IFC Power

March 2009Sarajevo, Bosnia and Herzegovina

The IFC advantage: A wide range of services and products for its ClientsVariety of products: greenfield projects, corporate loans, acquisition finance and refinancings, partial credit guarantees on loans and bonds, securitization of future cash flows, and a new product for IDA countries (infraventures)

Competitive maturity and pricing: Fixed/floating rates, currency of choice, commercial rates, repayment tailored to cash flow, long maturities (up to 20 years), etc.

Political Risk Mitigation: through our affiliation with the World Bank

Long-term Partnership: IFC works closely with partners in an affected project to address issues

Track recordProjects:129 projects in 44 emerging markets countries15,000 MW private generating capacity101 generation projects10 transmission projects17 distribution companiesFinancing:$ 3.5 billion committed in generation, T & D$ 2.5 billion raised through syndication$ 16 billion aggregate project values

Track recordCorporate FinanceExpansions / RevampingRestructuring / Refinancing

Project FinanceIPP / Greenfield

Equity / Quasi Equity

Infaventure context: Great Need for Bankable Infrastructure Projects Huge critical infrastructure needs in IDA countries, (especially in Sub-Saharan Africa and post-conflict countries). Globally:

1.6 bn lack access to electricity, 1.0 bn lack access to all weather roads, 1.1 bn lack clean water and 2.4 bn lack access to sanitation95% of those without access are in Asia and Africa; 1.4m children die p/a from water-borne diseases

Governments aware but unable to address these needs on their own

70% of all infrastructure spending in developing countries in 1990s financed by governments or public utilities own resourcesInvestment needs estimated at $479 bn for years between 2006-2010 Renewed interest in infrastructure development but while needs are high, sector is underfinanced in most developing countries.

Private funds available but very few bankable projects Great interest from DFIs and private financiers to fund bankable infrastructure projects18 EM infrastructure-focused private equity funds raised $7 bn from 1996-2006; in 2007, 16 funds raised +/-$30 bn But, number of bankable projects is limited, especially in frontier countries and difficult sectorsWater and sanitation, roads and power Sponsors with successful track records of bringing projects to full financing stage are also limited and/or few of them willing to take early stage risks in frontier countries

Constraints to Private Infrastructure Development Overdue sectoral reforms to be implemented by government includingEstablishing a stable macroeconomic environmentEstablishing a legal framework for concessions, contract enforcement, bankruptcy and lender remediesEstablishing a stable regulatory framework recognizing projects lifecycle needs Developing a domestic debt market State-owned utilities are not performing: poor generation performance, lack of investment, high level of losses, low collections Tariffs do not always reflect full cost recovery, especially in sensitive sectors like water and sanitation Perception of high country risk Persistent lack of funds and experienced professionals dedicated to early stage project development

What is Infrastructure Project Development?How does it differ from project financing? Earliest stages of project life cycle sometimes at conceptual stage Risk capital and human resources to move project from concept to financial close Project and prototype feasibility studies; pilot tests Financial modeling Economic, social, technical and environmental studies Negotiation of financial and legal terms Selection and supervision of project participants Negotiation of project documents Obtaining required permits Sourcing projects equity and debt financing

IFC Experience:Pre-IFC InfraVentures To date, IFCs active involvement in project development has been ad hoc (e.g., Kounoune, Pamir) IFCs involvement in project development not adequately compensated Experienced staff not dedicated to project development, staff incentives not aligned with project development Approval procedure not consistent with early stage project development practices High risk profile different from IFCs mainstream investments

IFCs Additionality in Project Development IFCs identity in market Convening power of the World Bank Group IFCs access to all WBG instruments and services IFC senior staff depth and breadth of experience Track record of hands-on project development with sponsors in most challenging environments IFCs involvement reassures all project participants IFCs global presence

IFC Response:IFC InfraVentures

Fund Composition and Objective

$100 million over 5 years in IDA countriesUp to US$ 4 million per projectDedicated, experienced senior professionals Fund staff to act proactively as project developers, principally with co-developer, or as surrogate sponsorObjective of bringing more projects to financial close and implementation

IFC Response:IFC InfraVenturesEarly Stage Risk Capital Risk capital (not grant funding) for full range of project development activitiesRisk capital (and sweat equity) to be compensated at financial close through stake in equity or development feeRisk capital to be made available in the form of different instrumentsIFC to seek right to arrange and participate in project financing

IFC Response:InfraVenturesEfficient Processes and Access to other resources Streamlined processes for approval of use of funds to projects meeting eligibility criteria Projects to be handed over to mainstream business lines at financing stage Leverage other IFCs and World Banks staff and resources Cooperation with other private and donor-funded project development initiatives Possible use of Trust Funds for external consultants

Project Eligibility Criteria Must be private or PPP infrastructure project in IDA country/region Must be at early stages of development Meet IFC Additionality guidelines Type of projects include :Sponsor has agreement with GovernmentProjects being tenderedProjects not requiring contract with GovernmentPost-conflict country initiativesInfraVentures acts as a surrogate sponsor in the initial stages Projects that could reach financial close within a few years Must have high development impact

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