Financing Power Projects in Africa

Jeannot Boussougouth

Senior Manager: Energy, Utilities and Infrastructure

Investment Banking Coverage

Jeannot.Boussougouth@standardbank.co.za

Standard Bank

1 July 2011

UNECA 2011, Addis Ababa

11Contents

Section Page

1. Introduction 2

2. Standard Bank 4

2.1 Natural partner in Africa 5

2.2 Recent Accolades 6

2.3 Selected Infrastructure Credentials 7

3. Our African Infrastructure Understanding 10

4. Business and Financing Challenges 13

5. Requirements for Successful Private Sector Participation 16

6. Potential Financial Structure 23

7. Standard Bank’s Value Proposition 25

8. Case Study: Morupule B Coal Power Plant Financing 34

Private and confidential

Section: 1

Introduction

3

� Standard Bank is the largest bank in Africa

– We are present in 17 countries across Africa (especially Sub-Saharan Africa)

– Our current market capitalisation is USD 24.77billion (11 January 2011) and our Total Assets are USD 182.6 billion (June 2010 Interims)

– We are 20% owned by ICBC (the world’s largest bank)

– In most African countries, Standard Bank operates as an integrated corporate and investment bank

� The purpose of today’s presentation is to :

Introduction

– Introduce Standard Bank to the audience in terms of our offering, capabilities and strengths in Africa

– Highlight business and financing challenges in the African power space

– Highlight Standard Bank’s proposed financing solutions, including ECAs

– Highlight some of the most attractive power projects in Africa

Private and confidential

Section: 2

Standard Bank

5

On-the-ground presence in 17 African countries

� Nearly 150 years of experience in Africa

� Largest bank in Africa

– Over 40,000 employees in Africa

– Over 8,000 bank branches headquartered in Johannesburg

� Growth on the continent is a key strategic focus area

Most comprehensive network in Sub-Saharan AfricaKey points

Standard Bank: Natural partner in Africa

On-the-ground presence in 17 African countries

Unrivalled knowledge of sub-Saharan Africa � Growth on the continent is a key strategic focus area

� Investment banking presence across the region and in key markets strengthened by recent acquisitions:

– IBTC Chartered Bank, Nigeria

– CFC Bank, Kenya

– Recent banking licence awarded - Angola Standard Bank

Angola (33.3 million)

Botswana (1.8 million)

DRC (63.6 million)

Ghana (23.1 million)

Kenya (34.7 million)

Mozambique (20.3 million)

Lesotho (1.7 million)

Malawi (12.8 million)

Mauritius (1.2 million)

Namibia (2.1 million)

Nigeria (154.7 million)

South Africa (47.4 million)

Swaziland (1.1 million)

Tanzania (37.8 million)

Uganda (27.6 million)

Zambia (14.6 million)

Zimbabwe (13.1 million)

Saharan Africa through on ground presence

Strong product teams in Johannesburg, Lagos, Nairobi and London

6Recent Accolades

Global Finance Magazine – 2009

� Best Investment Bank in Africa (2010)

� Best Investment Bank in Nigeria (2010)

� Best Bank in South Africa (2010)

� Best Equity House in Africa (2009)

� Lakatabu Expansion - Africa Industrial Deal of theYear (2009)

� MTN Uganda - Africa Telecoms Deal of the Year.(2009)

� Zain - Middle East Telecoms Deal of the Year(2009)

Euromoney – 2010, 2009The Banker – 2010, 2009, 2008

� Deal of the Year Africa: Bonds (2010)

� Deal of the Year Africa: Capital Raising (2010)

� Deal of the Year Africa: Structured Finance(2010)

� African Bank of the Year (2009, 2008)

� Bank of the Year, South Africa (2009, 2008)

� Best Investment Bank from Africa (2009, 2008)

� Best Bank in Botswana, Lesotho, Malawi,Swaziland , Tanzania (2009)

� Deal of the Year for the Ruashi Copper MiningProject in DRC (2008)

� Deal of the Year - Botswana for NationalDevelopment Bank BWP100 million 11.25% notesdue 2017 (2008)

African Banker – 2009, 2008

� Investment Bank of the Year, Africa (2009)

� Best Issuing House in Africa (awarded to StanbicIBTC Bank) (2008)

� Deal of the Year - ICBC 20% acquisition ofStandard Bank (2008)

� Best Debt Bank in Africa (2009)

� Best Foreign Exchange Provider in South Africa(2009)

Key points

Euromoney: Best Investment Bank in Africa (2010)

African Banker: Investment Bank of the Year, Africa

� Best Africa Investment Bank (2009)

� Best Africa Research Team (2009)

� Infrastructure Deal of the Year for Gautrain (2008)

Africa Investor – 2009

� Deal of the Year - DRC for the Ruashi CopperMining Project (2008)

� Deal of the Year - Finland for Talvivaara NickelProject US$320m debt facility (2008)

� Deal of the Year - Germany for Kreditanstalt furWiederaufbau NGN28.7 billion 8.5% notes due by2011 (2008)

� Deal of the Year - Tanzania Electricity SupplyLimited TZS300 billion syndicated loan (2008)

� Deal of the Year - Zambia Sugar Project (2008)

� Deal of the Year (South Africa) for the 20%investment by ICBC in Standard Bank (2008)

� Deal of the Year Award - Bahrain for ArcapitaBank US$1.1b syndicated Murabaha facility(2008)

� Most innovative in Trade and Project Finance(2008)

� Ranked No 1 in sub-saharan Africa and No 106 inThe Banker Top 1000 World Banks (2008)

Standard Bank has won various awards that demonstrate our capabilities across the entire range of advisory and funding services in Africa

EMEAFinance – 2009, 2008

� Best Investment Bank in Africa (2009, 2008)

� Best Investment Bank in Nigeria (awarded toStanbic IBTC Bank) (2009)

� Best Natural Resources Deal in EMEA:Kayelekera Uranium project (2009)

� Best Oil and Gas Deal in Africa: Oando (2009)

� Best Project Finance Deal in Africa: BotswanaPower Corporation (2009)

� Best Project Finance House in Africa (2009)

Environmental Finance Magazine - 2009

� Carbon Finance Deal of the Year for Camco-Standard Bank Structured Carbon CreditsTransaction (2009)

(2009)

� Best Investment Bank in Africa (2009)

� Best Investment Bank in Nigeria (2009)

� Best Investment Bank in South Africa (2009)

the Year, Africa (2009)

Africa Investor: Best Africa investment Bank (2009)

7

� Ongoing – Scatec Solar, South Africa

Standard Bank has been mandated as Sole Financial Arranger and Underwriter, and BEE funding provider to Scatec Solar on its various Solar PV project in the Northern Cape and Eastern Cape provinces of South Africa

� Ongoing – Solar Reserve, South Africa

Standard Bank has been mandated as financial advisor to Solar Reserve on its Solar CSP plants, using molten salt storage technology, totalling [80-100]MW, in South Africa

� Ongoing – Confidential, Africa

Standard Bank has been mandated for a confidential Equity raise in Africa

� Ongoing – The Power Company/Built Africa, South Africa

Mandated as financial advisor for The Power Company/Built Africa [20]MW Solar PV Project, over several South African sites

� Ongoing – Gitson Energy, Kenya

Mandated lead arranger & financial advisor for Gitson Energy’s [300MW] Wind Power Project in Bubisa, Kenya

� Ongoing – Solar Capital, South Africa

Recent Energy, Power & Renewables Credentials (1/3)

� Ongoing – Solar Capital, South Africa

Standard Bank has been mandated as financial advisor and main lead arranger for Solar Capital on its five Solar PV plants in the Northern Cape

� Ongoing – African Clean Energy Developments, South Africa

Standard Bank has been mandated as main lead arranger for African Clean Energy Development (ACED) to develop a [400MW] wind farm in cookhouse in the Eastern Cape

� Ongoing – CGNPC, South Africa

Standard Bank has been mandated as a financial advisor to China Guangdong Nuclear Power Corporation (“CGNPC”),China’s largest Nuclear Energy company, in support of their bid to build South Africa’s potential nuclear power programme

� Ongoing – Just Energy, South Africa

Financial Advisor to Oxfam’s energy subsidiary, Just Energy, to develop [74MW] of wind farms in the Eastern Cape

� Ongoing – Italgest, South Africa

Standard Bank has been mandated as Financial Advisor to Italgest on its [100 MW] Solar PV project.

8

� Ongoing – BHP Billiton, DRC

Mandated Transaction Advisor to BHP Billiton SA (Pty) Limited on the INGA 3 hydro-electric project concept study in theDemocratic Republic of Congo.

� Ongoing – Mphanda Nkuwa Hydropower Project, Mozambique

Financial advisor to the Mphanda Nkuwa consortium on the development of 1500 MW hydro electric project in Mozambique

� Ongoing – Anglo American, South Africa

Standard Bank has been mandated as the Financial Advisor to Anglo American’s [450MW] discard coal-fired IPP nearWitbank

� Ongoing – SARGE, South Africa

Standard Bank has been mandated as the sole Project and Equity Raising Financial Advisor and Lead Arranger to theSARGE 50 MW, Solar PV project in the Northern Cape, as well as 216 MW of wind projects

� Ongoing – Forest Oil Corporation, South Africa

Standard Bank has been mandated as Financial Adviser to Forest Oil Corporation in connection with the development of an

Recent Energy, Power & Renewables Credentials (1/2)

Standard Bank has been mandated as Financial Adviser to Forest Oil Corporation in connection with the development of anintegrated [750-800 MW] natural gas to power project

� Ongoing - Oelsner Group Wind Farms , South Africa

Standard Bank mandated Financial Advisor and Lead Arranger to Oelsner Groups’ two wind farms being Kerrifontein(20.8MW) and Langefontein (50MW)

� Ongoing – Confidential , South Africa

Standard Bank has been mandated as the sole Project and Equity Raising Financial Advisor and Lead Arranger to a SArenewable energy company on a multiple wind farm project

� Ongoing – Volta River Authority, Ghana

Standard bank has been mandated as Financial advisor to VRA on the expansion of the Takoradi power plant

� Ongoing - Aldwych International, Kenya

Joint Lead Arranger for long-term financing to Aldwych International for the 300MW Lake Turkana Wind Project valued atUS$760m

� Ongoing - Gulf Power, Kenya

Co-lead Arranger of the Greenfield 84MW Athi River HFO power plant developed by Gulf Energy

9

� Ongoing – redcap, South Africa

Standard Bank has been mandated as the Lead Arranger for the Kouga Wind Farm project

� Ongoing - AMD Energia, South Africa

Standard Bank has been mandated as the Lead Arranger for Alt-E’s multiple solar PV projects

� Ongoing – Confidential, Africa

Standard Bank has been mandated as the Buyside Financial Adviser for the purchase of a power station

� Ongoing – Confidential, Africa

Standard Bank has been mandated as the Sellside Financial Adviser for the sale of a power station

� Ongoing – Aeolus, Kenya

Standard Bank has been mandated as the Financial Advisor and Lead Arranger to Aeolus Kenya Ltd on a 60MW wind farm project

Ongoing – Electromaxx, Uganda

Standard Bank – Recent Energy, Power & Renewables Credentials (3/3)

� Ongoing – Electromaxx, Uganda

Sole Lead Arranger of the expansion from 25MW to 50MW of the Electromaxx HFO power plant facility

� 2010 – Companhia Moçambicana de Hidrocarbonetos, S.A. (“CMH”), Mozambique

Standard Bank acted as FA and lead arranger to Companhia Moçambicana de Hidrocarbonetos, S.A. for the funding of its share of the

project costs for the expansion of the Central Processing Facility at the Pande and Temane fields’ reservoirs near Bazaruto

� 2009 - Mmamabula Energy Project, Botswana

Mandated by CIC Energy for a 1200 MW coal fired power plant, coal mine and related infrastructure in Mmamabula, Botswana. Project

size of US$5 billion and mandated as co-lead arrangers for the ECIC covered ZAR tranche as well as the ZAR commercial facility.

� 2009 – Eskom, South Africa

Standard Bank acted as the Mandated Lead Arranger in the Kusile Boilers contract. Standard Bank acted with 4 international banks in

funding the Euro 705 million contract over 12 years. Export Credit was also arranged with Euler Hermes (German ECA) over the

foreign content of the contract with Hitachi Power Europe.

Private and confidential

Section: 3

Our African Infrastructure Understanding

11

� Positive correlation between infrastructure expenditure and GDP

growth (Economic Research (Aschauer, 1989; Munnell, 1990) )

_e.g. through increased productivity, reduced logistics costs etc.

� Conversely, inadequate infrastructure is cited as a key constraint to

investment and growth (ADB, 2007)

� Therefore, the provision of quality infrastructure is a necessary

element of any strategy for economic integration and sustainable

development in Africa

� SSA requires $93bn/year in infrastructure investment to meet MDG,

(or around 15% of GDP)

African Context

African Infrastructure Context

Table 1: Overall Infrastructure Spending Needs for SSA

Key points

Inadequate infrastructure is cited as a key constraint to investment and growth

SSA requires $93bn/year in infrastructure

� 15 countries in Africa are land-locked, with 40% of the continent’s

population estimated to live in these countries

� Hence efficient cross-border transportation is vital for their

economic development

� However, the cost of trucking increases in Africa by between 684%

- 1560% due to poor road conditions, with 40% of food produced in

rural Africa degrading due to the lack of roads and bridges (Council

for Scientific & Industrial Research (CSIR))

� Opportunity 1: Potentially high economic returns to investment in

infrastructure, but requires better policy frameworks to attract

investment and align economic returns with investor risks/returns

� Opportunity 2: Although investment currently dominated by public

sector, there’s a strong shift towards private sector (IPP, PPP,

Corporate etc.).

infrastructure investment to meet MDG

Better policy frameworks to attract investment required

12

� Context:

� Investing in African power / infrastructure is not usually for the marginal player – more a specialist activity so less subject to

boom and bust

� Project lead times will likely take longer than the credit crunch/global recession, e.g. often 3 years plus

� Developer Perspective:

� Some cut backs in capital expenditure (e.g. focus on lower risk markets) but reduced bank financing capacity is a larger issue

� Financing Perspective:

� Ability of African banks to raise USD has been dramatically affected, hence a focus on local currency financings which caps

African Infrastructure Characteristics

African Infrastructure Characteristics

Key points

On-the-ground presence in 17 African countries

Ability of African banks to raise USD dramatically

project size

� Current turmoil in the global credit markets has impacted on closings and increased borrowing costs. However, few clients have

walked away with more club deals seen. Limitation on banks’ liquidity/capacity BUT project finance less affected than most debt

financing classes

� Flight to ECAs and DFIs across all markets, not just Africa. Follow on question is their ultimate African appetite given competing

liquidity demands

� Supplier Perspective:

� Recent softening of forward-looking equipment prices but no dramatic plummet. Note most bail-outs encourage infrastructure

spending

dramatically affected

Flight to ECAs and DFIs across all markets

Private and confidential

Section: 4

Business and Financing Challenges

14

� Opportunity Costs of insufficient electricity supply/electrification

– Cost of Unserved Energy: $1.50/kWh (IRP 2010), $10/kWh (Dept of Energy)

– Small Diesel Generator: $1/kWh plus

– OCGT Diesel turbines: 30c – 50c/kWh peaking power

– Subsistence charcoal: destruction of our forests

– Reality Check: the real developmental costs of delayed decisions!!...

� New Generation Planning

Key Issues

Business and Financing Challenges

Key points

High opportunity costs of insufficient electricity supply

Greater certainty in future tariffs is paramount � New Generation Planning

– A complete financial model not a shopping list of projects

– Should include interest during construction (IDC)

– As an indicator to politicians, regulators and consumers about what realities we face

– Greater certainty in future tariffs is key to funding new investments today

– Greater support to credit ratings of utilities (key to tapping current EM liquidity)

� Effective Domestic Wheeling framework

– Framework must be standardised and transparent for all arrangements

– Pricing and risk sharing should facilitate wheeling not prevent it

paramount

Effective domestic wheeling framework needed

15

� Leveraging credit quality private off-takers

– Allocating risk to those that are able to best manage it

– Creating a domestic industrial/mining offtaker group. e.g. CEC Energy

– Innovative commodity risk management (commodity price indexation in loan terms)

– Allowing more private players on regional power pools (e.g. SAPP)

– Enables smaller countries to reduce burden on their utilities/Treasury

� Cross-border PPAs

Key Issues (Contd...)

Business and Financing Challenges

Key points

Effective risk allocating approach

Unrivalled knowledge of sub-Saharan Africa � Cross-border PPAs

– Chicken and Egg situation (smaller countries can’t build large projects alone)

– Mozambique’s Mpanda Nkuwa 1,500MW hydro project would benefit entire region but needs Eskom

– Challenge: CESUL line and Mpanda Nkuwa require back-to-back contracts

– Could a Mozambique coal IPP sign a private PPA with mine in SA or Zambia?

� Integrated Mining/ Power projects

– Reality check: new mining investment is key to our economies over next 20 years

– Using Diesel Generators cost GDP and jobs

– New quality creditors for power projects: Commodity Buyers

Saharan Africa through on ground presence

Strong product teams in Johannesburg, Lagos, Nairobi and London

Private and confidential

Section: 5

Requirements for successful private sector participation

17

� Finalise the enabling framework to allow and facilitate private sector participation in the power sector

– E.g. In SA. New Generation Regulations of August 2009 is a positive step, but market requires more clarity on

process (amongst several other issues)

– Rules on Selection Criteria for Renewable Energy Projects

� Market requires a bankable PPA (which allows for the appropriate risk allocation between the private sector and the buyer

(SOEs or any Integrated System Operators)). This should include such items as:

– A balanced liability regime

– Appropriate protections for the generation companies for risks not within their control

Overview

Key Requirements

Key points

Finalise the enabling framework

Bankable PPA are required

– Appropriate protections for the generation companies for risks not within their control

– A stablisation clause for changes of law

– Fair termination events for buyer and seller

– Appropriate termination compensation regime

– Clauses allowing for restructuring which may affect the buyer (e.g. unbundling of the Public utility)

� Government support required to stand behind buyer, in order to provide comfort to private sector (developers, equity

participants, lenders, etc.) that PPA availability payments will be made accordingly and termination provisions are fair (and

termination payments will be funded)

– E.g. In SA, if buyer is Eskom, NT support for PPA required as Eskom is already highly leveraged. Further PPA-type

commitments could negatively impact on Eskom’s balance sheet and current debt covenants. Risk that private

sector not prepared to enter into PPAs with Eskom without Government backstop

Government support required to stand behind buyer

18

– E.g. In SA, if buyer is ISO, NT support required as will be newly formed company with no trading history. Private

sector will require Government backstop for new entity

– E.g. In SA, Cash-flow timing risk – monthly payments under PPAs versus collections from distribution companies

(municipalities), large industrial users and Eskom Distribution

� Market is looking for independent offtaker / buyer – e.g. Eskom is seen to be conflicted as a fellow generator and somewhat

higher risk creditworthiness

– Independent buyer is seen as key by private sector

� Independent systems operator has been a successful model in other jurisdictions, seen by the market in a favourable light

Overview (Contd...)

Key Requirements (Contd…)

Key points

Need for independent offtaker / buyers

ISO has been a successful model

19

� The PPA grants the concession and sets the tariff. It is the primary document that the SBO would focus on. To some extent all

the others are secondary

PPA 101

Key Requirements (Contd…)

Key points

Grants the concession • Grants the concession - gives the project the right to exist, and the right to generate electricity. Term typically 20-25 years from completion of construction

Ownership • BOO or BOT

Sale and purchase of capacity

• Generator (IPP) paid on the availability of net dependable power capacity irrespective of despatch sufficient to cover debt service, equity return and fixed O&M

• Procurer (SBO) takes price and despatch risk

• Take or Pay

Sale and purchase of Net Electricals

• Variable O&M costs recovered through the sale of the net electrical energy dispatched

O&M

Indexation • Tariff payments may be indexed for inflation and movements in Foreign Exchange rates

• Procurer may take inflation and forex movements risk

� The responsibilities will be split

Specifications and Performance Standards of the Plant

• PPA sets out the responsibility of the Generator to build by a given date a plant to very precisely documented specifications, operating standards and designs

• Generator / EPC Contractor takes the responsibility and risk of building the plant to the requirements of the Procurer

Revenue Write Down provisions for non-Performance

• PPA includes provisions to reduce the payments payable to the Generator if the tested dependable capacity at any time or the actual availability [or the heat rate] is worse then the levels the Generator is contracted to provide

• Generator takes performance risk

Delay LD’s for late commissioning

• Delay LDs payable for late commissioning payable by Generator/ EPC Contractor

• Generator takes risk of late commissioning

Performance criteria

20

� The responsibilities will be split (Contd…)

PPA 101 (Contd...)

Key Requirements (Contd…)

Key points

Third party responsibilities

Water and Power Transmission interconnections

• Generator would seek to make it an obligations of the Procurer to design build and commission all required water and transmission linkages by an agreed date and prior to scheduled testing

• Procurer takes responsibility for providing Water and Power Interconnections

• The PPA sets out provisions for the Procurer to keep the Generator whole and / or pay compensation if such facilities are late

Supply of Gas / Coal / Fuel • In many markets, the Generator would seek to make it an obligation of the Procurer to supply Gas / Coal / Fuel (ie energy conversion)

• Generator may take fuel / hydrology risk assuming satisfactory pricing and supply

• Procurer takes risk of fuel supply and pays deemed commissioning if fuel is not available Generator takes efficiency risk through an incentive penalty regime

Force majeure / political events

assuming satisfactory pricing and supply risks

Permits • PPA allocates responsibility for obtaining permits

• Split between Procurer and Generator

Natural Force Majeure • PPA sets out provisions in relation to relief of liability and the provision of insurance (both damage and business interruption) to mitigate Natural Force Majeure Risk

• (Lightening, fire, earthquake, accidents, explosions, epidemics etc.)

• Insurance

Political Force Majeure • There are certain risks which are uninsurable, political in nature and which Generators will not accept and need to be taken by the Procurer

• (Act of war, blockade, boycott, rebellion, civil commotion, Change in Law and / or unjustified failure to renew permits)

• Procurer Risk

• Payments of deemed commissioning [or termination buyout if prolonged] or tariff adjustments to compensate for additional costs or revenue losses

21

� The responsibilities will be split (Contd…)

PPA 101 (Contd...)

Key Requirements (Contd…)

Key points

Termination

Termination • The Agreement will stipulate the Events of Default, cure periods and the termination regime

• In the event of termination due to Procurer default, the Procurer is obligated on request to purchase the plant for an agreed sum that covers debt and probably an equity return

• In the event of termination due to Generator Default, the Procurer has the right but not the obligation to purchase the plant but for a lesser sum covering only debt

Credit Support • In the event of termination due to Procurer Default and a purchase price being payable then lenders may seek some form of

• It is a matter of commercial negotiation as to whether SBO would be required to provide such a backstop. It may be possible to structure without

backstop credit support in respect of the payment to be made, typically in the form of a payment guarantee

22

� A number of different tariff structures are feasible – in this document we have focused on the most commonly used structure:

‘Availability’ payment structure

� The RFP for an IPP tender will specify the tariff structure which bidders must adhere to and will form the basis of payments to / from the Project Company (Generator) and the offtaker (Procurer)

� Each bidder will be invited to bid a number of Charge Rates

– Occasionally charge rates can be firmly fixed and bidders would have to target LEC (Levelised Electricity Cost) based on an Asset Value (Brownfield)

– Lower charge rates however may not always equate to better value for money for the procurement Authority

� For an availability driven tariff, payments will typically be split between Capacity and Output

Tariff structure – integral component of PPA

Key Requirements (Contd…)

Key points

Availability payment structure

Bidders would have to target LEC

� For an availability driven tariff, payments will typically be split between Capacity and Output

– Capacity Payments are designed for recovery of all the fixed costs of the plant, including debt service, taxation, equity return and fixed O&M costs. Typically deductions for non-availability and / or poor plant performance would be netted off against these capacity payments

– Outputs Payments recover the variable operating costs of the plant and may also include an adjustment for fuel consumption

� In the case of a merchant plant or ‘Take or Pay’ agreement, the tariff structure is much simpler. Revenue = Plant Output (MWh) * Market Price (ZAR/MWh)

Service Payment

Capacity Payment

Base capacity component Fixed O&M component

Output Payment

Fuel adjustment payment

Variable O&M payment

Payments typically split between Capacity and Output

Private and confidential

Section: 6

Potential Financing Structure

24Financing Structure

IPP

Utility/Single Buyer

PPA

Discard coal

Mine orSmelterCo

Sale of coal to local industry and smelters

Potential Financing Structure

� Leveraging credit quality of end-users

– Mines

– Smelter or Steel mill

– Commodity offtakers

� Unlocks the Chicken/Egg problem

– Facilitates investment in interdependent power, port and mining

infrastructure at same time

Coal Mine Co

PortCo

RailCo

Commodity Offtaker

Discard coal

Security of supply for Coking Coal Offtaker

� PPP basis

– Private sector partnerships with public electricity, rail and port

utilities

– But reduces investment, guarantee and operations burden on

utilities/Treasury

� Standard Bank can facilitate:

– Advisory

– Bring in foreign partners

– Debt Funding

– Commodity Risk Management

Private and confidential

Section 7:

Standard Bank’s Value Proposition

26

Our Project Advisory and Finance Services

Standard Bank’s Value Proposition: Robust Project Advisory/Finance Services

� A Standard Bank team of about 70 project f inance specialists (based in Johannesburg, Lagos, Nairobi, London, Beijing, and Sao Paolo) provides advisory and arranging services to government and private sector clients on limited recourse projects

� Our experts come from diverse disciplines, are knowledgeable in a variety of sectors and have an understanding of local regulatory f rameworks and f inancial market constraints

� Our project f inance team is able to work closely with other areas of our banks to create customised solutions that draw on sector and product expertise f rom across the banks

Strong

Multi-Disciplinary

Team Structure

� Standard Bank can act in any one or a combination of the capacities of financial advisor, arranger and underwriter of senior debt, mezzanine debt and equity for all large capital projects. Our project f inance services include:

– Project evaluation and feasibility studies

Project Finance

Services

Excellent

Relationships with

DFIs and ECAs

– Project evaluation and feasibility studies

– Financial modelling and sensitivity analysis

– Risk evaluation and risk mitigation strategies

– Advice on the structure of project contracts

– Taking an active role in negotiations

– Financial structuring

– Foreign exchange risk mitigation techniques

– Arranging of multi-source funding, including development f inance and export credit f inancing

– Arranging and underwriting bank f inancing

� We have established excellent relationships with development f inance institutions, multilaterals and major credit export agencies having closed numerous project f inancings with them across a range of emerging markets

� Standard Bank Group is an Equator Principle Financial Institution, having adopted and integrated all 10 of the Equator Principles which relate to Project Finance

27

Selected Experience with DFIs

Standard Bank’s Value Proposition: Experience with DFIs

Transaction Year Amount DFIs involved SB Role

Pulkovo Airport Expansion Project Current EUR1.2bnEBRD, IFC, DEG, NIB, BSTDB,

EDBMLA and Bookrunner

Lake Turkana Wind farm project, Kenya CurrentEUR450m

AfDB, DEG, FMO, ProparcoMandated co-arranger

and lender

Petromax Power Project, Bulgaria Current Undisclosed EBRD Advisor, MLA

Nairobi Northern Corridor Concession, Kenya

Current UndisclosedIFC, DEG, FMO, IDC, AfDB,

PAIDF, EAIFAdvisor

Guinea Allumina Project, Guinea Current US$2.8bn AfDB, EIB, IFC Advisor

Lekki-Eppe Expressway PPP 2008 US$300m AfDB Advisor and Lender

Monastir & Enfidha airport concessions, Tunisia

2008 €562mEIB, AfDB, IFC, OPEC,

PROPARCOArranger and Underwriter

Eleme Petrochemicals Company Ltd, Nigeria

2007 US$125m IFC Arranger

Federal Grid Company, Russia 2007 RUB5.0bn EBRD Arranger

Empresa Nacional de Hidrocarbonetos de Moçambique, Mozambique

2007 ZAR1.08bn EIB, MIGA Arranger

Chelyabinsk Tube Plant,

Russia2007 €145m EBRD Arranger

RusHydro, Russia 2006 RUB6.3b EBRD Co-Arranger

Pervouralsk New Pipe Plant, Russia 2006 €115m EBRD Arranger

INDORAMAINDORAMA

28

Selected Experience Working with ECAs

Standard Bank’s Value Proposition: Experience with ECAs

Transaction Year Amount ECAs involved SB Role

Lake Turkana Wind farm project, Kenya Current EUR450m EKF, SACE Co-arranger and lender

Nord Stream Pipeline Project Current EUR3.9bn Hermes, SACE Arranger, lender

Kusile Power Project, South Africa Current Undisclosed Hermes TBC

Mmamabula, Botswana Current Undisclosed ECIC, China Exim MLA

El Boleo Project, Mexico Current US$1.2bn US Ex-Im, EDC, KDB Advisor, lender

Guinea Alumina Project,

Guinea

Current US$5.0bn COFACE, China Exim and ECIC Club participant and arranger of ECIC tranche

Kolwezi Copper Cobalt Mine, DRC Current Undisclosed EDC, EFIC and ECIC Club participant and Kolwezi Copper Cobalt Mine, DRC Current Undisclosed EDC, EFIC and ECIC Club participant and arranger of ECIC tranche

Mozal Aluminium Project,

Mozambique

Current Undisclosed COFACE Club participant and arranger of ECIC tranche

Federal Palace Hotel and Casino,

Nigeria

2008 US$167m ECIC Lead arranger and underwriter

Akwa Ibom Power Project, Nigeria 2006 US$60m US Exim, ECIC Club participant and arranger of ECIC tranche

Empresa Nacional de Hidrocarbonetos de Moçambique,

Mozambique

2006 ZAR1.08bn ECIC Arranger

Sasol Natural Gas Project, Mozambique 2004 ZAR 2.5bn SACE and EFIC Lead Arranger and underwritter

Kansahi Copper project,

Zambia

2004 US$120m ECIC Arranger

29

� An Export Credit Agency (“ECA”) is typically a government agency or parastatal organisation. Its goal is to promote its domestic

industries and to foster economic growth through the provision of financial support to exporters.

� This is most often achieved by providing political and commercial insurance cover or loan guarantees to banks.

� A financing solution incorporating an ECA represents one of the most attractive financing solutions where there is a cross-

border movement of capital goods and/or services.

� Given the general decrease in available liquidity and risk appetite for emerging markets and emerging market assets, the

significance and importance of ECA supported funding has increased.

Export Credit Agencies

Standard Bank’s Value Proposition: Export Finance Solution (1/4)

� ECA backed funding is especially beneficial in transactions requiring a longer tenor, large amounts and for higher risk grade

countries.

� Repayments can be “stretched” to match future cash flows, not country limit constraints

� Lower interest rates and competitive USD funding, eg Libor + 2.50% for ECIC-backed financing from South Africa

� Alternative source of funding (not tying up all credit lines with Standard Bank)

Advantages of an Export Finance structure

30

� If a client or its subsidiary is sourcing capital goods and services from a supplier in South Africa, Standard Bank can provide an

Export Finance backed term loan which is partly guaranteed by the ECIC.

� A lending rate of LIBOR + 2.50% is payable by the Borrower under the South African Export Finance scheme and an ECIC

premium for political risk insurance and commercial risk insurance is also payable by the Borrower.

� The ECIC premium (for the provision of political and commercial cover) may be payable up-front as a lump sum payment or

payable over the drawdown period or annualised over the tenor of the loan.

� The premium is determined by a number of factors including country, tenor, drawdown schedule, repayment profile and the

security package relating to the loan.

Mechanics

Standard Bank’s Value Proposition: Export Finance Solution (2/4)

USD term loan

(plus hedging if required)

Borrower

Equipment suppliereg in South Africa

Standard Bank

ECAeg ECIC from South Africa

Insurance coverexported equipment

31

� The principal objectives of the ECIC are:

– to facilitate and encourage South African export trade by underwriting bank loans and investments outside the country, in

order to enable foreign buyers to purchase capital goods and services from the Republic; and

– to provide investment insurance to South African companies investing in assets offshore.

� Unlike a number of other export credit agencies (such as EFIC for instance), ECIC does not lend directly to projects.

– ECIC provides insurance cover (100% Political and 85% Commercial Risk cover) to Lenders that are signatories to their

Export Credit Support Agreement and Standard Bank provides the liquidity.

ECIC

Standard Bank’s Value Proposition: Export Finance Solution (3/4)

� The ECIC have appetite for most countries in Africa and are mandated to cover countries around the world in general.

– Their appetite both in terms of number of transactions supported as well as quantum of support per transaction differs

from country to country.

– They are actively looking to diversify their insurance portfolio and are most keen on countries where they currently have

low levels of exposure.

32

� Tied Export Programme

– The ECIC will support projects (under their “tied” export program) where there is an export of capital goods and services

from South Africa.

– ECIC will support 85% of the South African export contract (SA contract value) and will require the Borrower to make a

down payment of 15% of the SA contract value to the South African exporter.

– The minimum ECIC requirement for South African content is 50% of the value of the South African export contract.

– The ECIC provides insurance for credits of a minimum of 2 years and typically up to a maximum of 12 years (in the

Criteria to qualify for ECIC support

Standard Bank’s Value Proposition: Export Finance Solution (4/4)

recent past we have seen longer tenors).

Private and confidential

Section: 8

Case Study

34Case Study: Morupule B Coal Power Plant Financing

� Chinese partners: USD1.6bn coal-fired power plant, 600MW, built by Chinese contractor CNEEC, funding arranged by ICBC/Standard Bank

� Cost effective: The all-in cost of the whole project was USD 2.91m per MW (compared to USD4.5m per MW for the Kusile plant in South Africa)

� Single financial solution: Standard Bank and ICBC arranged a US$ 825mn loan for 20 yr, backed by a Botswana Ministry of Finance guarantee, Sinosure ECA 15

yr guarantee and the World Bank 15-20 yr guarantee. A US$ 140 mn bridge finance facility was provided by ICBC, guaranteed by Standard Bank. The BPC sells

power in Botswana Pula (BWP). Standard Bank swapped the BPC’s floating USD exposure to a fixed BWP exposure for the whole 20-yr period.

� Standard Bank’s expertise: Our local banking presence in Botswana, power sector expertise and deep relationships with Chinese partners allowed us to bring

together all the parties to present the Botswana Government with a single, quick and cost-effective solution to secure its domestic power supply.

World Bank

Sinosure

Guarantee

15 year Political/Ministry of

Finance

Guarantee

Standard Bank

ICBC

BPC

ICBC

Partial Credit

Guarantee

Standard Bank

$140mn $140 mn

Guarantee Bridge 9 month

Currency and

Interest rate hedging

$825 mn 20 year loan

16 – 20 year

15 year Political/

Commercial cover

Bridge

35Disclaimer

This presentation is provided for information purposes only on the express understanding that the information contained herein will be regarded as strictly confidential. It is not to be delivered nor shall its contents be disclosed to anyone other than the entity to which it is being provided and its employees and shall not be reproduced or used, in whole or in part, for any purpose other than for the consideration of the financing or transaction described herein, without the prior written consent of a member of the Standard Bank Group. The information contained in this presentation does not purport to be complete and is subject to change. This is a commercial communication. This presentation may relate to derivative products and you should not deal in such products unless you understand the nature and extent of your exposure to risk. The presentation does not include a personal recommendation and does not constitute an offer, or the solicitation of an offer for the sale or purchase of any financial product, service, investment or security. The investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value Whilst every care has been taken in preparing this presentation, no member of the Standard Bank Group gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information in this presentation Past performance is not indicative of future results. For the avoidance of doubt, our duties and responsibilities shall not include tax advisory, legal, regulatory accounting or other specialist or technical advice or services. You are to rely on your own independent appraisal of and investigations into all matters and things contemplated by this presentation. By accepting this presentation, you agree to be bound by the foregoing limitations. Kindly note that this presentation does not represent an offer of funding since any facility to be granted in terms of this presentation would be subject to the Standard Band Group obtaining the requisite internal and external approvals. Copyright 2010 Standard Bank Group. All rights reserved.

UK ResidentsThis presentation is not intended for the use of retail clients and must not be acted on or relied on by persons who are retail clients. Any investment or investment activity to which this presentation relates is only available to persons other than retail clients and will be engaged in only with such persons. Standard Bank Plc (SB Plc) is authorised and regulated by the Financial Services Authority (FSA), entered in the FSA’s register (register number 124823) and has approved this presentation for distribution in the UK only to persons other than retail clients. Persons into whose possession this presentation comes are required by SB Plc to inform themselves about and to observe these restrictions. Telephone calls may be recorded for quality and regulatory purposes. Standard Bank Plc, 20 Gresham Street, London, EC2V 7JE.

South African ResidentsThe Standard Bank of South Africa Limited (Reg.No.1962/000738/06) is regulated by the South African Reserve Bank and is an Authorised Financial Services Provider and Credit Provider.The Standard Bank of South Africa Limited (Reg.No.1962/000738/06) is regulated by the South African Reserve Bank and is an Authorised Financial Services Provider and Credit Provider.

United States ResidentsIn the US, Standard Bank Plc is acting through its agents, Standard Americas, Inc. and Standard New York Securities, Inc. Both are affiliates of Standard Bank Plc. Standard Americas, Inc is registered as a commodity trading advisor and a commodity pool operator with the NFA. Standard New York Securities, Inc is a member of FINRA and SIPC. Neither are banks, regulated by the United States Federal Reserve Board, nor insured by the FDIC.

Hong Kong ResidentsStandard Bank Asia Limited is a fully licensed bank under the Banking Ordinance and is a registered institution under the Securities and Futures Ordinance in Hong Kong. Standard Securities Asia Limited is a licensed corporation with the Securities and Futures Commission. Any investments and services contained or referred to in this presentation may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services.

Dubai ResidentsStandard Bank Plc, Dubai Branch, is regulated by the Dubai Financial Services Authority (‘DFSA) (register number F000028). Within the Dubai International Financial Centre, (‘DIFC’) the financial products or services to which this marketing material relates will only be made available to Professional Clients, including a Market Counterparty, who meet the regulatory criteria of being a Client.

Turkey ResidentsStandard Unlu Menkul Degerler A.S. and Standard Unlu Portfoy Yonetimi A.S. are regulated by the Turkish Capital Markets Board “CMB”). According to CMB’s legislation, the information, comments and recommendations contained in this presentation are not investment advisory services. Investment advisory services are provided under an investment advisory agreement between a brokerage house, a portfolio management company, a bank that does not accept deposits or other capital markets professionals and the client. The comments and recommendations contained in this presentation are based on the personal opinions of the authors. These opinions may not be appropriate for your financial situation and risk and return preferences. For that reason, investment decisions relying solely on the information contained in this presentation may not meet your expectations.