Is your project investable? Key tips to make sure it is. 15 th March 2016 A Presentation at Power and Electricity World Africa conference, Sandton Convention Centre South Africa Presented by Paul Mwesigwa Chief Finance Officer Uganda Electricity Distribution Co. Ltd

Scope of the presentation 1. A closer look at asset prices 2.How to highlight the opportunity and ROI 3.Moving away from a one-size-fits-all approach to attracting investment 4.It’s about more than just money 5.Be prepared to negotiate

Why Invest? Profit and/or Sustainability Private!! Who is to do the Investment? Government!!

Global trends to make an Investment Qn. Is it Private or Gov’t; what affects the decision? Self sustainability is Key=> Cost recovery plus maintenance; this will affect the asset pricing regardless of the funding source 1.Domestic revenues/Taxes from the consolidated collection fund 2.Borrowings from any source 3.Public Private partnerships. 4.Grants etc. 5.Private investment.

The SWOT Analysis Vs Risk Matrix Treat all kinds of investment as a PROJECT; That should bear time frame, specific objective and expected results => ROI/Tax base Clear review for the Strength, Weaknesses, Opportunities and Threats on a continuous basis even after commissioning. How many have done this aftermath review? e.g on a generation plant, distribution facilities like:- power lines, water, roads, railway etc. Risk matrix is paramount; plus continuous reviews for compliance to the mitigation strategies.

Government Investments This could either be through:- 1.Parastatals; 100% Limited Gov’t owned company -> Initial investment required, then thereafter initial investment recovery and profit making is a MUST. How? Do the right pricing/tariff at inception or after grace period. 2.Government Departments/Ministries; Always financed annually from Taxes, Government borrowings, Grants etc. 3.Public Private partnerships;

The Common Trap to Gov’t Inv’ts Over Capitalization with LESS and/or NO working capital Among the impact and indicators; Borrowing in order to carry out repairs and maintenances e.g replacing aged or fully depreciated equipment like:- Substations, Water pumps, street/traffic lights, generation turbines etc. Capital Investment Revenue generated

Private Investment Source of funding may either be Equity, borrowing and/or others. ROI is a Must for sustainability => Shareholder’s interests Capital InvestmentRevenues and ROI

Forget !!...“one-size-fits-all” BUT There are other factors that needs to be analyzed in order to attract investment, they could be internal and/or external to the investing body:- Is the asset among the major back borne of the country? Roads, railway, electricity etc Technological changes Regulatory environment Effective policy frame work; e.g. Licenses for operation, Environment, safety and occupancy clearance, etc. Climate Change and Variability

Forget!!.. “one-size-fits-all”…… Cont…. Access to Primary resources; labour, materials, Affordability Vs the per capita income for the targeted market. Net present Value: Net Investment Vs Inflows ->ROI Social Impact; population life hood, education, health etc Other infrastructures; roads, railway, pipelines, water etc. Economic impact; job creation -> down streams of those jobs for future sustainability Political environment Tax policy and treatment.

Key Guideline for investment to succeed. 1.Good negotiation skills and teams; -> BOTH PRIVATE AND GOVERNMENT INVESTMENTS 2.Best practice backed with Good corporate governance; -> NO SHORT CUTS!!! 3.Do the Right strategy; -> Target a self sustainable environment => SUBSIDIES MAY BE FOR A DEFINED TIME.

Lessons learn ’t Example; Both Private and Concessional financing into the generation and distribution energy sector in Uganda is ongoing after the unbounding program during earlier 2000s. Achievement; Energy supply stability has significantly improved with more investment in the sector. Major Challenge: Huge capital investment required, thus affordability of the end user tariff, that has increased from an AVG of Shs180 per unit (2005) to Shs650/= per unit (2016). At the same time a devaluation of a USD exchange rate from 1,740/= to now 3,350/=.

. Conclusion; For most of the infrastructural investments, the key objective has been to have security and/or reliable supply, BUT affordability and sustainability has remained a challenge with minimum solutions.

Thank You