Peter GrayPartnerClyde & CoDecember 2010

Banque Africaine D’Import – Export

Critical Issues in Power Project Financing in Africa

African Export – Import Bank

IntroductionIntroduction 1. Commercial Break

2. So what’s happening?

3. Power project structure – a reminder

4. Essentials for deal closure

5. Trust – the forgotten factor

6. Governments need to …

7. Private sector needs to …

8. Lenders need to …

9. Everyone needs …

10. Questions

Commercial BreakCommercial Break

International firm specialising in trade matters

800 lawyers in 24 offices

Shanghai to San Francisco – all 5 continents

Nominated law firm of 2010 twice

Biggest user of the UK’s commercial court

500 arbitrations running

“Clyde & Co cuts a hugely impressive figure … the firm has bloomed into a genuinely distinctive practice that boasts considerable global reach”Legal Week 19 November 2010

Power Project Structure – a reminder

Power Project Structure – a reminder

Government

Fuel SupplierElectricity Utility

Project Company

EPC Contractor Shareholders

Commercial Banks

Multilateral Lending Agency

Export Credit Agency

(Intercreditor Deed)

(Debt)

(Security)

(Concession, Implementation Agreement)

(EPC)(Equity)

(Sub Debt)

(Direct Agreements)

(FSA)

(Direct Agreement)

(Shareholder Support)

(PPA)

Our international network of offices

Our international network of offices

Our international network is supplemented by relationships with correspondent law firms in over 120 countries

A significant part of our practice involves work of an international nature

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CARACAS

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LONDON& GUILDFORD

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MOSCOW

ST PETERSBURG

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DOHA

ABU DHABIDUBAI

SINGAPORE

HONG KONGSHANGHAI

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RIYADH

DAR ES SALAAM

NEW YORK & NEW JERSEY

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PARIS

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So what’s happening?So what’s happening?

Power projects in Africa:

Completed in 2010 1.43 gigawatts

Underway 0.36 gigawatts

Planned 14.58 gigawatts

All these figures are probably understated, but at current closure rates we are looking at 10 years to close the existing pipeline of projects

Essentials for deal closure Essentials for deal closure

Government identifies need for power and has political support

Private sector prepared to deliver Project is bankable Banks are able to lend Risk allocation works Environmental Other implicit issues:

domestic political and economic stability efficient and fair legal system satisfactory infrastructure corruption under control no cheating efficient bureaucracy Good quality advisers (price/quality arbitrage)

Trust/good working relationship

Trust – the forgotten factorTrust – the forgotten factor Value of detailed signed contract

Day-to-day working issues

Different experience levels

Balanced share of benefits

Long haul commitment

No claims culture

Transparency

Responsibility

Governments need to …Governments need to …

Be joined up – only negotiate each issue once

4Ps

Be clear about their concerns

Understand investor concerns

Have in place an effective legal and regulatory system

Ensure broad based political support

Have a realistic timetable

Appoint a champion

Private sector needs to …Private sector needs to …

Sort out consortium issues up front

Be transparent with objectives and concerns

Understand Government concerns

Validate the technical solution

Don’t sidestep difficult issues

Do its homework – due diligence

Lenders need to …Lenders need to …

Be clear about risk concerns

Don’t over promise lending capacity

Don’t change the wish list

Be honest about deal breakers

Everyone needs …

Good advisers

THANK YOU FOR YOUR TIME

QUESTIONS?

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© Clyde & Co LLP 2010