Global Competitive Insights Infrastructure November 2011

Investment Trends – Africa and Middle East — November 2011

Page 1 © 2011, Indalytics Advisors

Infrastructure

November 2011

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Global Competitive Insights — Infrastructure — November 2011


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In this Report

October 2011 issue of Global Competitive

Insights — Infrastructure discusses the

following latest developments, which have

taken place in the infrastructure sector

globally.

China Investing in Other Countries

State-owned Chinese Development Bank is

planning to invest in New Zealand’s infrastructure sector. The bank has signed a

memorandum of understanding with the New

Zealand arm of PricewaterhouseCoopers to

invest in Christchurch reconstruction

projects. Besides Christchurch, the bank will

also be investing in the NZ$2.4 billion

(US$1.97 billion) inner-city rail loop and

second harbor crossing in Auckland, and

other infrastructure projects related to

property including roads, bridges and

buildings.

China is also investing US$2.5 billion in South

Africa’s infrastructure and mining projects. China’ which is South Africa’s top trade partner, is looking to invest in projects such

as energy, roads and other bulk infrastructure

in the country. The investments will also help

China in getting the resources, required to

fuel its economic growth.

China is further expected to invest in

Bahrain’s infrastructure and housing sectors. China will be investing its resources in the

country to build approximately 50,000 homes

in next four years, which would be worth

US$5 billion. Bahrain is expected to witness

increase in Chinese investments as the

political turmoil in the MENA region is

settling down, and the member countries are

coming up with investor-friendly policies to

attract foreign investment.

Indian Infrastructure Sector Showing

Promising Future despite Slow Growth

Indian infrastructure sector has witnessed a

slow growth rate in August 2011. The eight

core industries, which make up the Indian

infrastructure sector, witnessed an annual

growth of 2.3% in September 2011 from a

year ago, as against annual growth of 3.7% in

August 2011. The eight core industries –

which comprise of coal, crude oil, natural gas,

refinery products, fertilizers, steel, cement

and electricity – account for 38% of India’s factory output, and the slowdown in their

growth is seen due to tighter monetary policy



by the government of India, which has led to

decrease in demand.

Despite the slow growth, private equity fund,

Blackstone is still bullish on India’s infrastructure sector. The fund, which has

over 15 investments, and US$2.8 billion

deployed in the country, is focusing on the

power sector. In last one and a half years, the

fund has made investments in Visa Power,

Monnet Power and US$300 million in Moser

Baer’s renewable energy company, the largest so far in India by the fund.

Canada Expected to Invest in

Infrastructure

Canada’s infrastructure sector possesses

investment opportunities in near future.

According to economists, as the country is

expected to have an infrastructure deficit of

more than CA$300 billion (US$302.3 billion),

there will be opportunity for private firms to

enter the sector under the public–private

partnership. The Canadian Imperial Bank of

Commerce is also working with the federal

government to launch energy mega-projects,

which can help create jobs in the country.

Canada is expected to spend approximately

CA$180 billion (US$181.4 billion) in the oil

sands and C$50 billion (US$50.4 billion) in the

power sector over the next decade. This will

include development in the oil sands,

pipelines, power generating stations and

transmission lines, and will help the country

generate approximately 50,000 jobs per year,

over the next 20 years.

Canada will be investing approximately CA$2

million (US$2 million) through transport

Canada, on the Wabush airport. The

government will be spending the amount on

roof restoration for air terminal and

maintenance buildings, and South Airport

Terminal Parking upgrade.

India Easing Regulations for

Infrastructure Sector

India’s central bank, Reserve Bank of India

(RBI) has allowed Indian infrastructure

companies to raise Chinese Yuan-

denominated debt. The debt can be raised

through the approval route, subject to an

annual cap of US$1 billion, pending further

review. Further, according to the guidelines,

the approval will be valid for a period of three

months from the date of issue of the approval

letter, and the loan has to be executed within

the same period.

RBI has also relaxed permissions for Indian

infrastructure companies. Companies with

minimum direct foreign equity of up to 25%,

and indirect foreign equity of up to 51%, will

now be able to raise fund overseas, through

external commercial borrowing, without

government permission. The cap of ECB

issued by RBI is up to US$5 million.



Companies Reacting to Increasing

Need for Infrastructure

Growing need for infrastructure has led to

German industry conglomerate Siemens AG;

introduce ‘Infrastructure & Cities’ as its fourth business unit starting October 1, 2011.

With around 87,000 employees, the unit has

five divisions: Rail Systems, Mobility and

Logistics, Low and Medium Voltage, Smart

Grid, and Building Technologies.

Africa Inviting Countries to Invest in

Infrastructure

The African Development Bank (AfDB) has

approved an 8.5-year senior loan for US$45

million to the Emerging Africa Infrastructure

Fund (EAIF). The loan will be used by EAIF to

finance its investment commitments and

support private sector infrastructure projects

and infrastructure-related companies in sub-

Saharan Africa. EAIF, has already approved

over 30 transactions in the region, and has

infrastructure projects worth approximately

US$500 million in its portfolio. It had earlier

received a senior loan of US$31.25 million

and a US$12.5 million standby loan facility

from AfDB in 2009. The funding is done from

a joint pool of AfDB, Austrian Development

Bank and the International Finance

Corporation, which amounts to a total of

US$105 million.

Another African nation, Ghana, has invited

both local as well as foreign investors – having

technical or financial capacities – to invest in

country’s railway and mining sectors. The government has recently completed the

Mining Sector Support Program, being funded

by the European Commission, and has

discovered some new minerals such as

phosphate, nickel, chromium, copper lead,

zinc and uranium. As the local mining and

exploration firms lack the financial and

technical expertise to carry on the

exploration process on a large scale, the

government is inviting foreign players to enter

the market.

Investments Happening in MENA

Region despite Political Turmoil

Middle East and North Africa (MENA)

region is witnessing increased investment in

infrastructure. Financing of the first public-

private-partnership project in Bahrain’s wastewater sector has been completed by a

consortium led by Samsung Engineering. With

Invest AD and United Utilities as partners of

Samsung Engineering, the Muharraq

Wastewater Treatment Plant, involves a

greenfield 100,000 m3/day wastewater

treatment plant and a 15 kilometers deep

gravity sewer conveyance system under an

availability based concession structure. The

consortium’s financial advisor was Macquarie Capital, which arranged a US$22 million

financing solution for 22 years through its

teams in the UAE and South Korea.



Qatar is also expected to invest

approximately US$80-100 billion by 2016 in

infrastructure in order to prepare itself for

the 2022 FIFA World Cup. The government

is planning to invest approximately US$45

billion budget for developing the country's rail

and road networks, including US$824 million

for 13 large infrastructure projects across the

country through its Public Works Authority,

Ashghal. The projects include the Lusail

Highway (US$687 million), the Dukhan

Highway (US$300 million), the Doha

expressway (US$27 million), a 3-lane highway

in Barwa City, and the Najma road.

Egyptian private equity firm Citadel Capital

will be funding a five-year project to improve

transport links between Kenya and Uganda.

The firm will invest US$234 million in Rift

Valley Railways, which operates 2,352 km of

track linking the Indian Ocean Kenyan port of

Mombassa to the Ugandan capital Kampala,

for a 25-year concession period. The funding

will be a mix of both new debt, as well as

equity.



Organizations Mentioned in this Report

African Development Bank

Austrian Development Bank

Blackstone

Canadian Imperial Bank of Commerce

Chinese Development Bank

Citadel Capital

International Finance Corporation

Invest AD

Macquarie Capital

Monnet Power

Moser Baer

PricewaterhouseCoopers

Reserve Bank of India

Samsung Engineering

Siemens AG

United Utilities

Visa Power



Disclaimer

The information contained in this report is of a general nature and is not intended to address any particular

individual or entity’s circumstances. Although proper care has been taken to provide accurate and timely

information, there can be no guarantee that such information is accurate as of the date it is received or that it will

continue to be accurate in the future. Indalytics Advisors Private Limited does not guarantee that the information

contained in this report is authentic and reliable. No one should act upon such information without appropriate

professional advice after a thorough examination of the particular situation.

In order to book your annual subscription of Global Competitive insights, mail us at [email protected], or

[email protected], or visit us at www.indalytics.com.

Publication Volume: GCI-11-011

Publication Date – November 2011

© 2011 Indalytics Advisors Private Limited

For further information, please contact [email protected]

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Global Competitive Insights Infrastructure November 2011