IFC Power March 2009 Sarajevo, Bosnia and Herzegovina

The IFC advantage: A wide range of services and products for its Clients Variety 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 record Projects: 129 projects in 44 emerging markets countries 15,000 MW private generating capacity 101 generation projects 10 transmission projects 17 distribution companies Financing: $ 3.5 billion committed in generation, T & D $ 2.5 billion raised through syndication $ 16 billion aggregate project values

Track record Corporate Finance Expansions / Revamping Restructuring / Refinancing Project Finance IPP / 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 sanitation 95% 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 resources Investment 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 projects 18 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 sectors Water 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 including Establishing a stable macroeconomic environment Establishing a legal framework for concessions, contract enforcement, bankruptcy and lender remedies Establishing a stable regulatory framework recognizing project’s 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 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 project’s equity and debt financing

IFC Experience: Pre-IFC InfraVentures To date, IFC’s active involvement in project development has been ad hoc (e.g., Kounoune, Pamir) IFC’s 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 IFC’s mainstream investments

IFC’s Additionality in Project Development IFC’s identity in market Convening power of the World Bank Group IFC’s 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 IFC’s involvement reassures all project participants IFC’s global presence

IFC Response: IFC InfraVentures Fund Composition and Objective $100 million over 5 years in IDA countries Up to US$ 4 million per project Dedicated, experienced senior professionals Fund staff to act proactively as project developers, principally with co-developer, or as “surrogate” sponsor Objective of bringing more projects to financial close and implementation

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

IFC Response: InfraVentures Efficient 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 IFC’s and World Bank’s 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 Government Projects being tendered Projects not requiring contract with Government “Post-conflict country” initiatives InfraVentures 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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