Infrastructure investor May 2008 - Simon Griffiths

infrastructure investorproject finance round-upThis year’s slow economic start does not mean African project finance has suddenly comeoff the rails, argues Simon Griffiths, who says the continent is safe from the credit crunchProject finance boomed in 2007, but2008 started slowly with no new projectfinance deals closing in the first twomonths of the year. Has Africasuccumbed to the global credit crunch?Unlikely, says Paul Eardley-Taylor, a SeniorVice-President with HSBC Africa: “Deals closingnow would probably have been underwrittenbefore the market tightened, so shouldn’t beimpacted by the crunch.”Deal volumes in Africa are still low by globalstandards and so a hiatus of two months isn’tcause for concern, and there is a long pipeline oftransactions waiting in the wings. Dealogic hasidentified 23 African project finance deals atvarious stages of development: not all of thosewill close this year, and some of those at preapprovalstage may not progress as hoped, butthere are a handful of deals already in finance thatshould hit the market soon.Three of those deals are mining projects,reflecting the continued strength of commoditiesmarkets. Orezone, a Toronto-listed junior miningcompany, wants to raise US $250 million of debtfinancing to develop operations at its Essakanegold mine project in Burkina Faso. Essakane,330km northeast of the capital Ouagadougou, isBurkina Faso’s largest known gold resource,holding an estimated four million ounces of theprecious metal. In January, Orezone appointedUniCredit Group and Standard Bank as mandatedlead arrangers for the deal.Also in west Africa, the Australian companyMineral Deposits Limited (MDL) plans to raise$172m to begin operations on the massiveGrande Côte zircon project in Senegal. Theproject entails the dredging of mineral sands from445.7km sq of dunes stretching 80km alongSenegal’s north-west coast. Zircon is a mineralused, among other things, for making abrasivesand insulating materials. The company saysmining should start in mid-to-late 2009 andoperations could continue for several decades.In South Africa, Wesizwe Platinum Limited hasappointed ABSA Capital, Deutsche Securities andthe Development Bank of South Africa to act aslead equity and debt arrangers for its Frisch-Gewaagd-Ledig project. Wesizwe is a blackempowermentmining company with ambitions togrow through mergers and acquisitions, using theproject as a catalyst. A bankable feasibility studyon the project is due to be delivered shortly.Other projects waiting in the wings includeseveral liquefied natural gas (LNG) and oil refineryprojects in Libya and Nigeria, and a massivepower project in South Africa.Unclogging transportIn the development finance sector, the AfricanDevelopment Bank (AfDB) Group and Cameroonsigned a $76.5m loan agreement to finance theDouala-Bangui and Douala-Ndjamena roadcorridor, linking Cameroon, the Central AfricanRepublic (CAR) and Chad. The objective, in linewith NEPAD’s goals, is to “create commerciallyand economically viable corridors devoid ofbarriers, formalities and unnecessary road blocksthat cause undue delays and high transactioncosts,” says Mandla Gantsho, the AfDB’s ViceDealogic has identified 23African project financedeals at various stagesof developmentPresident in charge of infrastructure, privatesector and regional integration. The project willalso support railway developments.In Ghana, the AfDB is putting $44m intoreinforcing the country’s power system. Theproject aims to reduce electricity losses, improvereliability and expand access to power in theKumasi area.“Unreliable power supply is a major constrainton the country’s economic growth,” says a Bankspokesperson.Business managers should be pleased: poortransport and electricity infrastructure is a majorheadache for them (see our feature oninfrastructure competitiveness).Elsewhere in the infrastructure section weask the International Council on Mining Metals(ICMM) what governments and other stakeholderscan do to avoid the so-called “resource curse”and ensure they benefit from the exploitation ofminerals.We have an interview with Richard Laing, CEOof CDC Group, about CDC’s recent investment inthe Actis Infrastructure 2 Fund, and why mobilepower is so promising. We also reveal howEurope’s contractors’ organisation is working toget European contractors to look seriously atopportunities in Africa. Finally, in our NEPADcorner we publish an interview with ProfessorEmmanuel Nnadozie of the United NationsEconomic Commission for Africa (UNECA),looking at how his organisation promotesinfrastructure development.African infrastructure projects in financeProject name Amount (US $m) Country SectorEgypt VCM/PVC Chemical Plant 868 Egypt Petrochemical/Chemical PlantEssakane Gold Mine Project 250 Burkina Faso MiningFrisch-gewaagd-Ledig Platinum Mine 483 South Africa MiningGrande Cote Zircon Project 172 Senegal MiningSource: Dealogic Chris Ryan/Dreamstime60