African Finance Corporation

Africa Finance CorporatioN Building the New Africa

Published by Henley Media Group Ltd in association with the Commonwealth Secretariat

AFRICA FINANCE CORPORATION

Africa Finance Corporation (AFC) Building the New Africa Overview

The Central Bank of Nigeria(CBN) provided the anchor capital for the start-up of the Corporation. The Bank’s current shareholding of just over 42 percent will decrease as other

Africa Finance Corporation (AFC) is a private sector led

African shareholders join the Corporation. African financial

International organisation established by treaty between

institutions currently make up 48 percent of our shareholders,

independent sovereign states, domiciled in Nigeria with

with African industrials and corporations holding close to 10

activities across Continental Africa. Current membership

percent. Each of these groups contributes significantly to the

includes Nigeria, Ghana, Guinea Bissau, Guinea, Sierra

makeup and operations of the institution. The public sector

Leone, The Gambia and Liberia.

shareholding gives AFC important access to government, which is critical in Africa for sustainable investments in

AFC was established in 2007 to fill a void in project

infrastructure. Having African financial institutions so actively

structuring expertise and available risk capital with US$1bn

involved promotes synergy between African banks, broadens

in fully paid-in equity capital. The Corporation offers a

our reach and strengthens local support and partnership.

unique value proposition as an Africa-focused infrastructure

The African industrials and corporations on our board help

financing institution providing competitive products and

integrate local corporate experience, and strengthen support

services across the complimentary areas of; principal

from leading local sponsors.

investing, financial advisory services, project development and technical advisory.

The Corporation’s business is that of providing principle investment capital in infrastructure projects or companies operating in five

Our shareholders include the Central Bank of Nigeria,

target sectors – Power, Oil & Gas, Transport, Telecommunications,

various African financial institutions and other industrial

Heavy Industry - deploying all our financial instruments – debt,

and corporate shareholders. The AFC Board of Directors is

equity, mezzanine and guarantees, across continental Africa.

chaired by the internationally respected investment banker,

The Corporation also uses its liquidity to support trade finance

Bayo Ogunlesi, who has several decades of experience

transactions in African countries. Since inception, AFC has been

financing infrastructure assets globally. The Corporations

actively involved in originating, structuring and executing a portfolio

management team is lead by its President & Chief Executive

of projects and transactions in the African infrastructure space, with

Officer, Mr Andrew Alli.

over US$733m in gross debt and equity investment approvals.

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C.S. Tyco Resolute at Tema Port, Ghana - Submarine cable laying vessel on arrival from Siexal, Portugal.

Executing our Mandate

the products and services that drive economic development.

Since inception, we have underwritten over $ 732.9 m in debt, equity and equity-related products across our project

AFC’s Role - AFC is a supranational financial institution, is self

portfolio.

regulated but adheres to international best practices including ‘inter alia’ capital and leverage tests. Maintaining a sound

Principle investing and co-investing is another way

financial condition is vital if we are to be effective in meeting

we directly align the corporation’s interests with those of

the needs of our clients. Among the roles we play for our

our clients. While returns fluctuate based on equity market

largely institutional client base are transaction advisor, project

performance and other factors, our investment banking

developer, financier, investor and co-investor. Today, AFC is

business has achieved credible returns from generation of

increasingly being seen as a partner of choice for infrastructure

advisory and arranging fees for our shareholders over the

investment across the continent.

long term.

Project Development - Financing for Growth & Economic

Our financial and technical advisory business serves as

Development. AFC acts by providing capital for our investing

our primary point of contact with our clients and is often the

clients for financing projects to generate growth and deliver

genesis for sourcing other opportunities to serve them.

Project Development

Principal Investing

Advisory

Coordinate project management

Provide financial to projects on a

Financial advisory on project finance

from concept through construction

project finance basis, and to existing

transactions

firms seeking expansion capital Risk capital for project development Engineering and technical expertise

Arranging of external debt and Equity, mezzanine, debt and

equity to support advisory or other

other instruments as needed

transactions

to ensure flexibility and maximum returns

Technical advisory services

Business Model Underpinned by Complementary Offerings

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Portfolio Highlights The bulk of our project portfolio is in the power, oil and

AFC operates a project portfolio that has seen US$732.9m

gas, transportation and heavy industry sectors across

in gross debt and equity investment approvals since 2008.

six jurisdictions including; Cape Verde, Ethiopia, Ghana,

No one sector contributes more than 25 percent. Among

Kenya, Nigeria, South Africa.. Of its US$1.1 bn in capital,

other projects financed by AFC a number are noteworthy:

Main One Cable Company AFC

In 2010 AFC received the African Banker Magazine award for Deal of the Year for its 2009 Main One investment. AFC was nominated alongside Citadel Capital, EFG-Hermes Investment

AFC is the largest equity investor in the USD240mn African-

Bank, Rand Merchant Bank and Standard Bank.

led Main One Cable System. This is an undersea fibre optic cable that has increased broadband capacity along the west coast of Africa tenfold, providing a major link to the “information super-highway”, enhancing West Africa’s connection to Europe and the rest of the world. Main One continues to deliver excellent operational performance (100% uptime since going live) and strong sales performance despite competition in the marketplace, funding challenges for some bandwidth purchasers, and a lag in investments required by market operators to take-on capacity from the cable.

Main One ‘Splice’ Event on board CS Tyco Resolute Completion of cable laying and connection of all landing stations of the cable system - Tema Port, Ghana. L-R: Andrew Alli, CEO AFC; Funke Opeke, CEO Main One Cable Company.

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Source: http://manypossibiities.net/african-undersea- cables

African Undersea Cable Capacity

Main One Splice Event on board CS Tyco Resolute Tema Port, Ghana. R-L: Funke Opeke, CEO Main One Cable Company; Representative of SubCom (Tyco Electronics Subsea Communications); Hon. Haruna Iddrisu MP, Minister of Communications, Ghana; Former Head of Ghana Telecommunications Regulatory Commission, Ghana

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Seven Energy Gas Pipeline Project - Uquo Ikot Abasi, Akwa Ibom, Nigeria

Seven Energy

arrangements are in place with major industrial customers in the region (power & heavy industry).

Nigeria suffers from a significant gas supply-demand

Seven Energy Sustainability - The oil and gas business

imbalance, presenting enormous challenges for domestic

is Nigeria’s largest industry and by far its largest export

power generation. Seven Energy is an indigenous oil and

and earner of foreign currency and fuel oil, making it the

gas exploration and production company, focused on

second largest importer of refined petroleum products in the

the monetization of Nigeria’s significant discovered but

world’. . Nigeria has the seventh largest gas reserves base

undeveloped gas reserves. Seven Energy has several

in the world (180 Trillion cubic feet, but despite substantial

major assets with proven reserves owned in Nigeria, and is

discoveries of both associated and non-associated gas, the

managed by an internationally experienced team. In August

domestic market and infrastructure remain under-developed.

2010, Seven Energy entered into a Joint Operating Agreement

In the absence of sufficient electricity generation capacity, the

with Sinopec for development of the Stubb Creek field, and

country relies heavily on diesel.

in November 2010 entered into a strategic alliance with Petrofac Limited. Petrofac is a leading international provider of facilities solutions to the oil & gas production and processing

“From its origins as an oil and gas development subsidiary,

industry, with a diverse customer portfolio including many of

Seven Energy has set out to become a major gas producer

the world’s leading integrated, independent and national oil

to the Nigerian home market. In 2010 Seven Energy:

& gas companies. Petrofac is quoted on the London Stock

Employed more than 500 workers from host communities

Exchange and is a constituent of the FTSE 100 Index. Petrofac

to work on and support construction of the pipeline, and

will invest US$100 million to acquire a 15.0% interest in Seven

strengthened its senior management team”.

Energy alongside a further $50 million from existing and other investors. New Production is due end 2011. Key off-take

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Scott Aitken - Chief Executive officer Seven Energy

Seven Energy Gas Pipeline project – Uquo Ikot Abasi, Akwa Ibom,Nigeria

Lowering in of final sections

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Bakwena Toll Road

The Africa Finance Corporation

Bakwena Toll Road - AFC is an investor in the Bakwena toll road project, South Africa. The Bakenwa toll road route has been designed to form part of an East-West axis connecting South Africa’s industrial and commercial heartland of the Witwatersrand, with its nearest deep water port in Maputo, Mozambique. The industrial corridor was conceived to stimulate agriculture, manufacturing, mining and tourism.

The Bakenwa project is a combination of urban tolling in the suburbs of Pretoria and long haul intercity tolling.

The Bakwena Highway group signed the concession agreement with the South African National Roads Agency Limited (SANRAL) to design, build, finance, operate and maintain the Platinum Toll Highway in 2000. The highway consists of a 95 km section of the N1 running from Pretoria (Tshwane) northwards to the town of Bela Bela and a 290 km section of the N4 running from Pretoria westwards to the Botswana border. The N4 route consists of a dual carriageway on the northern side of Pretoria from Tshwane to Rustenburg and onwards to the Bostwana border.

Geographic location of the Bakwena Toll Road, South Africa

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www.afcriafc.org

Doornpoort Toll Plaza Approach - Bakwena Toll Road, South Africa

The N1 also connects the N4 from Witbank at the Proefplaas Interchange with the new N4 Platinum Toll Road to Botswana at the Doornpoort Interchange. Africa Infrastructure Investment Managers (AIIM) co-invested with AFC in an equity investment to part-fund the acquisition of Infrastructure Concession South Africa (Pty) Ltd, a special purpose vehicle established to hold 50% of Bakwena Platinum Corridor Concession (Pty) Ltd, a toll road concession company that operates the Bakwena Highway. The Bakenwa toll road route has been designed to form part of the Maputo development corridor, an EastWest axis connecting South Africa’s industrial and commercial heartland of the Witwatersrand, with its nearest deep water port in Maputo, Mozambique. The industrial corridor was conceived to stimulate agriculture, manufacturing, mining and tourism. The Bakenwa project is a combination of urban tolling in the suburbs of Pretoria and long haul intercity tolling. The investment underscores AFC’s expertise in investing in Public Private Partnerships and Private Finance Initiatives in its focal

Doornpoort Toll Plaza - Bakwena Toll Road, South Africa

sectors across the African continent.

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Cabeolica - Renewable Energy Project The first commercial scale Public Private Partnership wind farm in Sub-Saharan Africa - The Cabeolica Project was awarded the Best Renewable Project in Africa Award at the Africa Energy Awards 2010 The Cape Verde based Cabeolica wind farm project is the first commercial scale Public Private Partnership (PPP) wind farm in Sub-Saharan Africa. AFC is the majority investor in Cabeolica SA, which was established to develop, build, own and operate

the US$90 million, 26MW landmark renewable energy wind power project in Cape Verde, on the western seeboard of the Continent, north of the Equator. The PPP with the Government of Cape Verde and the national power utility, Electra, entails the construction of 30 wind turbines on four of the seven inhabited islands of the mid-Atlantic archipelago. The project is financed with equity from the Africa Finance Corporation, Finnfund, InfraCo Africa, Electra and the Government of Cape Verde. Debt financing is provided by the European Investment Bank and the African Development Bank.

Providing 26MW of electricity into the grid, the project will ensure that over 25% of the nation’s power needs are provided through renewable energy sources (instead of

Windmill installation, Santiago, Cape Verde

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utilizing expensive and imported fuels) and the project stands to benefit from carbon credit revenues under the Clean Development Mechanism Initiative. In addition, the project will lead to significant direct and indirect employment opportunities and local manpower capacity development.

The project is the first commercial scale PPP wind farm in Sub-Saharan Africa and underscores the global imperative for sustainable renewable / green energy solutions. Through this project AFC has strengthened its commitment to pioneering renewable energy investments on the continent by effectively harnessing local renewable energy resources to provide more cost efficient and sustainable power for national economic development in Cape Verde. Renewable energy resources need to be harnessed effectively to provide more cost efficient sustainable power, address the infrastructure investment deficit and make an economic difference in the lives of Africans. AFC has strengthened its commitment to pioneering renewable energy investments on the continent with a lead investor role in this project, and was honoured to be recognised for providing an African private sector investment solution which

Windmill installation, Santiago, Cape Verde

underscores the global imperative for sustainable energy.

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Ethiopian Airlines Fleet Modernisation

workforce and cost in the region of USD 668 million. AFC co-financed new Boeing 777 aircraft, as part of the Ethiopian Airlines’ investment plan for 2010-2018, by providing debt

Ethiopian Airlines, the national flag carrier of Ethiopia,

finance to Ethiopian Airlines in support of the purchase of

was founded in 1945. Today, it has become one of the

five Boeing 777-260LR passenger jets. The new aircraft

continent’s leading carriers, operating at the forefront

will expand Ethiopian airlines capacity on long haul routes

of technology, and unrivalled in Africa for service and

to and from Africa, from its Addis Ababa hub. AFC’s co-

operational excellence. The airline plays a pivotal role in the

financiers in the project include; Citibank N.A., London,

economic development of Ethiopia with a highly respected

African Development Bank, US Eximbank, and PTA Bank,

indigenous training and maintenance operation, and

Kenya. AFC will continue to partner with institutions such

integrated cargo network. The Airlines commands a major

as Ethiopian Airlines, in its quest to achieve and surpass

share of the pan-African air transport network, serving 58

its worldwide competitors in continued technical and

international destinations. It plays a major role in capacity

service excellence and capacity development, and in so

development within Ethiopia. The modernization of its fleet

doing execute on our mandate to bridge the infrastructure

will create in excess of 400 skilled jobs within the airlines’

investment deficit in Africa.

Investment in Neconde Energy – Landmark Oil and Gas Acquisition Neconde Energy is an indigenous E&P company with strong potential to be a local indigenous champion similar to recently formed companies taking advantage of the emerging local content and International Oil Company divestment opportunities. The company is championed by reputable Nigerian entities supported by international technical and financing institutions, thus positioning the company to take advantage of the dynamic regional oil & gas prospects and attain a strong production asset base. An investment in Neconde falls squarely in AFC’s oil and gas strategy, to support the growth of indigenous firms seeking regionalisation and to

Shell Divestment of its Nigerian onshore ‘acreage’/assets

capture more of the value of Africa’s natural resources on the

OML 42, Nigeria

Continental ridge the infrastructure investment deficit in Africa.

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Public Sector Financial and Technical Advisory In Nigeria, AFC has advised the Federal Ministry of Finance (FMoF) and the Central Bank of Nigeria (CBN), on appropriately structuring investment interventions in the various infrastructure sectors - particularly power and transport (aviation). The CBN mandate centres on Technical Advisory for the N300.0bn (US$2.0bn) Power and Aviation Intervention Fund (PAIF).

Formal signing of Ghana’s membership-

Thus far, AFC’s recommendations have led to the approval

Ministry of Finance, Accra, Ghana

of N185.2bn (US$1.2bn) of the Fund by the Committee of Governors of the CBN, with 80.0% of this being for aviation

L to R: Dr. Kwabena Duffuor, Minister of Finance & Economic

projects, and 20.0% for power projects.

Planning of Ghana (left) with Mr. Andrew Alli, AFC President & CEO, after the formal signing

In Nigeria, the Corporation closed a number of captive IPP financings, aimed at supporting industrial power supply capacity, pending an appropriate regulatory environment for larger sized projects. As Technical Adviser to the CBN, AFC

for the establishment of the Africa Finance Corporation (the AFC

is playing a quiet role in helping drive policy decisions in the

Treaty) and the Charter of the Africa Finance Corporation (the AFC

appropriate direction to support private power investments.

Charter). In June, 2010 Nigeria formally ratified her membership of

AFC is also leading a group of international partners towards

the corporation by passing the Diplomatic Immunities and Privileges

bringing the 300MW Ghanaian independent power project

(Africa Finance Corporation) order granting full International status

- Cenpower (one of the largest privately-owned IPPs in the

to the corporation. The Corporation’s membership is comprised of

region) to financial close in 2011. This project will serve

African States, corporate entities such as major commercial banks

to illustrate the enormous potential for private-sector led

and financial institutions, other private sector commercial entities

solutions in power generation, both in West Africa and

and a few individuals. AFC’s current member states, in the order

elsewhere on the continent.

in which they joined the organisation are: Nigeria, Guinea-Bissau, Sierra Leone, The Gambia, Liberia, Guinea. Ghana formally joined

Executing our Mandate – Expanding Country Membership

the corporation as its seventh member on 30 November, 2010 when the Ghanaian Parliament ratified Ghana’s membership and approved a resolution for Ghana to subscribe for US$50 million of shares in the Corporation thus expanding the pan-African country membership of AFC. Prospective new members include Zambia,

The Africa Finance Corporation is an international organisation

Zimbabwe, and the countries which comprise the West African

established by treaty between independent sovereign states. AFC

Economic and Monetary Union: Benin, Burkina Faso, Cote d’Ivoire,

was created by two constitutive legal instruments: the Agreement

Guinea Bissau, Mali, Niger, Senegal, Togo.

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