How do you describe the Africa Finance Corporation?
AFC is a multilateral infrastructure finance institution. It is self regulated but adheres to international best practices including ‘interalia’ Corporate governance, capital and leverage tests
The Africa Finance Corporation was established in 2007 to fill a void in project structuring expertise and available risk capital. Can you tell us about what you have achieved so far, and the most notable projects financed through the US$1 bn in fully paid- in equity capital you have raised?
Since inception, AFC has been actively involved in originating, structuring and executing a large volume of projects and transactions in the African infrastructure space. This has been in accordance with its mandate. We have carried out in-depth reviews of over 100 potential investments of various types. These were across Africa, in all of our five main target sectors – power, transportation infrastructure, telecommunications, natural resources and heavy industry, deploying all our financial instruments – debt, equity, mezzanine, guarantees. They represent a total AFC potential investment of approximately USD1 .5bn, with no single sector contributing more than 25 percent.
AFC operates a project portfolio that has seen over US$700m in gross debt and equity investment approvals since 2008. AFC is increasingly being seen as a partner of choice for infrastructure investment across the continent
Of the projects that we have financed, a number are noteworthy. AFC is the largest equity investor in the USD240mn African-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.” This project, which was financed during the global financial crisis, yet completed on time and to budget, will bring important developmental benefits to the countries in which the cable lands. We are pleased that AFC received the 2010 African Banker Magazine’s Deal of the Year award for its role in this project.
In 2010, AFC acquired a 46 percent controlling stake in Cenpower Generation Company Limited, which is developing the 340 megawatt Kpone Independent Power Plant in Tema, Ghana. This USD450mn plant will make a major contribution to Ghana, meeting its targets for providing electricity to its rapidly growing economy. We intend to bring this project to financial close in the near future with the strong support of the Government of Ghana, our local and international partners. This complements other power sector projects we are supporting, such as the landmark Cabelioca renewable wind power project in Cape Verde. Cape Verde, one of the many island states across the continent, has excellent wind resources, but relies heavily on expensive imported fossil fuel for power generation. The wind power project will reduce that reliance substantially by increasing the national utility’s installed generation capacity from 66 to 94 megawatts. AFC has invested €61 mm to acquire a 40% stake in the development. This public-private partnership with the Government of Cape Verde entails the development, construction, ownership and operation of 30 wind turbines on four of the seven islands of the south Atlantic archipelago.
In the oil and gas sector, we also invested in Seven Energy Limited. Seven Energy, through its local subsidiary in Nigeria, Septa Energy Limited, is playing a critical pioneering role in developing the gas infrastructure for domestic use in Nigeria. This is crucial for the generation of electricity and the development of a number of industries. We are also providers of debt financing, through a USD1 bn international loan syndication, to Kosmos Oil and Gas for its development of the Jubilee Field in Ghana. This is the largest oil and gas discovery on the west coast of Africa in a decade. The jubilee field came on stream in late 2010 and will be a very significant contributor to the Ghanaian economy.
In the transport sector AFC has made an equity investment in the Bakwena Toll Road Concession Company. 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.
In addition to utilising our balance sheet for investments, AFC has also deployed its technical expertise in the execution of a number of advisory assignments, most notably its appointment as Technical Advisor to the Central Bank of Nigeria in respect of its USD2bn Power and Aviation Intervention Fund
What sort of projects do you seek to help, and of what magnitude? What is your approach to risk management and how has that evolved during the crisis?
At AFC our mission is to help address Africa’s infrastructure development needs, while seeking a competitive return on capital for our shareholders. We therefore prioritise our sectors to those which simultaneously offer a significant development impact and a high profit potential. We originate and execute transactions in the power, transportation infrastructure, heavy industries, natural resources and telecommunications sectors.
AFC operates a best practice enterprise-wide risk management framework, with our Board of Directors exercising and assuming authority and responsibility for the corporation’s risk management. We have a very effective Board Risk and Investment Committee, comprising non-executive directors, which is responsible for oversight of all areas of risk, approval of risk policies, and credit approvals above management’s limits. We also have a strong internal risk management function led by an experienced chief risk officer; and we report under International Financial Reporting Standards (IFRS)
You are majority backed by the private sector. Can you tell us who your backers are? Who are the various African financial institutions?
AFC is private sector majority owned and led. Our shareholders include the Central Bank of Nigeria, various African financial institutions and other industrial and corporate shareholders. The Chairman of our Board of Directors is the internationally respected investment banker, Bayo Ogunlesi, who has several decades of experience financing infrastructure assets globally. The anchor capital for the start-up of the corporation came from the Central Bank of Nigeria, whose current shareholding of just over 42 percent will drop over time as other African shareholders come on board. African financial institutions currently make up 48 percent of our shareholders, with African industrials and corporations holding close to 10 percent. Each of these groups contributes significantly to the makeup and operations of the institution. The public sector shareholding gives AFC important access to government, which is critical in Africa for sustainable investments in infrastructure. Having African financial institutions so actively involved promotes synergy between African banks, broadens our reach and strengthens local support and partnership. The African industrials and corporations on our board help integrate local corporate experience, and strengthen support from leading local sponsors
Current member nations are host country Nigeria, Guinea-Bissau, Sierra Leone, The Gambia, Liberia, Guinea and Ghana. Would you like to cover the entire continent eventually?
AFC is an international organisation established by treaty between independent sovereign states. We also have investors, sovereign and non-sovereign, that provide our capital as discussed previously. We are still a relatively new institution, but our membership is expanding. In addition to the existing country members, others have expressed interest and are completing internal formalities with a view to joining the organisation. Our mission is to finance and develop infrastructure across Africa, so we certainly hope to have as many African countries become members, though AFC in not precluded from making investments in infrastructure development in a non-member country