Advisor for the private sector in infrastructure
Edifice Capital Group advises private sector on their investment strategy in infrastructure particularly in Europe and in Africa.
ACOFI is an independent group of financial services specialized in conception, management and distribution of investment vehicles for third parties.
ACOFI’s expertise in asset management revolves mainly around two expertises, Real Asset management and Direct Loans to the economy. These expertises covers 4 major thematics:
- Real Estate
- Specialty finance solutions for industrial firms,
- The public sector off state.
La Française and ACOFI signed a strategic agreement to invest jointly in the direct lending activities developed by ACOFI Management.
La Française and ACOFI signed a strategic long-term agreement to invest jointly in the creation of a major player in the field of Direct Loans to the economy, at the service of big investors and institutional investors.
Crédit Mutuel Nord Europe has 86% ownership in La Française AM, a group of asset management, from the merger in 2009 of La Française des Placements, an entrepreneurial company and UFG-IM. La Française is rated “High Standards” by Fitch (August 2014).
With over 480 employees, La Française manages more than 45 billion euros of assets (including € 10 billion in real estate) through its offices in Paris, Frankfurt, Hong Kong, London, Luxembourg, Madrid and Milan.
Energy in Africa
Structural growth drivers in Africa support a massive Energy demand
- Investment need in the Energy sector is estimated to be around $42,5 billion per year (AfDB).
- Growth drivers:
- Demographic growth: African population will double during the next 40 years (from 1 billion to 2 billion). In 2050 it will represent 50% of the world’s population.
- Increase of the middle class, reaching more than 250 million people by 2040.
- Urbanization: African urban population will reach 800 million people by 2050.
- Acceleration of the GDP growth: annual growth rate about 6,2 %,
- International trading development (times 7 within the 30 next years),
Long-term production and transportation of energy is needed to sustain the long term emergence of Africa and the development of agriculture, industry, transport and water infrastructure but also the social infrastructure (health, education, etc.).
Why investing on the energy infrastructure in Africa?
- is an asset class that offers a steady yield on the initial investment as long as the infrastructure meets the economic and social demand.
- has a low correlation with other asset classes and resistance to economic cycles.
- offers protection against inflation and economic cycles (Inflation adjustment on the revenues, Possibility to cover the exchange rate risk)
- has a low risk of capital loss: Public or Public/Private contracts backed by guarantees (also possibilities to cover country risks via MIGA, OPIC, Coface…)
- offers long-term revenues enabling to secure an exit value.
Energy Sector in Africa:
- The Energy sector in Africa offers high growth due to the massive demand.
- Energy is a primary resource and long-term need: an efficient and large-scale national energy sector is needed to develop agriculture, industry and other infrastructure sectors such as Transport or Water
- The Generation sub-segment is typically backed up by long-term Power Purchase Agreements (PPA) (either with governments or local utility companies or large industrials) usually with an indexation mechanism this it offers strong long-term resilience and stronger bankability. Very limited or no demand risk in most of the PPAs
- Energy in Africa offers a large pipeline of opportunity
- In Africa, the Energy sector offers a very limited correlation to GDP with a good hedge against inflation
- Overall Energy assets have an above average liquidity
Investment Advisory Strategy: a diversification strategy across the whole energy chain
- Thermal power plants (fuel, gas, coal, peat…) this does include power plant transferred. Gas power plants will be favoured given the lower carbon foot-print
- Renewables: Hydro (small and medium, large not a focus), solar farms, wind (niche market in Africa given the high costs), biomass (option only if not conflict with the food chain)
- Transmission and Distribution
- Fuel and gas storage
Edifice Capital Group already develops duplicable projects, enabling lower development costs and economy of scale, especially in the following sectors:
- Thermal power plants given the strong need for base load electricity production (which wind and solar can’t offer) with a focus on gas
- Small and medium hydro given the large potential in Africa, its low cost, low environmental impact and shorter development time.
Health in Africa
Developing private health solutions in Africa: the social issue.
The African countries experience a major societal change with the emerging of a upper and middle-class that may access medical services delivered by the private sector. There is therefore a real and fast-growing market for international standard healthcare services in most of the African capital cities.
Medical services for all: In order to have a real social impact, medical services in Africa have to be available to a larger part of the population, including lower income communities.
Collaboration with donors & DFIs: All Development Finance Institutions, foundations, donors address the issue of delivering affordable medical services to a larger part of African population, including lower income population. Several multi-donors initiatives mobilize important financing for this crucial issue. A strong and far-reaching collaboration with DFIs but also private Foundations has to be developed in order to pull resources, knowledge and enable synergies.
Why investing in Health Infrastructure in Africa?
- The demand for health services is huge in Africa, this in turn requires modern infrastructure to deliver international standard health services.
- Transport is the main component of the health expenditures in Africa: the Africans spend more money in air fairs than in medical services in the total amount of health expenditures.
- There is therefore a huge market for local health services at market prices.
- This demand is driven by the impressive growth of the African population. It is also sustained by the capacity of the emerging middle class to afford modern health services at market prices.
- The emerging of Africa could not be sustainable on the long-term if most of the population is deprived of quality health services or has to travel abroad to have access to them.
- Health is typically a sector where innovative PPP could be developed, with most of the revenues coming from private monies (people out-of-pocket money, private health insurances, etc.) to ensure profitability, with public subventions for the poorest par of the population, to develop the social anchorage.
- Many African countries are developing National Health Insurance Fund and Social Security Schemes for the largest part of the population.
Investment advisory strategy:
Diversification and innovative approach
- A continental geographical coverage: All African Countries, including Mauritius and Madagascar.
- A mixed and balanced Investment Strategy:
- A few medium-size PPP/PFI-style projects: projects driven by the public bodies, with the private sector is in charge of the conception, design, building, equipment, management, operating and maintenance of the infrastructure, with a partial public payment on the long term (up to 20 years) and/or a strong public participation (direct investment in the SPV / guarantee / subvention);
- Several portfolios of small, duplicable Private Equity Projects developed by dedicated holding companies: small private projects, where profitability is ensured by private monies, but with the possibility to develop a social aspect of the project ; the development of “duplicable projects” will be ensured by specific holding companies, thus enabling a pooling of resources, the parallel development of similar projects in several countries, economies of scale and interesting opportunities of exit strategy (holding companies benefiting from a free carry in each project developed; first projects to be developed quickly on equity/quasi-equity (without debt).
An innovative approach:
- Initial investments in holding companies : small amount of capital will be invested in early-stage holdings (development capital), in order to cover development costs of very carefully selected portfolios of projects, thus generating, at closing, the reimbursement of development costs and a free carry of the SPV (higher risk but very high leverage effect).
- Greenfield opportunities with long-term contracts backed by private or public securities with important upsides on exit (once the project is operational).
- Brownfield opportunities on existing assets requiring additional financing for upgrading or extensions and inclusion a regional network of similar projects, generating a fast payback and an immediate yield in the early years.
Equity and quasi-equity with a leverage effect
Equity and quasi-equity financing:
- Shareholders debt,
- Convertible bonds,
- Mezzanine debt giving access to capital.
Mezzanine debt instruments will be offered given:
- Securities provided by intercreditor agreements, co-signed with lenders,
- High returns on investment through:
- A financing instrument that optimizes project financing through offering a debt product less costly than a pure equity investment – i.e. interesting for project stakeholders.
- High “market” interest rates in several African countries on mezzanine debt (at least > 15% p.a.)
- Opportunities to structure some fees / kickers / cash sweep / preferable repayment in the project that increase the mezzanine debt IRR.
- Opportunities to structure some convertible instruments (convertible bond, redeemable preferred equity, etc.) to get access to the share capital and optimize exit strategy.
A diversified strategy with different types, sizes and specializations of projects
- Diagnostics Centres
- Dialysis Centres
- Specialized Centres: mother and child, cardiology, etc.
Regional specialized “hubs”
- Concentration of know-how and specialized competences in regional capital cities in order to attract population from the whole region, with possibilities of “satellite sites” in secondary cities;
- Objective: to reduce the “health tourism” of African out of the continent and to develop it between African countries on a regional / specialization approach.
Collaboration with first-ranking international healthcare groups
- Health projects to be developed in Africa in close collaboration with top-level international hospitals or healthcare groups to favour transfers of know-how and implementation of international standards / procedures in healthcare infrastructure offering “state of the art” medical services.
- Strong development of telemedecine (e.health solutions) with the objective of reducing the costs of travels and enhancing the exchanges of medical data to benefit from high-level expertise of specialists based all around the African continent but also in the EU, US.
A strong social responsibility dimension
Collaboration with African Government and Health Organizations
- Ensuring a national footprint;
- Government playing a key role in PPP projects: investor, facilitator, providing a public guarantee…
- Projects coherent with the National / Regional Health Strategy and the need of the population.
Partnerships with the National Social Security Schemes and Private Insurances Groups:
- Healthcare infrastructures accessible to the largest part of the population and not only the wealthiest one.
- Ensuring a subsidy of the State for people who couldn’t afford market prices
- Partnership with Private Health Insurance in order to secure a large part of the revenues and reduce the percentage of people paying by themselves.
- Overall objective: to reduce the “traffic risk”, i.e. the payment by individuals, families, etc.
- Partnerships with International Foundations involved in health projects in Africa
- Providing medical infrastructures to international foundations developing extensive prevention programs, thus leading to revenues diversification.
- Developing the social impact / RSE dimension and therefore strongly reducing the sovereign risk.
Positive image / communications impacts derived from these collaborations.
This post is also available in: French
- Olivier Stintzy, Partner of Edifice Capital Group, attended the Conference on “PPPs in French-speaking Africa: Challenges and Opportunities” hosted by Eversheds Sutherland, CIAN and Business Africa in Paris on June 29th.
- Launching of CLUB PPP MALI at Edifice Capital Offices, in the presence of Dr Boubou CISSE, Minister of Economy and Finances of MALI, and Mamadou Sinsy Coulibaly, Chairman of the National Council of Malian Employers (CNPM)
- Edifice Capital Group attended and participated to the 4th forum of the Islamic Development Bank Member Countries Sovereign Investments Forum
- Interview of Nicolas Boudeville, General Director of AMI and Michael Sean Harris, Rector in Music in Africa
- Senior : les résidences pour tous c’est possible