MAKING PRIVATE SECTOR INFRASTRUCTURE INVESTMENT HAPPEN IN AFRICA Keith Palmer Chairman, InfraCo

Page 1 Enormous unmet infrastructure need in Africa Infrastructure shortages are holding back growth (e.g. electricity shortages in East, West and Southern Africa) Africa’s response to the global food crises – held back by poor access to agriculture- supporting infrastructure (e.g. irrigation) Need for private sector investment in Africa recognised (e.g. by NEPAD) Wholly inadequate response so far – except mobile telephones The Infrastructure Challenge

Page 2 It is not because of a lack of finance It is due to a shortage of profitable investment opportunities Investment Constraints Few developers are willing to take on the “front-end” costs and risks of identifying new project opportunities and bringing them to market: –Lack of credit-worthy counter-parties –Regulatory risks re. pricing of outputs –Small project size reduces payoff of success –Affordability of services, especially in rural areas –Scarcity of good project developers Many infrastructure projects become attractive to private investors at financial close if properly designed and structured Why has private sector infrastructure investment been so weak? Why is there a shortage of infrastructure investment opportunities?

Page 3 Infraco is a publicly-funded, privately-managed infrastructure development company What does InfraCo do? –Identifies ‘green field’ opportunities – creates local subsidiary –Develops projects to financial close at own cost and risk –Secures debt financing and sells majority stake in local company to (domestic and foreign) equity investors –Reinvests proceeds from successful sales in more development activity –Uses targeted subsidiaries to make services affordable for the poorest Works with local and foreign partners when appropriate (e.g. leveraging mining infrastructure) InfraCo – a Public / Private Response InfraCo makes infrastructure projects happen in situations where the private sector would otherwise be unwilling or unable to invest

Page 4 Examples of InfraCo Activities Uganda: integrated infrastructure services (Kalangala) Ghana: combined cycle power generation (KPONE) Cape Verde: wind power Guinea: power and rail Zambia: irrigation project Rwanda: small hydro Mozambique: agricultural infrastructure Uganda: waste water and sanitation (Kampala) Nigeria: combined cycle power generation Madagascar: water supply

Page 5 Project Examples: A Closer Look Kalangala, Uganda US$40 million infrastructure services initiative on Bugala Island, Lake Victoria Existing infrastructure dilapidated or non-existent Project will provide a power supply for the island, a ferry service, a main island road and a potable water supply. Affordability for the poor is ensured through project structuring and output based aid Debt and equity funding being raised from domestic and international sources KPONE Power, Ghana C. $300m gas-fired power plant in Tema Will provide an additional MW of generating capacity - substituting for existing diesel generation Utilise capacity from West African gas pipeline Completed PPA negotiations with main off-taker (ECG) and now moving into other project agreements, procurement and capital raising activities Wind Power, Cape Verde 30MW wind power project c. $75m capital cost Replaces substantial portion of current diesel generation with lower cost, clean energy PPA term-sheet agreed with power utility, Electra Wind turbines procurement process underway Strong investor interest from banks and multilateral institutions InfraCo business model is working. $20 invested by private sector for every $1 invested by InfraCo

Page 6 Africa needs action on the ground not words InfraCo is an innovative, successful approach to leveraging private investment into infrastructure in Africa There is great potential to extend the approach into agriculture / agribusiness to ensure a strong response to the global food crisis Conclusions