Structuring Today Strengthening Tomorrow

1. Structuring Today Strengthening Tomorrow High Level Executive Dialogue 2013

2. The Six Golden Rules* • 1. Follow the money • Know who is buying and if/how/when they will pay • 2. Care for your project • Never let it out of your hands, especially not to consultants • 3. Ask all the hard questions • Even if you don’t like the answers; if you don’t ask often and early they will come back to bite you later • 4. Go fast • Delays cost money: higher development costs and lower returns • 5. Do everything in parallel • Things left till later mean other things may have to be redone • 6. Governments do not behave like businesses • All parastatals are irrational and slow, and civil servants are only interested in keeping their jobs * With apologies to Bob Hemphill

3. A Case Study - Rabai • 90MW diesel-engine plant burning HFO, Mombasa • Aldwych and BWSC of Denmark won international competitive tender in 2005, won rebid in 2006 • PPA signed February 2007 • Total project cost: €113 million; all European DFI debt • First use of “GOK letter”, which falls short of a sovereign guarantee of payment • Financial close Oct 2008, first power to grid Sep 2009, completed on time and on budget May 2010 • Most efficient thermal plant on Kenyan system Confidential – not for circulation

4. Rabai and the Six Rules • Follow the money • Power tariffs in Kenya are cost-reflective • Rabai was the fourth IPP to be developed in Kenya and the customer (Kenya Power) had a good payment record • The comfort letter attracted equity (including bridge financing from PAIDF) and competitively priced debt • Care for your project • The partnership with BWSC (as both shareholder and EPC contractor) worked well and still works well today • Aldwych kept control of the financial model • Ask all the hard questions • Aldwych didn’t shirk from tackling head-on the legal challenges to the project and the fall-out from the 2007 violence • Worked through 2008 financial crisis with lender group Confidential – not for circulation

5. Rabai and the Six Rules • Go Fast • We tried… but see previous Rule • Nevertheless, once the obstacles were removed we did go fast • BWSC had faith in project; engines in production pre-FC • Do everything in parallel • We nearly dropped the ball on this one: insurance, as ever, became critical path • We also had a late scramble to secure an acceptable fuel supply contract • Governments do not behave like businesses • The Government understood project finance • A robust legal framework for IPPs meant that government employees were comfortable in taking decisions Confidential – not for circulation

6. Rules for Elsewhere • Follow the money • Often there is none: bankrupt state utilities need support, but they also need your product (in this case, power) • Care for your project • How to rescue projects developed by inexperienced sponsors, who believe it’s “their” project – and it is • Ask all the hard questions • This is doubly hard with original sponsors: the last thing they want is the “wrong” answer • Go fast • … but don’t cut corners. It never pays in the end • Do everything in parallel • This sometimes means going back and redoing to get it right • Governments are not businesses • Project finance is a mountain to climb even for those of us who run businesses: have sympathy and patience! Confidential – not for circulation

7. Structuring Today Strengthening Tomorrow High Level Executive Dialogue 2013