

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

Board of Directors• 20 Executive Directors elected by the

Board of Governors

• Oversees the general operations of

the Bank

Decisions by both

Boards require two

third majority or

70% should any

member require so

…focused on combating poverty, and improving living conditions on the continent

55 years of partnership for the development of Africa

Americas

Africa

Europe

Middle-East

Asia

G-7 Shareholding: 28%

(As at 31st December 2017)

GCI-I

1976

GCI-II

1979

GCI-III

1981

GCI-IV

1987

GCI-V

1998

GCI-VI

2010

200 541 1,588

15,381 8,075

62,291

General Capital Increase (in USD million)

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Nigeria 9.332%

Egypt 5.622%

South Africa 5.055%

Algeria 4.243%

Côte d'Ivoire 3.738%

Morocco 3.608%

Libya 2.652%

Ghana 2.140%

Zimbabwe 1.965%

Ethiopia 1.580%

Kenya 1.440%

Tunisia 1.406%

D.R.Congo 1.293%

Zambia 1.177%

Angola 1.168%

Cameroon 1.082%

Botswana 1.077%

Senegal 1.047%

Gabon 0.997%

Tanzania 0.762%

Mauritius 0.653%

Madagascar 0.649%

Mozambique 0.622%

Congo 0.454%

Uganda 0.450%

Mali 0.433%

South Sudan 0.412%

Guinea 0.403%

Burkina Faso 0.399%

Namibia 0.345%

Sudan 0.309%

Sierra Leone 0.289%

Malawi 0.244%

Burundi 0.238%

Niger 0.237%

Benin 0.193%

Liberia 0.192%

Togo 0.157%

Gambia,The 0.152%

Equ.Guinea 0.146%

Rwanda 0.132%

Swaziland 0.114%

Cape Verde 0.070%

Sao Tome & P. 0.068%

Chad 0.066%

Lesotho 0.057%

Mauritania 0.057%

Cent.Afr. Rep 0.042%

Eritrea 0.031%

Somalia 0.030%

Seychelles 0.028%

Guinea Bissau 0.021%

U.S.A. 6.623%

Canada 3.876%

Brazil 0.332%

Argentina 0.090%

Kuwait 0.451%

Turkey 0.359%

Saudi Arabia 0.194%

Japan 5.518%

China 1.183%

Korea 0.483%

India 0.258%

Germany 4.157%

France 3.773%

Italy 2.438%

U.K. 1.774%

Sweden 1.578%

Switzerland 1.473%

Denmark 1.182%

Norway 1.181%

Spain 1.070%

Netherlands 0.879%

Belgium 0.642%

Finland 0.491%

Austria 0.449%

Portugal 0.240%

Luxemboug 0.202%

High 5s - Scaling up implementation of the Ten Year Strategy

Light up and Power

Africa

Unlock the continent’s energy potential in

order to drive much-needed industrialization

Feed Africa

Transform agriculture to increase productivity, lower food prices, enhance food security, revive rural areas

and create jobs for Africans

Industrialize Africa

Lead other partners in the process of industrializing

Africa and developing the private sector to create

wealth from natural assets

Integrate Africa

Address barriers, create regional value chains and

leverage complementarities in order to tap the

continent’s huge market potential

Improve the Quality of life

for the people of Africa

Develop innovative flagship programs to open up

opportunities for youth employment, improve access to basic services and create economic opportunities for

the extreme poor

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High 5sInvestment

NeedsUSD 170 bn

AFFILIATED

PARTNERS

Bringing scarce risk

capital to

transformative

projects

EQUITY

Africa 50

Africa Guarantee Fund

African Export-Import

Bank

Providing long-term

debt to public and

private sectors

LENDING

INSTRUMENTSMitigating the risks

attached to

investments in Africa

GUARANTEES

Allowing our borrowers

to hedge and

manage their debt

responsibly

RISK MANAGEMENT

PRODUCTS

Bridging the gap in

trade financing in

Africa

TRADE FINANCE TECHNICALASSISTANCE FUNDS

Financing the

completion of feasibility

studies, training and

project preparation

1 2 3 4

765

Large Menu of Financial Instruments

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*Subject to the availability of local currency funding or swap opportunities

Fully Flexible Loan (FFL) - Description

The Fully Flexible Loan (FFL) – embeds further hedging features and introduces maturity-based pricing to provide more alternatives to

borrowers to meet the needs of their projects and programs.

Opportunity to fix, unfix and re-fix the base interest rate

Ability to cap or collar all or part of the floating base interest rate

Ability to change the lending currency, including into local currency*

The FFL product will enable ADB sovereign / sovereign-guaranteed borrowers to customize the financial terms of their loans, and to meet

their evolving debt and risk management objectives.

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What we offer ADB sovereign clients

PRICING

BASE RATE-

Floating (6m LIBOR/ Euribor; 3m JIBAR)

FUNDING MARGIN-

Bank’s cost of borrowing / LIBOR, EURIBOR, JIBAR

Calculated twice a year

MATURITY PREMIUM

˃ 12.75 yrs up to 15 yrs: 10bps

˃ 15 yrs up to 17 yrs: 20 bps

CONTRACTUAL SPREAD

80 BPS

CURRENCIES

EUR, USD, ZAR, JPY

and LCYs

FRONT END FEE

25bps of loan

amount

COMMITMENT FEE

25bps of undisbursed

amount

MATURITY

25 years including

8 year grace

period

CONVERSIONSFix, re-fix, unfix the

base rate, cap and

collar + change

currencies at any

time during the loan

Pricing Formula = Base Rate + Funding Margin + Lending Spread + Maturity Premium

RATIONALE:

Reduce clients foreign exchange risk /

overall economic risk exposure

Provide long term funding in local

currencies

Introduce benchmark issuances and role

model transactions

Introduce a new asset class and allow for

diversification

Promote domestic capital market

development

FUNDING METHODS*: Domestic bond issue

Synthetic Local Currency Loans (non-deliverable forwards or “NDF”)

Cross currency swap

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The Bank currently has 10 approved African lending currencies:

South African Rand, Egyptian Pounds, Uganda Shilling, Nigerian

Naira, Kenya Shilling, Zambia Kwacha, Tanzania Shilling, Ghana

Cedi, Botswana Pula, CEMAC region CFA and WAMU region CFA.

*Decision on which funding method to adopt will depend

primarily on cost considerations – cost efficient funding that

meet project requirements will be pursued.

Local Currency Loans

NGN

XOF XAF UGX

ZMW

TZS

EGP

KES

BWP

GHS

Standard Private Sector Loan

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• Maturity: up to 15 years including a 5-year grace period

• Currency: EUR, USD, ZAR, JPY and anyAfrican lending currency approved bythe Bank through the local currencyloan program

• Pricing: Floating base rate + credit

margin

• A Free option to change the floatingbase rate into fixed base rate

Corporate Loan

Line of Credit

Project Finance

• Eligibility: Private Sector Companies inall Regional Member Countries (RMCs)and non-sovereign guaranteed publicentities in middle income RMCs.

Private Sector Portfolio Overview

* As at end of Q3 2017 in UA million

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Instrument Amount Approved UA * %

Loans 5,014 40.91%

Line of Credit 4,904 40.02%

Equity 1,343 10.96%

Guarantee 939 7.66%

Grants 55 0.45%

12,254 100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,0006,542

1,7821,331 1,237

562 424 229 87 44 16

in U

A m

illio

n

Regional

36%

South

24%

West

20%

North

9%

East

8%

Central

3%

Active Portfolio By Region

Approved Projects By Instrument

Projects By Sub Sectors

Existing Public Co-financing Mechanisms - Resources

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Fund Type Description Use of Available Resources Available ResourcesUtilization To-

Date

Accelerated Co-Financing Facility for Africa (ACFA)

Japan International Cooperation Agency under the Enhanced Private Sector Assistance Initiative.

Joint / Parallel co-financing for selected ADB and ADF countries on comparable or better terms.

UA 0.75 Billion for EPSA III (2017 to 2019)

USD 1.5 Billion approved phase 1+2 (2006-2017); phase 3 pipeline in progress.

Africa Growing Together Fund (AGTF)

Foreign exchange reserves from the People’s Bank of China

Joint co-financing for ADB Sovereign and Non-Sovereign (80/20 split).

USD 2 billion, includingUSD 0.4 for non-sovereign operations

Total Approval to date USD 421m

EU- Africa Investment Platform (AIP)- (formerly Africa Investment Facility - AfIF).

Combination of EU grants with loans or equity from public and private financiers

Availability of resources depending on project pipeline.

EUR 434 million mobilized EUR 411m

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Syndication and Co-Financing- Parallel Financing

DFIs ECAs Commercial Banks

Borrower

DFIs 1

DFIs 2

DFIs 3

……

.

Parallel Lenders

Parallel Financing

Various DFIs lend under parallel facility agreements all coming under harmonized contractual arrangements, the Common Terms Agreement (“CTA”)

Rationale

To partner with financial institutions not eligible for B loans (mainly DFIs)

Individual loan agreements required to explicitly refer to individual policies and privileges embedded in each DFIs charter

A/B Loans

Acting as Lender-of-Record, the Bank lends to a borrower;

Keeps/ commits to the A- loan portion for its own book (the

A Loan); and sells participations to commercial investors

(the B-Loan)

B lenders share Preferred Creditor Status

One loan agreement, AfDB is lender of record for entire A/B

loan

B Loan Participation Agreement transfers all risks to B lender

Rationale

To leverage up the Bank’s capital investment to a single

project

To facilitate the entry of commercial co-financiers

Via the extension of the Bank’s immunities and

privileges through the B Loan Participation

Agreement

To provide the necessary risk mitigation to achieve a

bankable transaction structure for the B Loan lenders

Disbursements

Debt Service

ADB B loan

Participant

1

Participant

2

Participant

3

Borrower

AfDB - Lender of Record

AfDB A-Loan

B- Loan Syndicate

Syndication and Co-Financing- A/B Loan

B Loan Participation Agreement

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What is a Partial Risk Guarantee (PRG)

• A PRG is a financial guarantee which covers commercial debt service defaults, normally for a private sector project, when such defaults are caused by a government or government owned entity’s failure to meet its specified contractual obligations to the project.

Description

Currency Inconvertibility and Non-transferability

Protects against losses arising from inability to: Convert local currency into foreign exchange within host country Transfer funds out of the host country

Expropriation, Confiscation, Nationalization and Deprivation

Protects foreign investor against host government’s interference with investor’s fundamentalownership rights

Political Force Majeure Risks

Such as - damages to assets resulting from politically motivated strikes, riots, civil commotion,terrorism, sabotage, war and / or civil war

Breach of Contract

Protects against loss arising from breach or repudiation of a project agreement (e.g.,infrastructure and power projects)

Risks not covered Currency depreciation and devaluation not covered Pre-existing restrictions on conversion or transfer not covered (unless government has

expressed to undertake cover)

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Risks covered by PRGs – selected sovereign risks

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Partial Credit Guarantees (PCGs)

• PCG/PBG covers “part” of debt service defaults regardless the cause of default:

• PCG supports the borrowing of the government or public sector entities in investment operations

• PBG (Policy Based Guarantee) supports the borrowing of the government for fiscal support under Policy Based Loan Framework

Purpose of Partial Credit Guarantee (PCG)

• Commercial financiers lending to African States and non-sovereign entities (public and private)

Beneficiaries

Private Project

Company

Lenders /

Bondholders

Loan or Bond

Provide guarantee repayment of

commercial debt covered by PCG

Counter-indemnity

OR

Security Package / Collateral

Government or

State Owned

EnterpriseFees

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Partial Credit Guarantees – Structures

Fees

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Direct Equity and Quasi-Equity

DFIs Insurance, Commercial Banks & Microfinance

Trade Finance Program

Risk Participation

Agreement

Trade Finance Line

of CreditSoft Commodity

Finance Facility

Trade enabling policies, Infrastructure projects, T/As

Trade Finance Program

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The Bank is able to supplement its financialproducts with grants from bilateral orthematic funds to provide technicalassistance to borrowers with the aim to: (i) Raise the effectiveness of project

preparation; (ii) Foster and sustain RMCefforts in creating enabling businessenvironment to promote private sectorinvestment and growth.

Focus Areas: capacity building / trainingof government officials in project design,preparation and analysis

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Special Funds & Initiatives

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fist2@afdb.org

For further inquiries please contact:

Syndication and Client Solutions Division

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.