Top-notch Financiers Meet Over Morupule B

Staff Writer
Despite the liquidity challenges that have engulfed the global economy, international financiers have shown a huge interest to invest in the P11.5 billion Morupule B Power Station and Transmission Project.

This emerged on Thursday in Phakakane at a financiers' conference co-hosted by the Ministry of Finance and Development Planning and the Ministry of Minerals, Energy and Water Resources.

The conference was attended by bilateral, multilateral, and commercial financiers including the World Bank, Citi Group, Fortis Bank, Deutche Bank, China Exim Bank, the African Development Bank (AfDB), Southern African Development Bank, Investec Bank, Standard Bank of South Africa, Nedbank, Absa Capital and Calyon, a French investment bank.

Botswana banks Barclays, Stanbic, FNB and fund managers were also there.
The World Bank's lead financial analyst responsible for Africa, Varadarajan Atur, said in an interview with Monitor Business that despite the liquidity challenges, especially of hard currency, there was "sufficient interest" shown by the majority of financiers to fund Morupule B.

"We are aware of the liquidity challenges that face our member countries," Atur said.  "However, for Botswana and this project, there has been overwhelming support because of the country's good ratings, stable economy and government support for the project, which means it lowers its risk."

The World Bank provided Botswana with a credit guarantee for the project. "The country's AAA ratings gives assurance to the financiers, hence reducing the cost of funding for the project," he said.

Atur added that the World Bank has been in discussions with its members, including Botswana, on what the Bank can do to assist them as the credit crisis continues to cripple several economies around the world. In these discussions, Botswana has emerged favourably because of its good fiscal management and macroeconomics.

However, Atur said, this does not mean Botswana will not be affected by the credit crisis in the long run, hence the country needs to formulate strategies that will help minimise the impact.

A senior banker at Calyon, the investment arm of Credit Agricole of France, said

while there is still capital available to fund projects, the money comes at a cost because of the global financial turmoil.

"The money is available but the problem is at what cost to the lender and the borrower?" said Frank Vein of Calyon. "It is very expensive for banks to raise money, so they end up passing the costs to the borrower."

Vein said financiers have been pulling out of risky investment asset classes; however, Morupule B is less risky because of its government backing and the investment grading that Botswana enjoys.He said Calyon is targeting the southern African region for expansion and that projects like Morupule B gives it welcome opportunities. The company was involved in the funding of the Caborra Bassa power project in Mozambique.

A representative of China Exim Bank, Lin Ming, also said despite the global credit crisis that has also affected China, Exim has enough money to fund a project like Morupule B.
"We are here to get more details about the project so that we can make an informed decision," Ming said.

Meanwhile, information reaching Monitor Business is that though local banks attended the conference and have excess liquidity, they are limited by the Bank of Botswana on how much they can invest individually.  However, they can partner with their parent companies and form other consortiums to raise the total cost of P11.5 billion needed for the project.

Unlike the banks, local fund managers like Bifm which have close to P16 billion in assets under their management , can afford to finance part of the project. Bifm is already involved in infrastructure developments like Plot 21 and the still-under-construction SADC headquarters through public private partnerships (PPP).

Asset formation for financing Morupule B is to be achieved through a 50/50 debt/equity arrangement.      



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