Presented by Cresco Project Finance “ Your project development partner, delivering value through a multi-skilled team ”

1. Project Finance for AFRICAN Projects 19 July 2011 Presented by Cresco Project Finance “Your project development partner, delivering value through a multi-skilled team”

2. CONTENTS • Introduction • Project Finance Overview • Risk Assessment and Allocation • Project Structuring • ECIC Small Medium Transaction Product • MIGA Political Risk Insurance

3. INTRODUCTION Introduction

4. INTRODUCTIONCRESCO bridges the gap between a concept and reality to achieve a viable sustainable project CRESCO has a multi-skilled team to assist investors in securing and developing high quality businesses and projects Concept Viable • Promoters do not have time and/or necessary skills to develop their projects • Often project risks have not been adequately addressed • Promoters have unrealistic expectations of investor requirements • A well structured and bankable project • Efficient project implementation • Skilled operational and financial management of project Helping you bridge the gap

5. CRESCO RECENT CREDENTIALSExperience of a number of projects across diverse industries and countries Set out below recent project finance transactions supported by CRESCO

6. PROJECT FINANCE OVERVIEW Project Finance Overview

7. PROJECT FINANCE OVERVIEWProject finance is the funding of a major capital project in which the lender looks principally to the cash flows • Project finance is the funding of a major capital project in which the lender looks principally to the cash flows of the project as the source of funds for repayment of the loans • Project Finance covers a wide range of financing structures with 2 common features, namely financing is not primarily dependent on: • The balance sheet of the sponsor; or • The physical assets of the project. • That is, the balance sheet of the project owner or the assets of the project do not therefore provide sufficient security to the lender. • The optimal structure for a project owner is to have “no recourse” to his balance sheet but that would practically never happen, rather limited recourse. • Degree of recourse changes through the project life: • During construction, higher guarantees required than once started producing income • Project owners often have weak balance sheets, so project finance may be the only way to fund a project

8. PROJECT FINANCE OVERVIEWProject finance is focused on identifying robust cash flows which can support a debt or equity cost obligation • As a result of the limited recourse nature, project finance structuring is: • Based on cash flow certainty – high level of due diligence by lenders • Credit intensive – lenders require all risks to be assessed and mitigated • Often cross border • Highly structural – expensive to establish • Usually long term • Relatively low margins to bankers

9. PROJECT STRUCTURINGBalancing the size of the project with the appropriate financial Structure. Generally project finance not possible under USD25M Financial Advisors Sponsors ECA’s & MLA’s Insurers Co financing Government Insurance Banks or PRI Equity Concession Commitments Performance or Site Lease Bonds Lenders Loan Finance Suppliers Project SPV Supply Contracts Swap Proceeds A/c Counter parties Leases Security Agent / trustee Lessors Performance Warranties Sales Operation Agreement Agreements Equipment Suppliers Turnkey Offtaker O & M Company Contract Construction Companies Transportation Agreement Transportation Rating Agencies Lawyers

10. PROJECT FINANCE OVERVIEWDetailed below are key project risks that can “kill” a project very early • Technological innovation • First of a kind • Inexperienced operators • Logistical remoteness • Evacuation of product • Retail interface • Market risk • “Political” Projects • Spectrum of marginality • Too high up on the production cost curve • Marginal resource

11. RISK ASSESSMENT AND ALLOCATION Risk Assessment and Allocation

12. 16 RISKS OF PROJECT FINANCEEach of key project risks need to be mitigated Set out below are the key risks that we experienced to be difficult to mitigate

13. TYPICAL PROJECT TIMELINEFunding is now a critical path of a project, no longer an afterthought. Needs to be considered in parallel with technical solution The deal process and key milestones PRE FUNDING POST FUNDING Operations Implementation / construction Commission Pre- Feasibility Fund raising Bankable Feasibility Concept Diagnosis Technical Completion Financial Completion Strategy & structuring Financial Close Marketing to investors Due diligence Negotiation Post-closing support

14. PROJECT FINANCE PARTIESProject Finance Lenders can be broadly classified into the following 3 key areas – each with different mandates / risk appetite • Commercial Banks/ local and international • Regional expertise and appetite • Sectoral expertise and appetite • Size and execution capacity • Relationship and ease of interaction • Syndicating capacity • Development Finance Institutions / regional and international PTA Bank, Ecowas bank, World Bank, EIB, IFC, DBSA, EBRD, IDA, ADB, DBSA, ADB, IDC, AFD, DEG, Proparco, FMO, OPIC, CIDA, SIDA China Eximbank, Afriexim etc. • Bi-laterals / Export credit agencies USEXIM, ECGD, Hermes, EDC, JBIC/Nexi, EFIC, SACE, Cesce, ECIC, Coface, Exim India, KFW IPEX, OND, SEK, Iftric etc.

15. ECIC SMALL MEDIUM TRANSACTION PRODUCT ECIC Small Medium Transaction Product

16. ECIC SMALL MEDIUM TRANSACTION PRODUCTTHE PRODUCT • For some time now a need has existed from manufacturers and suppliers of equipment, plant and engineering services to be able to offer their international clients a product that could be classified as “vendor finance”, “supplier’s credit” or “supplier terms” with speed and ease of access • Under normal circumstances these deals would be done on corporate- or guaranteed basis with ECIC and banks setting the requirements and terms of the credit on a case by case basis • APA, Cresco and ECIC have come together to develop a new standardized product that would facilitate fast and effective “vendor finance” with clear eligibility requirements • This Medium Term Suppliers credit product has now been approved and is ready to receive applications

17. ECIC SMALL MEDIUM TRANSACTION PRODUCTTHE PRODUCT – Buyers Credit is the norm and allows a SA bank to provide finance to the foreign buyer to allow contractor to sell the “kit” [Existing Mine – DRC] [SA Bank etc] [USD3.15m 5 yr loan] [USD 4 m Boiler] [Contractor A - Benoni]

18. ECIC SMALL MEDIUM TRANSACTION PRODUCTTHE PRODUCT – Basic Terms

19. ECIC SMALL MEDIUM TRANSACTION PRODUCTCREDIT CRITERIA – for transactions of less than $ 1 m

20. ECIC SMALL MEDIUM TRANSACTION PRODUCTCREDIT CRITERIA – for transactions of US$ 1 – 5m

21. MIGA POLITICAL RISK INSURANCE MIGA Political Risk Insurance

22. CRESCOs MIGA ADVANTAGECRESCO is the appointed agent for MIGA (world bank political insurance agency) which support projects in unusual destination • MIGA is a member of the World Bank Group • Mandate to promote foreign direct investment in developing countries by providing guarantees (political risk insurance) to investors and lenders • MIGA very helpful to supplement investments in projects in politically sensitive jurisdictions or where the Government is the counterparty • MIGA covers the following key political risks: • Currency inconvertibility and transfer restriction; • Expropriation; • War, terrorism and civil disturbance; • Breach of contract; • Non-honoring of sovereign financial obligations. • CRESCO / MIGA Agency • CRESCOs assistance to clients in respect of Miga products comes at no additional cost to the client and standard Miga rates will apply.

23. CONTACT USCRESCO Contacts Office details 2nd Floor, Lakeside Office Park 263 West Street Centurion South Africa +27 (0) 12 663 3660 +27 (0) 12 663 3651 Directors contacts Focus area Conrad Hefer Structuring and ECA  conrad@crescopf.co.za  +27 (0) 82 888 3836