G20 Africa Infrastructure Investment Conference

Financing Infrastructure in Africa

Stephan Diefenthal, Vice President

London, 18 July 2013

DEG: We finance opportunities.

A bank with a wide range of responsibilitiesDEG, a subsidiary of KfW

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Developing and emerging-market

countries:Financial

cooperation

International Financing

We promote Germany

Promotion construction

of new housing and modernization

as well as education

Promotion SMEs, business founders,

start-ups

Financing municipal infrastructure

projects and global loans Germany

agency business for Federal

Government

Domestic Promotion

We ensure internationalisa

tion

International project and

export finance

Business area Mittelstandsbank

Business area Privatkundenba

nk

Business area Kommunalbank

KfW IPEX-Bank Business area KfW Entwicklungsbank

Developing and emerging-market

countries:Private sector

promotion

DEG

Promotion of environmental and climate protection

We promote development

DEG at a glanceFacts and Figures 2012

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› Established 1962

› Employees 480

› Head office Cologne

› Shareholder KfW Frankfurt

› Equity EUR 1.8 billion

› Balance sheet total EUR 4.7 billion

› New business EUR 1.3 billion

› Portfolio EUR 6.0 billion

DEG is a partner for companies investing in emerging markets and developing countries. For more than 50 years, we have been successfully supporting people and markets on the spot.

DEG at a glance

Mandate and working method

› German development finance institution (DFI) for the private sector in emerging markets and developing countries

› Specialist for entrepreneurial development in all sectors of the economy

› Agribusiness, finance sector, infrastructure, manufacturing industries, services

› Long-term investment capital for private enterprises

› Financing of investments with a positive developmental impact

› Market-oriented conditions

› Ecological and social acceptance according to international guidelines

› Contributions to sustainable economic growth and poverty reduction

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Reasons to corporate with DEG

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Strategic planning

• Information on possible types of finance

• Advice on strategy and countries

• Evaluation of business plans

• Advice via local DEG offices

• Arranging contacts with local authorities and institutions

• Participation development cost

• Political support

Long-term finance

• Structuring of tailor-made finance

• Provision of various financing instruments

• Arranging of additional finance from commercial banks or financial institutions

• Finance from public programmes

• Coordination of the complete finance package

Competent partnership

• Establishment of suitable controlling instruments

• Mobilisation of additional funds

• Analysis of weak points

• Restructuring• Specific project and

sector expertise

Infrastructure Brochure / Cologne / 25.02.2013

New business 2012EUR 1.3 billion

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29%

27%

21%

16%

8%

Finance sector

Industrial sector

Infrastructure

Agribusiness and food industrie

Service

Sectors

37%

31%

18%

14%

Latin Amer-icaAsiaAfricaEurope

Regions

With a share of nearly 40 per cent, risk capital financings are at the core of DEG’s new business.

Mexico City

Lima

São Paulo

Accra

Johannesburg

Nairobi

Istanbul

Moskow

New Delhi

Peking

Bangkok

Jakarta

SingapurLatin America EUR 1.6bn

146 companiesLatin America EUR 1.6bn

146 companies

Africa EUR 1.1bn123 companies

Africa EUR 1.1bn123 companies

Europe EUR 1.3bn108 companies

Europe EUR 1.3bn108 companies

Asia EUR 1.8bn191 companiesAsia EUR 1.8bn191 companies

DEG worldwideOur work on-site

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› Strategic

› Reliable

› Developmental effectiveness

› International networks

Our commitment

› Profitable

› Successful in the long-term

› Environmentally andsocially compatible

Our project criteria

Our customers benefit from our network across the globe and individualised on-site advisory services.

Portfolio, as of: 31/12/2012

DEG representative offices

Our portfolio: EUR 6.0 bn

A strong allianceDEG is a member of the European Development Finance Institutions

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› Mobilisation of further capital

› Shared risks

› Structuring of complex finance

› Further partners outside Europe (International Finance Corporation, regional development banks)

International partnerships

DEG is one of the leading European development finance institutions which have joined to become the association of European Development Finance Institutions (EDFI).

Promotion of the developing countries: private sector

Establish and expand private sector structures in developing and transition countries

› for a sustainable economic growth

› for lasting improvement in the living conditions of the local population

By means of:

› Long Term Loans

› Mezzanine Finance

› Equity

› Guarantees

supported by technical assistance

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Financial instrumentsLong-term loans

› Currency: EUR or USD, in exceptional cases also local currencies

› Term: usually between four and 15 years

› Grace period: depending on cash-flow of the project company

› Interest rate: fixed or variable, margin is market-oriented depending to project and country risks

› Collateral: fixed and movable assets in the country of investment, project-specific arrangements

› Amount: usually up to EUR 30 million; larger volumes through cooperation with EDFI

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Financial instrumentsEquity capital

› Equity participation in the project company

› Minority stake, usually over a limited period

› Variable arrangement of the risk components (common shares, preference shares)

› In certain cases, voting rights and board seat

› Clearly defined exit strategies

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Financial instrumentsMezzanine finance

Financing combining elements of equity and debt:

› Tailor-made arrangements

› Subordination

› Conversions options

› Risk-oriented yield (equity kicker/ Ebitda multiple)

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General criteria for DEG financing

› Integrity, transparency of shareholder

› Track record of shareholder (know how, finance, management)

› International accounting standards

› Transparent corporate governance; secured local legal framework

› Majority interest in the project company through private company and private management

› Adequate protection for foreign capital investment; transfer of capital must be assured

› Limited governmental influence on license and concession agreements (independent regulatory authority)

› Financing: Equity ratio of at least 25 % (depending on project structure up to 40 %), adequate cash-flow oriented structure (i.e. debt service coverage, current ratio, flexible repayment structures)

› Minimum environmental social standard: in compliance with local, EU and World Bank requirements; in compliance with international standards of the International Labour Organisation and the UN

› Construction: Preferred: EPC contract on turn-key basis with completion and performance guarantees; adequate arrangements to cover cost overruns, project delays, unexpected event

› Operation: Long term O&M contract with experienced operator; modern equipment and operating system

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DEG activities in the African Infrastructure sector

14Infrastructure Brochure / Cologne / 25.02.2013

Infrastructure: The African context

› High and sustainable economic growth of Africa’s economy: 5.4% average growth 2004-2012 (source: African Economic Outlook 2013)

› Expected increasing FDIs: USD 42.7bn in 2011, USD 49.7bn in 2012 and expected USD 56.6bn in 2013 (source: African Economic Outlook 2013)

› Current spending on African Infrastructure: USD 45bn p.a.; need to spend USD 93bn p.a. to plug the infrastructure gap in Africa (source Infrastructure Investor Africa/AICD/World Bank)

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DEG activities in the African Infrastructure: sub-sectors

› Power production and distribution: conventional thermal (HFO, diesel, gas), renewables (wind, hydro, geothermal, solar, biomass)

› Telecommunication: mobile, fixed line, towers, submarine cables, satellite

› Water & waste: treatment, supply, sewage systems, desalination

› Transport: airports, railways, toll roads, harbors, container terminals, pipelines

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Type of Transactions

› Expansion of existing business

› Greenfield projects (with strong sponsor)

› Privatization

› Buy-outs (combined with new investments or significant improvements through new shareholder structure)

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DEG financing in the African Infrastructure

DEG commitments in African Infrastructure (as of 31.05.2013):

› All Infrastructure: USD 664m (= 29% of USD 2.3bn global DEG commitments)

› Power: > USD 200m = 31% of USD 650m globally (10 projects – gas, diesel, geothermal, hydro, wind, solar); strong African project pipeline: > USD 150m in 2013/4

› Telecommunication: Africa USD 380m (21 projects – mobile (18), fixed line (1), towers (1), submarine cables (1), satellite (1); project pipeline: > USD 80m (mobile, towers)

› Water & waste: nil

› Transport: > USD 100m (gas pipeline, rail, container terminal, toll road/bridge, barges, logistics)

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Conclusions for future DEG activities in African Infrastructure

› Strong business potential in African infrastructure due to existing gap and high GDP growth rates; DEG to almost double its new commitments in Africa to ca. USD 600m p.a. within next 4 years, expects up to 40-50% of its future business in Africa coming from infrastructure sector

› Power/Energy to remain the key sector for DEG; focus on renewable energy but also conventional thermal energy and energy distribution. Key countries: South Africa, Kenya, Nigeria, Ghana, Côte d’Ivoire, Cameroon, Zambia; also open for other countries (off-take structure, legal environment for IPPs)

› Telecommunication remains strong sector, shift from mobile (voice) to data transfer and infrastructure service providers (e.g. towers) expected

› High potential for transport sector: container terminals/ports, toll roads, airports, pipelines, logistics, etc.

› Water & waste: on selective basis (market liberalization = prerequisite)

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Selected References Mobile Telecommunication NetworkCELTEL International - Africa

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The Solution• Promoting a newly established company founded by Dr.

Mohamed Ibrahim with equity capital provided in several tranches by international financial institutions,

investment funds and DFIs

• Board- and Management team with rich track record in telecommunication and experience in Africa

The Challenge• Setting up of an Pan-African mobile phone operator in

13 African countries

• High growth potential for telecommunication services across the continent

• Low teledensity / poor fixed line systems

Value Added by DEG• DEG contributed USD 15 million venture capital in start-

up phase and suported expansion phase with another US$ 7 million

• DEG experience in developmental projects conveyed through Board Observer Seat

Financing of a Mobile Phone Operator in Sub-Saharian Africa

Equity Amount: US$ 22 million

Selected References 48 MW Geothermal Power PlantOlkaria III – Kenya

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The Solution• Project finance USD 105m

• Compliance with IFC Performance Standards (environmental/social)

• Strong project sponsor and management team

• Strong project advisors

The Challenge• One of first IPPs in Kenya and first geothermal IPP in

Africa

• High potential for geothermal power in Africa

• Country risk (2009), off-take risk

• Environmental and social impacts

Value Added by DEG• DEG contributed USD 50m own finance and acted as

arranger for USD 105m debt finance.

• Strong DEG experience in Kenya and power sector

• Geothermal know-how available in KfW Banking Group

Financing of a Geothermal Power Plant in Kenya

Senior Loan: USD 50m

Debt Arranger for USD 105m

Get in touch!

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Stephan DiefenthalVice President AfricaInfrastructure & Mining

Phone: +49 (0) 221 / 4986 - 1359Fax: +49 (0) 221 / 4986 – 1582

Stephan.Diefenthal@deginvest.de

DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH

Kämmergasse 22

50676 Köln

Germany

www.deginvest.de