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Port Development Boom on the African Continent“A New Era of Public Private Partnerships”

8 October 2015

Agenda

Overview of African Maritime & Port Sector Trends

Applicable PPP Models

Value Optimization through tailored PPPs

Introduction to MTBS

Conclusion

8 October 2015 “The New Era of Public Private Partnerships” 2

Prospected Port PPP Projects on the African Continent

• Financial & Strategic Advisory from Rotterdam, The Netherlands

• Specialised in Port PPPs: Preparation & Execution

• Global Project Portfolio: Africa Core Market

Ongoing MTBS Transaction

Successful MTBS Transaction

Completed MTBS Advisory Project

MTBS: Maritime & Transport Business Solutions


Leading Port Advisor in Sub-Saharan Africa


MTBS: Maritime & Transport Business SolutionsClosed Transactions



Freeport of Monrovia Port of Odessa Dubai

Transaction Advisor Financial Advisor Transaction Advisor

120 million USD deal size Confidential 35 million USD deal size

Concession Equity Concession DBFOM

Sell Side Buy Side Sell Side

2010 2009 2007

Transaction advisor

Public Water Transport SystemDubaiUAE

Deal Size: US$ 25 million

2007

Financial Advisor

Brooklyn-Kiev PortOdessa, Ukraine

Container Terminal Equity Valuation

Deal size US$ 37 million senior loanTotal project cost US$ 130 million

2009

Port of Vancouver, Canada

Port of Durban,South Africa

Port of Burgas, Bulgaria

Port of Moerdijk, Netherlands

Financial Advisor Transaction Advisor Transaction Advisor Transaction Advisor

Commercial advisory servicesPPP-scheme Durban

Dig-out portEquity transaction Navibulgar

container terminalConcessioning terminal

Concession ConcessionManagement Contract

Shareholders AgreementConcession

Sell Side Sell Side Private deal Sell Side


MTBS: Maritime & Transport Business SolutionsOngoing Transactions

Ibom Deep Sea Port,Nigeria

Greek Marinas and Ports, Greece

Port of Onitsha, Nigeria

Port of Bujumbura, Burundi

Transaction Advisor Transaction Advisor Transaction Advisor Transaction Advisor

Concession greenfield Deep Sea Port

Privatisation of Greek marinas and commercial ports

Concessioning of inland river multi-purpose port

General cargo port concession

Concession Concessions Full Bid Preparation Concession

Sell Side Sell Side Buy Side Sell Side


MTBS: Maritime & Transport Business SolutionsOngoing Transactions

Agenda

Overview of African Maritime &Port Sector Trends



Conclusion





Several trends have substantially impacted, and will have a substantial impact on, theAfrican maritime and port sectors.

Among the most influential of these trends are:

• strong predicted population growth in Africa in the 21st Century;

• continuous strong economic growth in the region;

• varying economic structures of African countries; and

• a continuous increase in cargo volumes and cargo vessel sizes.

An Overview of the African Maritime and Port Sector TrendsSeveral trends substantially impact and shape the African maritime and port sectors.

Population Growth


Firstly, the African population is predicted to quadruple in the 21st century, spurring maritime trade.

Economic Growth


Additionally, continuous strong economic growth is forecasted for the African Regions, thereby fostering trade demand growth.

The Impact of Economic Structures


Furthermore, different levels of economic diversification between countries elicit different port requirements.

Growth of the Maritime Sector

8 October 2015

“The New Era of Public Private Partnerships” 14

Finally, larger cargo volumes and cargo vessels entail construction of larger port facilities.

Agenda




Conclusion




A conservative assumption forthe maturation of the SubSaharan African economieswould be that:

• at some point the GDP –TEU multiplier reducesfrom 2.0 to 1.2;

• the GDP growth per annumdecreases from 5.0% to3.0%; and

• as a result, the average TEUgrowth rate also graduallydeclines from 10.0% to3.6%.

Estimating Port Requirements


Applying conservative assumptions and aforementioned trends, a continent wide container demand forecast is derived.

Forecasting Port Investments


African containerized cargo demand is forecasted to grow to 140 million TEU by 2050, resulting in a wave of port expansion projects.


PPP project prospects in African portsAfrica is getting prepared for this century’s port development boom

Greenfield - ContainerBrownfield - ContainerGreenfield - Dry BulkBrownfield - Dry BulkGreenfield - Other Brownfield - Other

Total projects

$# > 79 billion USD114 projects

Dry bulk projects


Container projects

$# > 40 billion USD57 projects 40 million TEUTEU

Total projects – planned start construction before 2018


Total projects – planned start construction after 2017


First wave of port expansions set to render 40 mTEU in coming decade


Point Noire

Djibouti

Mombasa

Dar Es Salaam

Algiers

Alexandria

El-Dekheila

Port Said West

Sokhna

Casablanca

Tanger Med

Luanda

Cape TownDurban

Nqura

AbidjanTema

Lagos

5

10

15

20

0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 7,0

Dra

ft (

m)

MillionsMajor Ports - Throughput > 500,000 TEU

Central East North South West

Development vessel size

1994 - 13.0m

2014 - 16.5m2006 - 16.0m

2005 - 15.0m1997 - 14.5m

PPP project prospects in African portsBesides expansion of existing ports, the increase in vessel size requires greenfield port development

- Durban Dig-Out Port South Africa

- Ponta Techobanine Mozambique

- Macuse Port Mozambique

- Nador West Med Morocco

- Dakhla Atlantic Port Morocco

- Safaga Industrial Port Egypt

- Matakang Port Guinea

- Kribi Deepsea Port Cameroon

- Seme-Kpodji Deep Sea Port Benin

- Barra do Dande Deepsea Port Angola

- Kenitra Altantic Port Morocco

- Agra Fria Port Namibia

- Bagamoyo Port Tanzania

- Lamu Port Kenya

- Ibom Deepsea Port Nigeria

- Lekki Port and Freezone Nigeria

- Badagry Deepsea Port Nigeria

- Enfidah Deepsea Port Tunisia

A multitude of greenfield deepsea ports is planned on the continent

The greenfield requirement is recognized

….more to follow 20

Greenfield ports require dedicated PPP solutions


(400)

(300)

(200)

(100)

-

100

200

300

400

0 5 10 15 20

mio

USD

Cash Flow Diagram

Cumulative FCF Investments Opex Revenues

• This Greenfield port project has a project IRR of 19% and a positive NPV.

• However, the first year of positive Free Cash Flow is in year 6

• The pay-back period is 10 years from initial investment.

• Vale created after the expansion investments in year 15 are not of interest for the lenders!

• So, how bankable is this project for project financing?

PPP project prospects in African ports

Agenda




Conclusion





Applicable PPP modelsFour likely applicable (basic) PPP models identified

Structure Characteristics Examples

1. Landlord • PA acts as traditional landlord• Substantial investments and financing is

required, but only for base infrastructure

• Rotterdam, Antwerp, Hamburg• Best practice port reform in

African ports

2. Landlord with DB(F)M • PA acts as traditional landlord• Construction contract is tendered out as a

DB(F)M, which implies that construction and maintenance (and financing) is the full responsibility of the infrastructure contractors

• No DBFM contract in ports up to date: currently under implementation in a North American port

• For Rotterdam MV2 it was concluded to apply DBM

3. PDMC • PA enters into Master Concession with PDMC (PA as co-shareholder)

• PDMC tenders individual terminal concessions and the construction contract

• PDMC attracts investors and arranges debt financing for investments (based on securities from anchor clients

• Busan, S-Korea – Hyundai, Bouygues, BusanPA, Macquarie, Kukje, KCTC

• Maputo, Mozambique – CFM, DP World, Grindrod

• Durban, South-Africa• Ibom Deep-Sea Port, Nigeria

4. Full BOT concession tender • Private consortium is responsible for port development and investments

• Appetite restricted by size of the investments

• Limited control PA

• Monrovia, Liberia – APMT• Mersin, Turkey – PSA & Afken

PAOperator

Operator

Infra

PAOperator

Operator

DB(F)M infra

PA PDMC

Opera-tor

Opera-tor

Investor(s)

Infra EPC

PAPrivate port consortium

Applicable PPP models - Landlord StructurePublic PA responsible for investments in land infrastructure and for port management

MarineInfrastructure

II. Private operator(s) / developers

I. Public Port Authority

Concession/Lease +Port dues

Investments through:EPC Contract/

purchase agreement / lease

Port management

Government

Lender(s)

Grant / soft loan provider

Marine services

Port land Infrastructure

Shareholder(s)

Lender(s)

Superstructures & Equipment

Public Client / Investor / Borrower

Private Client / Investor / Borrower

Client s/ offtakers

Client s/ offtakers

III. Client s /off-takersHandling charges /

off-take agreement

Operational revenues


Applicable PPP models - BOT Private operator responsible for investments in land, infrastructure and superstructure



Port management

Government

Lender(s)


Marine services

Shareholder(s)

Lender(s)

Handling charges / off-take agreement








Investments through:EPC Contract/ purchase agreement / lease

Client s/ offtakers

Client s/ offtakers

III. Client s /off-takers


Applicable PPP models - Landlord with DB(F)M Infrastructure Contractor responsible for investments that are recovered by availability payments




Port management

Government

Lender(s)


Marine services

Shareholder(s)

Lender(s)

Handling charges / off-take agreement





0. Contractor



DBFM Contract

Availability Payments

Government

Lender(s)

Client s/ offtakers

Client s/ offtakers

III. Client s /off-takers


Client s/ offtakers

Client s/ offtakers

III. Private operator(s) / developers

Applicable PPP models - PDMCSplit private responsibility and investments

II. PDMC JVI. Public Port

Authority

Master ConcessionLease + Port dues

Government

Lender(s)


PrivateShareholder(s)

Lender(s)

Sub-concessions

Shareholder(s)

Lender(s)


Port management

Marine services



Financing options

Interest construction companies & suppliers

International Port Developers

Marine service providers

PublicShareholder(s)

Handling charges / off-take

agreement




Agenda




Conclusion





1. Landlord

2. Landlord with DB(F)M

3. PDMC

4. Full BOT concession tender

Preparatory phaseTransaction

implementation phase

Decisions & commitments

Viability StructuringMarket

consultationTransaction strategy

Key success factors

Tailoring of the optimal PPP structure is an important step in transaction preparation



• To determine the optimal port management model, an evaluation is needed. Options are:

• a qualitative evaluation through a Multi-criteria analyses (MCA); or

• a quantitative Value for Money (VfM) analysis, as presented below.

Port Management Models

Evaluation to determine optimal model

Agenda




Conclusion




ConclusionTailored PPP structures support the trend towards more private funding of port developments in African ports


More privately funded port developments are seen in African ports due to:

• a substantial port capacity shortage

• consequential profitable port business (tariffs are high)

• limited public budget

• increasing institutional acceptance and facilitation.

There is a variety of PPP options out there:• Landlord Concessions

• BOTs

• PDMCs

• Other models.

Tailoring towards the optimal PPP structure is crucial, since it:• depicts the way risks are allocated over the public and the private parties involved

• is an important means for the public sector to ensure its strategic objectives are met

• determines the required profile of private sector bidders and the procurement plan

• drives project bankability.

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