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An Executive Report December 2012

The Gerset Development Proposal Eritrea Sugar Company ESC GERSET, Eritrea. An Executive Report December 2012. Contents. The Economic Profile The Legacy The Challenges The Proposition The Structure The CSR Initiative. Eritrea. The Economic Profile. The Legacy.

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An Executive Report December 2012

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  1. The Gerset Development Proposal Eritrea Sugar Company ESC GERSET, Eritrea An Executive Report December 2012

  2. Contents The Economic Profile The Legacy The Challenges The Proposition The Structure The CSR Initiative

  3. Eritrea

  4. The Economic Profile

  5. The Legacy WefriWarsayYika'alo (WWY) or WarsayYika'alo Program A successful Government Commitment Often compared to the Marshall Plan A series of Government sponsored investments in economic, education, health, and transportation related infrastructure A mixture of grants and loans from international organizations and from the Government of Eritrea Practical transfer of skills is an important component of this program. All planned 22 projects were completed except the construction of Keren Dam

  6. The Challenges Demographics Enthusiastic, Resilient and Young Population, with Competences High Rates of Education, Healthcare and Physical Fitness Low Urban Density and Facilities with Conventional Economic Sectors Committed Government and Civic Service, Despite the Fierce Embargo

  7. The Challenges Agriculture Production

  8. The Challenges Agronomics & Food Security 1.5 mln Capita are the Workforce for Rainfall based Agriculture Strategic Dams at Gerset, Fanko-Tsimue and Fanko-Rawi Strategic Transit and Transportation Systems & Solutions Formal Ambition towards Modern Farming and Agronomic Techniques Strategic Need to Develop and Improve Agro Productivity for Domestic and Export Use

  9. The Challenges Gash-Barka Region Nationally; 37,000 Square Kilometers or a Quarter of Eritrea 2009 Real GDP $ 4.4 billion, and growth rate 3.6% Population of 567,000 or One Third of Eritreans Illiteracy estimates as high as 70%. Student-teacher ratios are high: 54 to 1 over 3.5 million Livestock Life expectancy at birth is 59.5 years in 2008. Low Expenditure on health and Number of Physician Rich in Marble, Minerals & Gold for 15% of GDP arable land of 565,000 hectares or 1,396,000 acres The Breadbasket of Eritrea with 350,000 H. or 900,000 A. Due to Droughts, Erosion and Deforestation; 70-80% of population depend on Food Aid Main Cities: Barentu, Agordat, Molki, Sebderat and Teseney

  10. The Challenges Gerset Dam Reservoir of the Dam can accumulate 10,000 cubic meters Second Reservoir will hold 20,000 cubic meters 20 Pivot Sprinklers are capable of watering 28 and 60 hectares Furrowing and Installation of the Irrigation pipe systems Leveling the land in blocks for smooth movement of machineries Power supply runs from Alebu to Golij via Fanko-Tsimué and Gerset dams

  11. Impressions

  12. The Proposition Eritrea Sugar Company (ESC) Corporate & Capacity Building Develop Strategic Sugar Industry Government Commitment for land and Irrigation Co-Produce of Strategic Subsidiaries Strategic Co-Generation of Electricity Spearhead Development of Gash-Barka Region Finance and Support Regional CSR Initiatives

  13. The Proposition Gerset Sugar Project (GSP) Project Management Annual 2,500 to 5,000 TCD of Sugar Sugarcane plantation on 5,000 to 10,000 Hectares Land & Irrigation Provided by Government Co-Generation of 14MW (2-3MW for Plant use) Investment Structure as per Feasibility Plan CSR Programs at 10% of Projects Value

  14. The Proposition Gerset Development Initiative (GDI) Development Management VOCATIONAL Vocational High School Vocational Training Programs EMPLOYMENT Priorities and Opportunities to Local Human Resources HOUSING Contributions to Local Housing Improvement Program URBANISM Developing a Local Integrated Community Center YOUTH Sponsoring Sport, Camping and Campaigning Activities EDUCATION Support Local Schools Support Local Teachers HEALTHCARE Developing a Comprehensive Local Healthcare Center INFRASTRUCTURE Contributions to Local Grids and Networking

  15. Status 2012 Analysis, Risk & Actions ESC Assets No Assets No Title Deeds Gov Approval for 5000 Hectares Transfer? Operations No Organization No Operations Corporate? Liabilities No Direct Liabilities Engagement? GSP Scope 2,5000 TCD of Sugar Plant 5,000 Hectares Sugarcane Plantation 14 MW of Co-Generation Farming? Methanol? Waste Water?

  16. Investment 2012 Status, Sectors & Action ESC Government Approval on Proposal Commitment to provide 5,000 Hectares 2nd Party? Developer No Practical Deliverables Traded Assets in Recovery Agreement Penalties? Operator No Confined Role Procurement? Recovery Plan Ivory Capital Took over liabilities for US$ 10 mln+ Jurisdiction?

  17. Orientation Comprehensive Plan ESC Corporate GSP Project GDI Development Feasibility Review Project Planning Development Planning ESC Audit Report 2012 Investment Structure Engagement Management Compliance Report 2012 Project Plan Resources Management National Alignment Report Development Plan Communication Management Commitment Operation Deliveries Corporate Activation Production & Processing Sugarcane Farming Sugar Plant and Subsidiaries CSR Programs Investment Engagement Partnership Investment & Development Plan Operating Policies & Guidelines Sugar Farming Operator Sugar Processing Operator Development/Impact Investor EPC for Grids

  18. Recovery Plan Domain, Goals & Actions Commitment Corporate Activation Production & Processing Corporate Social Contribution Comprehensive Audit? Engagement ESC Associated Developer Sugar Farming & Processing Operator Development/Impact Investor RRM & Parties? Investment Strategy & Feasibility Study Investment & Development Plan Operating Policies & Guidelines Investment Model? Operation Sugarcane Farming Sugar Plant and Subsidiaries CSR Programs Corporate Model?

  19. Commitments Initial Engagement Year -2 Year -1 Year 1 Year 2 Year 3 Years 4-30 ESC Corporate & Capacity Building Corporate Structure, Policies & Guidelines Corporate Staffing, Training & Liaison Operations Marketing & Sales GSP Production & Processing Procurement of Developers, Operators & Suppliers EPC of Grids Electricity, Methanol & Waste Water Treatment EPC of Farms &Plants Sugar Production Farming Corporate Social Contribution Plan CSR Programs

  20. Scope of Initial Engagement H1/Year -2 H2/Year -2 H1/Year -1 H2/Year -1 H1/Year 1 H2/Year 1 ESC Corporate & Capacity Building Organization Strategy & BD Finance HR Legal Procurement Logistics Engineering Quality Sales Marketing Internal Audit Company Operations Marketing & Sales Operations GSP Production & Processing Procurement of Contractors, Operators & Suppliers EPC of Grids (Electricity, Ethanol, Potable Water) EPC of Plants Sugar Production EPC of Farms Farming Operations & Production Corporate Social Contribution Plan Planning CSR Programs Implementing CSR Programs

  21. The Structure Operating System CSR Initiatives Partnership Gov Company Long Term Operations Full Exit Surrender Back to Public Project Consortium Operator(s) Recovery Projects & Operations Investor(s) 30 Years Partial Exit Design & Build Parties Equity Supplies (IDM) Investment & Development Mgr 3 Years Assets Equity EPC Contractor(s) Kick Off Launch

  22. The CSR Initiatives Integrated Structures Partnership Framework CSR Framework Gov Liaison Co Gov Ownership Operating Company Local Authority Partnership Form CSR Initiatives Asset Based Value Development Targets Special Purpose Vehicle Local Development Plans PPP Product/Service CSR Programs

  23. Gerset Development Proposal References • Interim Country Strategy Paper for Eritrea, 2009-2011 • Sugar industry in Eritrea: Business Report 2012 • Sugar Engineers.com • FEASIBILITY STUDY REPORT for 10 000 TCD CAPACITY SUGAR FACTORY PROJECTS prepared by THE FEDERAL MINISTERY OF AGRICULTURE INVESTMENT DEVELOPMENT AGENCY (IDeA) Sudan • India-Eritrea Relations, Ministry of Foreign Relations, India • UNICEF HUMANITARIAN ACTION • WefriWarsayYika'alo

  24. Gerset Development Proposal Thank You..!

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