FINANCING INFRASTRUCTURE : Breaking the Barriers to Sustainable Development

1. FINANCING INFRASTRUCTURE :Breaking the Barriers to Sustainable Development Ade Adeola Managing Director Project & Export Finance Standard Chartered Bank, London April 2009

2. Agenda • Introduction • Infrastructure Finance Trends • Breaking the Barriers to Sustainable Investment • Conclusions & Recommendations • Leveraging on Experience

3. Corporate Banking Cash management Bilateral Credit Trade Finance Raising Capital and Risk Management Strategy and Equity M & A Forfaiting LBO/MBO FX, Derivatives Equity Private Placement Structured Trade Finance Securitisation Private Equity Investing Fixed Income Loan syndication Project & Export FinanceArranging & Advisory Global Markets Standard Chartered-Leading the Way in Africa, ME & Asia • Leading the way in Asia, Africa and the Middle East • Largest international bank in the Middle East & Africa • Strong focus on China, Japan,Korea, and Africa top 3 foreign bank in each major market • Our Global Presence • FTSE 100 and Hong Kong Stock Exchange listed • Long term credit rating A2 (Moody’s) and A (S&P) • 550 locations serving 56 countries • Our Local Presence • On the ground expertise in Asia, Africa, the Middle East, India region and Latin America • Facilitates delivery of innovative products, supported by quality delivery systems and excellent customer service • Our Value Proposition and Product delivery • Strong on-shore presence and in-depth local knowledge • Relationship and leverage with key corporates and institutions • Coupled with a deep understanding of the local markets, our product capabilities are tailored to suit client’s needs. Providing banking solutions to meet the needs of our clients

4. 2008 Financings & Current Mandates • NNPC/ExxonMobil NGL 2 Project- Nigeria-$220m • SCB acted as Financial Advisor and MLA in providing the NGL II project with US$220m add-on facility that was the first substantial oil and gas sector financing to come exclusively from Nigeria’s newly consolidated local banks. • ADDAX Petroleum-Gabon/Nigeria- $500m • In May, Addax Petroleum entered into a two-year, US$500 million senior revolving credit facility arranged by Calyon, Standard Chartered Bank and BNP Paribas. This was a hybrid corporate deal with a greenshoe option • OANDO plc- - Nigeria USD138m • Financial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields. • ALSCON-Rusal- - Nigeria USD130m • Sole Arranger for $130m bridge facility to finance acquisition and upgrade of the ALSCON aluminium smelter. • The bank has committed substantial resources to Africa . This is evidenced by the number of financial advisory and structuring mandates awarded by top tier sponsors in 2008. This includes: • Lekki Port Nigeria, $1.1billion • Main One Telecoms Cable Project-Nigeria, $120m • Lafarge Euro 225m Expansion facility • Viva Methanol Project, $1.2billion • Natural Gas Liquids supplemental financing, $200m • NNPC /ExxonMobil Satellite Oilfields Advisory, $680m • Addax Izombe LPG Project-

5. 2008 Financings & Current Mandates • NNPC/ExxonMobil NGL 2 Project- Nigeria-$220m • SCB acted as Financial Advisor and MLA in providing the NGL II project with US$220m add-on facility that was the first substantial oil and gas sector financing to come exclusively from Nigeria’s newly consolidated local banks. • ADDAX Petroleum-Gabon/Nigeria- $500m • In May, Addax Petroleum entered into a two-year, US$500 million senior revolving credit facility arranged by Calyon, Standard Chartered Bank and BNP Paribas. This was a hybrid corporate deal with a greenshoe option • OANDO plc- - Nigeria USD138m • Financial Advisor and Arranger for up to USD 140m facility to finance acquisition and upgrade of the Oilfields. • ALSCON-Rusal- - Nigeria USD130m • Sole Arranger for $130m bridge facility to finance acquisition and upgrade of the ALSCON aluminium smelter. • The bank has committed substantial resources to Africa . This is evidenced by the number of financial advisory and structuring mandates awarded by top tier sponsors in 2008. This includes:

6. Infrastructure Finance Trends:Statistics and Commentaries

7. Infrastructure Projects- Setting the Scene • Physical Infrastructure projects are ‘those services without which primary, secondary, and tertiary production activities cannot function’ Specifically capital-intensive facilities in: • Electric power (generation and distribution) • Energy (refineries, pipelines, processing facilities, etc.) • Telecommunications • Transportation (ports, toll roads,railways, etc.) • Water / Sewerage • The Input – technology, capital equipment, expertise are sourced mainly in the international markets and typically financed in international currencies. • The output (e.g., electricity, petroleum products) is sold primarily in the domestic market and paid for in local currency • The Debt/Bonds used to finance these projects are therefore exposed to 2 main risks • Devaluation – Reduction of USD value of cashflows below debt service levels. • Convertibility – Risks that local authorities may block the exchange of local currency revenues into dollars or block currency transfers from the host country

8. Infrastructure investment – a 15-25+year proposition that requires insight & foresight! Governments – adopting concessions/greenfield projects , PPPs vs. asset privatisations Sector Trends Telecommunications: strong cashflow from cellular services. Currently Private sector driven Power: Poor cashflows due to sub-economic tarrifs and under-investment Historically, cross-subsidised to benefit small residential consumers, implying politically difficult adjustment process to generate sustainable cashflows. Private sector involvement without govt capacity support may be limited to independent power producer (IPP) projects servicing large customers (industrials, distributors, etc.) Transport: airports and shipping ports generate strong cashflow today. roads and rail networks generate limited revenues and may need govt transfers (shadow tolling). Water and Sewerage: limited cashflow in Emerging mkts- viewed as the ultimate “public good”. The Infrastructure Situation at a Glance

9. Global Infrastructure Coverage & the Africa Situation

10. InfrastructureFinance Trends • Traditionally financed out of general government revenues • Trend in recent years for infrastructure to be financed on a project basis or for infrastructure projects to be purchased or developed by the private sector. • Given the high initial capital costs of infrastructure projects, long-term financing is essential for privately-owned infrastructure projects to be financially viable • Financing is now available from the private sector – in many instances with foreign private investors and creditors playing a major role • Key Growth Drivers • Privatisation- Govts adopting concessions/ PPP greenfield projects vs. asset privatisations • Commodity related infrastructure e.g. Mining, “Infrastructure enablers” offered by Resource players • Improving Governance e.g. Pension fund and Policy reforms • Private Equity Funds looking for higher yields (Reducing margins in Europe & Middle East Markets) • Technology leverage

11. Evolution of Private Infrastructure Investment in Africa (1990 – 2007)

12. Breaking the Barriers to Sustainable Investment

13. Barriers to Sustainable Infrastructure Development • Macro & Regional Barriers • The prevalence of inefficient monopoly providers (state owned) • Scarcity of investment spend because prices have been held below cost • Inadequate local expertise to structure long term Project financing • Lack of depth and defined yield curves in local debt and capital markets • Absence of incentive mechanism (fiscal tax etc) to encourage infrastructure financing • Governance and Management Barriers • Public Sector as equity holder is problematic. ( often essential to get other parties involved) • Appointment of concession holder due to political considerations which may not have right management experience for difficult initial stages of the project • May undertake project location and or management decisions on political considerations • Increase perceived commercial risks for debt finance • Sovereign and Cross-Border risks

14. CASHFLOW Regulatory Framework and Macro Stability Tariffs / Fees / Tolls Govt Supplements (MYTO?) Critical Investment Barriers & Enablers FINANCING Equity and Management Bank Debt (Loans) and Capital Markets Debts (Bonds) Credit enhancements possible?

15. What is required to achieve sustainable development? • Sponsors: Local parties to improve credit worthiness, corporate governance and management capacity • Banks: Innovative structures to project, corporate, and sovereign financings, with the aim of improving credit ratings for transactions: • Structures to mitigate the risk of devaluation, and • Structure to facilitate the use of local debt and capital markets, which can provide financing denominated in the currency in which the project earns its revenues • Structure to breach the sovereign ceiling, which therefore permit the transaction’s (global scale) local currency rating to become its foreign currency rating • Governments: Strong institutional framework for protecting creditors rights and improved access to legal enforcement and remedy • Development Finance Institutions and ECAs: • Country risk mitigation instruments (PRI & Gtees) • Deepen depth of Africa capital markets (Credit enhancement for Debts & Bonds, risk participations etc) Need for diversification of funding sources( Equity, Debt & Capital Markets) and mobilisation of long term investment from local and international markets

16. The Art of the Possible - Nigeria Homework is key Generation Mix: existing capacity, existing IPPs,New IPPs Comprehensive policy for greenfield IPPs and privatisations Sector-wide Payment security mechanism and Nature of Sovereign Support Enabling Legislation, Permits and Approvals Ensure sector and tariff reforms lead to reduced reliance on payment support mechanisms Tie-in with Distribution Privatisation Process & Packaging Investor and Lender Roadshows Engage Advisors Comprehensive and transparent RFP Package Adherence to timeframe and deadlines Don’t expect too much from the very first deals Need to attract international investors and lenders Progressive shift in risk allocation 16

17. How Can We Help? Project Finance Advisory Financial Modeling & Evaluation Structuring multi-sourced and multi-phase financing plan Managing Due Diligence Process Risk Allocation and Project Agreements review / mark up Preparation of Proposal Negotiations with Offtakers and Financiers Commercial Debt, Export Credits, B Loans, Debt Capital Markets Underwriting, Lead Arranging and Financial Close Privatisation Advisory Sector Strategy Risk Allocation RFP Preparation and Packaging Roadshows in Europe , Middle East and Asia Bid Evaluation, Negotiation and Selection Monitoring Financial Close 17

18. Summary • We believe that Nigeria has a huge scope for value creating investment in infrastructure • But most African markets do not have sufficient tax and government revenues for pure public sector funding • Funding is not the critical barrier • Project finance remains available for well structured projects • Credit markets can dealing with currency and political risks, for bankable projects • Revenue is not generally the critical barrier • The Governments in Nigeria have started the broad policies and regulatory changes to support stable revenue streams • There are greater challenges associated with revenue transfer arrangements e.g. in water & sewerage, roads A key management and institutional gap remains. This can be overcome by greater involvement of private equity and debt in financing of infrastructure

19. Confidential Energia Azteca x Energia de Baja California (Mexico) USD 804 M Project financing for a 1,060 MW natural gas power plant Marrafiq IWPP (Saudi Arabia) US$ 3,300 M Project Financing IBOM IPP (Nigeria) Independent Power Plant AES Ebute (Nigeria) Independent Power Plant Itezhi-Tezhi IPP (Zambia) Proejct Financing of IPP PT Indonesia Power (Indonesia) USD 55 M SBLC for Gas Purchase Bujagali Hydro (Uganda) Project Financing Arranger Mandated Lead Arranger & Modelling Bank Off-take Credit Support Provider Mandated Lead Arranger Lead Arranger Financial Adviser Mandated Lead Arranger On-going Ongoing 2007 Ongoing Ongoing Ongoing Ongoing Empresa Electrica Ventanas (Chile) USD 440 M Project financing for a 242 MW greenfield coal-fired plant Arranger & Documentation Agent 2007 Power & Infrastructure CredentialsNotable Deals

20. MALAKOFF Shuqaiq IWPP (Saudi Arabia) USD 1,400 M Project Financing Al-Hidd IPP (Bahrain) Project Financing Fujairah IWPP (UAE) USD 1,500 M Project Financing Taweelah A-1 10 (Abu Dhabi) USD 1,100 M Project Financing Shuaibah IWPP (Saudi Arabia) US$ 2,542 M Project Financing Mandated Lead Arranger and Hedging Bank Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger 2006 2007 2005 2006 2006 PENDEKAR POWER (LABUAN) AES Sonel (Cameroon) Capex Programme Financing Taweelah B IWPP (Abu Dhabi) US$ 2,670 M Project Financing Nam Theun 2 Hydropower Project (Laos) US$ 1,581 M Project Financing Mandated Lead Arranger Structuring Bank, Insurance Bank Documentation Bank, Joint Bookrunner, JBIC Co-ordinator, Hedge provider Security Trustee & Facility Agent for IFC, Proparco, EIB, AfDB, DEG & FMO Mandated Lead Arranger Hedging Bank 2006 2005 2005 Power & Infrastructure CredentialsNotable Deals

21. Regional Infrastructure Deals (I) (U.A.E) Umm-Al-Naar IWPP Mesaieed IWPP Suez Gulf Power (Egypt) USD 296M Project Financing (U.A.E) Port Said East Power (Egypt) USD 302M Project Financing USD 855m Sohar Power (Oman) (Qatar) Project Financing USD 855m USD 446M Project Financing USD 2.2 bn Project Re-Financing Project Financing Mandated Lead Arranger Bookrunner and Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Umm-Al-Naar IWPP Umm-Al-Naar IWPP Umm-Al-Naar IWPP (U.A.E) Umm-Al-Naar IWPP (U.A.E) Umm-Al-Naar IWPP Qasim International (U.A.E) Umm-Al-Naar IWPP (U.A.E) XXX Container Terminal (Pakistan) (U.A.E) Dolareh Container Terminal (U.A.E) Masdar Emirates Cement Company USD 855m USD 855m USD 855m (XXX) (Djibouti) (U.A.E) (U.A.E.) Project Financing USD 855m Project Financing USD 855m Project Financing USD 855m USD 100M Project Financing USD XXX Project Financing Project Financing USD 500M USD 290M USD 300M Islamic Project Financing (Current) Project Financing Project Financing Islamic Project Financing Project Financing (Current) Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Financial Advisor, Mandated Lead Arranger Financial Advisor, Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Financial Advisor

22. Regional Infrastructure Deals (II) Umm-Al-Naar IWPP (U.A.E) Umm-Al-Naar IWPP Disi-Mudawwara Water Shuqaiq IWPP XXX (U.A.E) ADWEA Sewage Marafiq IWPP XXX Conveyance Pipeline (Jordan) USD 855m (Saudi Arabia) (XXX) Treatment Plant (U.A.E) (Saudi Arabia) (XXX) Project Financing USD 855m Project Financing USD 2.0B USD XXX USD 2.2B USD XXX Confidential USD 1,000M Project Financing Project Financing Project Financing Project Financing Project Financing Project Financing Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Financial Advisor Financial Advisor Financial Advisor Financial Advisor Rousch Power Al Ezzel Power XXX Rousch Power Ras Laffan Shuaibah IWPP XXX Taweelah-B (Bahrain) (XXX) (Pakistan) (Qatar) (Saudi Arabia) (XXX) (U.A.E) USD 372M USD XXX USD 328M USD 712m USD 1.9B USD XXX USD 2,056M Project Financing Project Financing Interest Rate Swaps Project Financing Project Financing Project Financing Project Financing Financial Adviser Mandated Lead Arranger Pre-bid Underwriter and Mandated Lead Arranger Mandated Lead Arranger Mandated Lead Arranger Structuring & Hedging Bank Mandated Lead Arranger Mandated Lead Arranger

23. Ministry of Finance Ghana Re: Korle Lagoon Ecological Restoration Project (Ghana) USD 37 million ECA Buyer Credit Facility Ministry of Finance Ghana Re: Korle Lagoon Ecological Restoration Project (Ghana) USD 37 million ECA Buyer Credit Facility Sole Arranger/Lender Sole Arranger/Lender 2003 2003 Ghana Telecom (Ghana) USD 30 Million ECA Facility Mandated Lead Arranger & Sole Lender 2005 Regional Infrastructure Deals (III) Umm-Al-Naar IWPP (U.A.E) Tihama Power National District Cooling Sohar IWPP (Saudi Arabia) (U.A.E) USD 855M (Oman) USD 510M AED 700M Project Financing USD 414M Project Financing Project Financing Project Financing Pre-bid Underwriter and Mandated Lead Arranger Lead Arranger Lead Arranger Mandated Lead Arranger Thuraya Satellite (U.A.E) Project Financing Financial Advisor