BLACK LION HOLDINGS GROUP - Budapest Water … · The Black Lion Holdings team has experience...

BLACKLIONHOLDINGS

GROUPEngineeringAfrica’sTransformation

50Associates 256Advisors+Consultants

7RegionalOffices

5PanafricanDivisions

22SubsidiariesPartnerOffices

Our expert team of leading professionals have diverse experience across industries, disciplines and geographies. We consistently deliver innovativesolutions to highly complex challenges across Project Finance, Capital Raising Services, Spin-offs, Private Placements, Structured Products and othertransactions.

The Black Lion Holdings team has experience working across major sectors in the African region and other emerging and frontier markets. Personal andprofessional leadership are at the core of Black Lion Holdings’ development program. We strive to espouse the highest ideals and ethics in our work and inrelating to our clients, partners and broad set of stakeholders.

CapitalRaising

PPPDeliveryPartners

ProjectManagement

BlacklionTurnkeySolutions

PremieradvisoryandcapitalraisingservicesforeveryAfricanchallenge

01/12/2016 BlackLionInvestmentsHoldingsGroup- InternationalCopyrights&Trademarks2016

OurOperationalCapabilities

LargeProjects+Programme Management

CapitalAdvisory

InvestmentManagement

FundStructuring|SPV

ImpactInvestments

BusinessDevelopmentAdvisory

StrategicDevelopmentAdvisory- NationsBuilding

Infrastructure RenewableEnergies

Transports&Logistics Agri-Business Industrial

Development

InformationTechnologiesTelecoms

SustainableMining


BreakdownofourServicesandSolutions

CapitalRaising

••DebtFinance••PrivateEqity&VentureCapital

FundManagement

••VehicleforOffshoreInvestmentFunds(SPVs)

••CapitalManagement-PrivateGreenFeildProjects

ProjectManagement

••LargeProgrammes(PPPs)

••StrategicNational/RegionalProejcts


BlackLionHoldingsmanagesaportfolioof200investmentdealsinadiverserangeofindustriesandassetclasses.

CapitalAcess2016

$12BillionDirectAccess $50BfromPooledFunds

DealflowValue2016

$22 Billions

ProjectsPortfolio2016

150Greenfields 20 Brownfield 30UnderReview


23STEPS- PROJECTSFINANCEPROCESSDevelopingaProject&EngineeringaFinancialSolutionisCostlyandTime-Consuming:Thereisno“FreeLunch”

ProjectsSourcing

ProjectsSelections

DueDiligence

ReviewandAnalysis

SubmissiontoFundingSources

Development/ManagementFees

FeasibityStudies

SelectionofDeliveryParners

SelectionofLocalPartners

MOUs/Pre-Contracts

ProofofFunds+Capacity

SecureGuarantees

FinalApproval

FinalContract

50%ManagementFeesPayment SPVSet-up

FundsDisbursment

50%ManagementFeesPayment

ProjectPlan

Delivery+Implementation Monitoring

Post-ImplementationManagement

LessonsLearned|Process

Improvement


TheCurrentApproachisnotYieldingResults:HugeSDGFundingGapsinMobilizingPrivateSectorFinance

• AnnualSDGFundingGapofUS$2.5Trillion (UNCTAD)Ø EnergyfundinggapaloneUS$1Trillion(InternationalEnergyAgency)Ø Prioritiesforactionneedtoberenewableenergy,climatesmartand

newtechnologies,expandedmodelsforagricultureandhealth,innovativebusiness&financemodels

• FailuretoDate– In2014PrivateSectorFinanceOnlyUS$107Billion(4%AnnualSDGFundingGap)andHighlyConcentrated*ØLackoffinancefor:Prioritylowerincomecountries;sectorssuchasenergy,water/sanitation,health,agriculture;missingmiddle(projects<US$50Million)

Ø2014PrivateFinanceConcentrations:§ Countries/Regions:73%financein5countries(Brazil,Turkey,Peru,Colombia,India),2%inSub-

SaharaAfrica§ Sectors:96%financeintransportandenergy§ Projects:Only239projectsfinanced;averagesizeUS$419Million

*WorldBankPPIDatabase


BlackLionEnergy&WaterInvestmentFund

At Black Lion, we believe Investments for water security and climate resilient developmentcan benefit from combining different funding sources. Our key investment focus is onprojects such as:

• Water infrastructure (including urban drainage, water and sewage treatment)• Coastal zone protection and residual damage• Raw water supply (including distribution, storage, desalination, etc.)

Black Lion Holdings is in the process of setting up a Renewable Energy Fund for Africa that will include investmentsolutions for Water Infrastructure Projects. The fund strategy will involve mobilizing private investment that matchespublic money made available by beneficiary countries or public assistance funds from donor countries. The public fundswill be used to entice private investors. The Fund plans to invest in projects that are typically seen as risky.


• There are some 336,000,000 cubic miles of water on earth.

• The vast majority of this is salt water, only 2.5% of the total is considered ‘fresh’, and less than 1%, or 0.025% of all water on earthis accessible surface water.

• While fresh water supplies are relatively static, the global population is expected to increase from around 7.0 billion to anestimated 9.0 billion by 2050. This would be enough to meet humanity’s needs – if it were evenly distributed but it is not.

• In many areas, water is polluted, exacerbating the supply constraint. Almost one-third of the world’s population currently has noaccess to safe drinking water, which creates local supply-demand challenges on a huge scale.

• Under a current ‘business as usual’ scenario, water demand will outstrip supply by 40% by 2030. This has the potential to put USD63 trillion of global GDP, or approximately 22%, at risk by 2050.

• In developed countries, roughly half of all water consumed is for industrial use, whereas in developing countries, agriculture isusually the biggest consumer, at levels approaching 80%. The growing imbalance between supply and demand is underpinned byfour key factors:

1. Population growth2. Ageing infrastructure3. Water regulation4. Extreme weather

TheBigPicture:Whatdoweknow?


• The number of people on our planet is increasing rapidly, at 1% - 3% per year, and is the main reason behind additional demand for water.

• The UN predicts that by 2050 two-thirds of the world’s inhabitants will be water stressed’, with two billion people living in countries facing water scarcity.This is a particular issue in emerging markets.

• This population growth, urban migration and rising living standards, is greatly increasing the demand for water services. Furthermore, an expanding andmore affluent middle class with a preference for a higher protein/meat diet in many emerging economies is exacerbating agricultural water demand.

• Much of the existing water supply and sanitation infrastructure was designed and built at a time of significantly different resource availability and water use.Upgrading and/or expanding the water supply and sanitation infrastructure is an urgent need in many

• places in both developing and developed regions.

• Urban areas in particular are under strain, as people migrate to cities seeking employment opportunities and (perceived) better living standards.

• In 2001, people consumed 54% of the world’s available fresh water. If water utilization continues to rise steadily, population growth alone will account forthe consumption 70% of available fresh water by 2025.

• This unsustainable trend explains the need for urgent action to address the demand for improved water conservation, treatment, re-use, and desalinationfacilities.

Source:WaterPartnershipProgram/WorldBankWater

TheBigPicture:Whatdoweknow?


Increasing populations and evolving consumption patterns

Freshwater resources under considerable strain

Growing gap between supply and demand

Climate disruptions and extreme weather events

Substantial capital investments in water treatment technologies and distribution infrastructure to reduce imbalances

New investment opportunities into companies providing new ways to supply, distribute, conserve and treat water

Investing in the water sector can be complex and requires a deep knowledge of current legislation and technologicaldevelopments. To fill the water infrastructure financing gap successfully, the water sector must provide investors withstrong risk-adjusted returns, and at Black Lion, we believe this is only possible through Public-Private Partnerships.


Urbangrowthacrossmuchofsub-SaharanAfricaisgeneratingconsiderablepressureonpublicandprivateutilitiestoprovidesafeandreliablewaterandsanitationservices.

ThemunicipalwaterinfrastructureofmanyAfricancitiesalsofacesdauntingchallengesfromage,lackofmaintenanceorconnectingcommunitieswithoutwaterandsanitationaccess.

ThecostofachievingwatersecurityforAfricaisestimatedtobetensofbillionsofdollarsannually.ItisestimatedatbetweenUS$30toUS$50billionforcapitalinvestment,andUS$5– 15billiononannualmaintenanceandresiliencebudgets.

IssuestoAddress:

1. Dauntinggapsinfinancing

2. LackofBankableProjects

3. Needtoaddressfailuresandcorrectthem

4. ImprovementofRegulatoryFramework

5. Needfordynamicperformancetrackingandreporting

TheChallengestoAddressinEnergyProjects(Electricity&Water)- 1


Infrastructure

AssetManagement

Water&Energy

Efficiency

InnovativeTechnologies

FinancingSolid

RegulatoryFramework

CivilSocietyEngagement

TransboundaryPartnerships

All countries face a growing funding gap as they try to keep up withthe rehabilitation, operation, and maintenance of aging waterinfrastructures. New water systems must also be built to cope withgrowing populations, shifting consumption patterns, and a changingclimate. The 5 Actions Plan to tackle this issue:

• ACTION ONE: Build on Proven Approaches – Projects andFinancing Mechanisms

• ACTION TWO: Localize the Required Technical Capacity

• ACTION THREE: Expand the Local Marketplace connectingDemand and Supply

• ACTION FOUR: Provide Support for capacity-building,financial advisory, project preparation, risk mitigation

• ACTION FIVE: Track and Report Performance

TheChallengestoAddressinEnergyProjects(Electricity&Water)- 2

01/12/2016 BlackLionInvestmentsHoldingsGroup- InternationalCopyrights&Trademarks2016 (Global Clearinghouse for Development Finance)

Fin-HubTheoryofChange:UnlockPrivateCapitalwith“SmartProjectDevelopment”

BankableProjects:

LocalFin-Hubprovidestechnicalsupport&linkagesrequiredtomeetinvestorcriteria

Projectdevelopersdevelopprojects

alignedwithinvestorcriteria

Governmentsproviderequiredinputs(enablingenvironment,offtakecontracts,funding,etc)

Privatesectorfinancesprojects(equity,debt),

providesexpertise&equipment

Developmentcommunityprovides

targetedinterventions

(projectsupport,riskmitigation,funds,

etc)

Demand Supply

Governments DevelopmentPartners


Waterservicesprovideimportanteconomic,health,andenvironmentalbenefitsbutareseverelyunderfundedonaglobalscale

Fundingsources,fromprivateinvestmenttoutilityrevenuesandpublicexpenditures,havebeeninadequatetomeetpastneeds andarebecomingscarcerasaresultofthefinancialcrisis.Nevertheless,investmentneedsinthesectorarelargeandincreasingalongsidepopulationgrowthandurbanization.

Ø Private investors prefer to work in middle-income countries where the risk is lower,

Ø The poorest countries depend on volatile public budgets and donor commitments.

Ø An estimated 75 percent of water investment in developing countries comes from public sources.

Ø Slower growth and lower tax revenues imply that donor commitments, public budgets, and household contributions are at risk of diminishing.

Ø Most countries can improve their financial control by helping utilities to move toward cost recovery and by improving public spending.

Ø From targeted subsidies to risk pooling and guarantees, public contributions lay the groundwork for sustainable water service delivery.

Ø Improving the way public funds are allocated and transferred will help governments leverage private finance in the long run.

Ø When supported by sound governance frameworks, these contributions can foster mutually beneficial partnerships between the public andprivate spheres that can help fill the financing gap.


ExampleofSolution:UseofProjectFinanceApproach

ProjectCompany(SPV)

ConstructionContractor

Lenders

ConstructionLoan

DebtServicePayments

ConstructionContract Payment(usingloanproceeds)

OutputPurchaser

Productorservice

Payment

InputSuppliers

InputsPayment

RiskMitigationProvider2

Payment

PartialGuarantee

RiskMitigationProvider1

PaymentCreditSupport

Examplesofriskmitigation:(1) SPV/ring-fencedrevenues(2) TechnicalStudiesthatconfirmdebt

serviceprojections(3) Creditsupportintheformofa

guaranteeofpaymentbytheOutputPurchaser“Offtakecontract”)

(4)Apartialguaranteeoftheproject’sdebt


EXAMPLE:STRUCTUREOFAPOOLEDFINANCINGFACILITY

Project

UserfeesInfrastructure

Services

InfrastructureUsers

Government/Development

Partners

IntergovernmentalFinancialTransfers/Output-BasedAidifNeeded

PooledFinancingFacility(highly

structured)

DebtServicePayments

FundingforProjects

Long-TermLoan

DebtServicePayments

BanksPensionFunds

PEFirms

Government/DevelopmentPartners

TechnicalAssistance

CreditEnhancement

PerformanceIndicators


ConnectDemand:Sponsorsengageinprojectdevelopmentbasedoninvestorcriteria,climatesmartapproaches,newbusinessandinnovative

financemodels

ConnectSupply:Providersofserviceandfinancecanengagewith

potentiallyviableprojectsandproviderequiredinputs

MatchingDemand&SupplyinProjectDevelopmentwithTargetedPublicInterventions

Collaboration:Subnational/CentralGovernment,DevelopmentPartners,PrivateSector

SUPPLYProvidersofServices,Products,Finance

SUBNATIONALDEMAND

PublicandPrivateProjectSponsors

SustainableBankableProjects

ClosingtheVIABILITYGAP:

IdentifyingRequired

Interventions&Partners

RESULT:MOREFUNDINGOFNATIONAL&SUBNATIONALPROJECTS01/12/2016 BlackLionInvestmentsHoldingsGroup- International

Copyrights&Trademarks2016 (Global Clearinghouse for Development Finance)

DevelopmentPartnersReorientProgramstoSupporttheRequiredContinuousProcesses

Advisory&Capacity-Building:1)Creditworthiness&SustainabilityPlanning2)Identify&DevelopProjects,SecurePartners,Monitor

1)CreditworthinessNational&SubnationalRequisites&DebtCapacity

Obtainintergovernmentaltransfers,improve

ownsourcerevenue,goodmanagement

Securestablefinancialbasis,publicdisclosure&obtain

finance

2)FinancialVehiclesIdentifysustainablebankableprojects(withtargeted

support)

StructureBankableSpecialPurposeVehicles&Obtain

Funding


CriteriaforProjectSelection

• CredibleProjectSponsor(legalentitywithestablishedfinancialbasisandneededexpertise)

• Projectthatcanchargeforitsservices(orobtain“output-basedaid”whichprovidessubsidiesforthosewhocannotaffordservices)

• Projecteconomicsthatenabletheprojectto• Payitsdebtservicewithacomfortablemarginforerror• Earnanadequateequityreturn

• Contributiontolocaleconomicdevelopment• Employmentcreation(directandindirect)• Valuechainimprovement• Facilitatesthedevelopmentofotherbusinesses• Increasedtaxreceipts• Genderequality• Improvesqualityoflifeforcommunity

• Noadverseenvironmentalorsocialimpactsthatcannotbemitigatedatareasonablecost


SequenceofProjectDevelopmentActivities

• PreparationofafinancialmodelbasedontheProjectSponsor’sknowledgeofthemarketandthetechnologyrequiredfortheproject

• ConceptualdesignoftheprojectbytheSponsor’sengineeringfirm

• Initialdiscussionswithpotentialequipmentsuppliersandpreliminarypricequotes

• Executionofthetechnicalstudiesrequiredfortheproject• PreparationofTermsofReferenceforthestudies• Selectionofconsultantstoconductthestudies• Conductofthestudies

• Selectionofaconstructioncontractortoconstructthebuildingtohousetheproject

• Obtainingfinalpricequotesfromequipmentsuppliers

• Negotiationandharmonizationofconstructioncontractandequipmentsupplycontracts

• Preparationofanenvironmentalandsocialassessment

• Obtainingriskmitigationfromdevelopmentpartnersorotherriskmitigationproviders,ifneeded

• Preparationofaninformationmemorandumforequityinvestors– ifequityinadditiontothatsuppliedbytheProjectSponsorisrequired

• Solicitationofadditionalequity,ifrequired

• Preparationofaninformationmemorandumforlenders

• Selectionofanagentbanktoleadthefinancing

• Syndicationoftheproject’sdebtfinancing,ifrequired

• Negotiationofthedocumentationfortheproject’sfinancing


ImplementingaProjectFinancing:TheTransactionStructureControlstheOperationsoftheProject

• The project will be owned a separate legal entity – A “special purpose vehicle” (SPV)• The SPV will be prohibited from engaging in any other business

• The project’s loan is non-recourse to the project sponsor:• The sponsor is not responsible for repayment of the debts of the SPV• Repayment of the project’s loan comes from solely from the cash flows generated by the project• The project lender is protected from any deterioration in the balance sheet of the project sponsor

• The project lender has collateral in the form of• A mortgage on the land and building of the project• A lien on all the machinery and equipment of the project• A security interest in all contracts, insurance policies, accounts, and other intangible assets of the project

• Cash flows can be “ring-fenced”• The project’s revenues are deposited in accounts maintained by the project lender• A cash flow “waterfall” directs the project’s revenues to be used, first, to pay operating expenses, then maintenance expenses, then debt service, and,

lastly, distributions to the project sponsor


CriteriaforProjectSelection

• CredibleProjectSponsor(legalentitywithestablishedfinancialbasisandneededexpertise)

• Projectthatcanchargeforitsservices(orobtain“output-basedaid”whichprovidessubsidiesforthosewhocannotaffordservices)

• Projecteconomicsthatenabletheprojectto• Payitsdebtservicewithacomfortablemarginforerror• Earnanadequateequityreturn

• Contributiontolocaleconomicdevelopment• Employmentcreation(directandindirect)• Valuechainimprovement• Facilitatesthedevelopmentofotherbusinesses• Increasedtaxreceipts• Genderequality• Improvesqualityoflifeforcommunity

• Noadverseenvironmentalorsocialimpactsthatcannotbemitigatedatareasonablecost


Step1:AssessProjectViabilityGaps&Fast-TrackSolutionsEvaluatetheViabilityGapsforPriorityProjects>Assesspriorityprojectsagainstinvestorcriteriaanddevelopmentimpactcriteria>Rankprojectsbasedonestimatedtimetocompletion,feasibilityofaddressingviabilitygaps(costs,risks)

IdentifytheFullMenuofProjectViabilitySolutionsbySector>Identifyprojectsupportprograms(preparationfacilities,etc)>Identifyearly-stageinvestors>Formulatefast-trackroadmapsenablingscalingupprojectsinsector(projectdevelopment&structuring;riskmitigationsolutions;governmentissueresolutionprocesses,approachesforequity,legalstructures,products,market,technology,etc)

ForEachProject,DevelopaCustomizedFast-TrackDevelopmentPlantoAttainBankability>Matchprojectviabilityissueswithviabilitysolutions>Developrecommendationsforprojectstructuring,includingEquityInvestors,ProjectDevelopmentPrograms,RiskMitigation

2401/12/2016 BlackLionInvestmentsHoldingsGroup- International

Copyrights&Trademarks2016 (Global Clearinghouse for Development Finance)

Step2:ExecuteFast-TrackProjectDevelopment&PresenttoGlobalPlatforms/Investors

ForEachHigh-PriorityFeasibleProject,ExecuteFast-TrackProjectDevelopmentPlan>Expeditesolutionswhenpossibleforkeyprojectbottlenecks>Engagegovernmentanddevelopmentpartnersupportwhereneeded

DevelopFinancialModelsinAlignmentwithInvestorCriteria>PreparePreliminaryProjectInformationMemorandum,includingresultsofhigh-qualityfeasibilitystudywithrigorousdemandforecastingaskeyinputsforcashflowmodel>Listanyoutstandingimpedimentstofinancewithpossiblesolutions

ProvideProjectstoGlobalPlatforms&Investors>AssistSponsorindeveloping&presentingProjectPresentation(permarketstandards)forselectedhighimpact,potentiallyinvestableprojects>Ifneeded,Fin-HubTeamtonegotiatetermsandconditions


BLACK LION HOLDINGS GROUP - Budapest Water … · The Black Lion Holdings team has experience...

Documents

Transcript of BLACK LION HOLDINGS GROUP - Budapest Water … · The Black Lion Holdings team has experience...