Investment Process
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Infrastructure Fund (NIIF) engages in proactive discussions with central and local government authorities to steer new infrastructure development to commercial business models, if they make sense. A team within NIIF, the Strategy and Policy Group, comprising public-private partnership and investment experts, works with these authorities when it sees the opportunity to set up a public-private partnership project instead of building infrastructure through public finance means. As an independent commercial entity, however, NIIF has no formal right to any infrastructure project that the government may consider developing, nor does it have the obligation to invest in policy-driven projects. The public sponsor may also use the government apparatus to facilitate the sourcing of certain deals. For example, Indian missions abroad are apprised of NIIF activities and can facilitate cross-border strategic alliances. • The SIF invests in developing early-stage investments that do not immediately generate a cash flow and may take longer to exit. For instance, Senegal’s FONSIS (Fonds Souverain d’Investissements Stratégiques, or Sovereign Fund for Strategic Investments) is explicitly mandated to act as project developer (see box 6.2). NSIA-NIF is also proactive in project development: of eight projects closed in the first half of 2018, half were sourced and developed by the NSIA-NIF investment team (the rest were brought to NSIANIF’s attention by external sponsors). SIFs may also pursue multiple origination routes, as shown in box 6.3, which describes the multifaceted origination approach of Africa50, a SIF that develops and invests in infrastructure projects across Africa.
BOX 6.2
FONSIS: Originating investment opportunities as a project developer The investment strategy of Senegal’s FONSIS (Fonds Souverain d’Investissements Stratégiques, or Sovereign Fund for Strategic Investments) explicitly envisages that the fund develops strategic investment projects to attract investment partners. In such capacity, FONSIS prioritizes greenfield projects and is often the very first source of capital, well before any other commercial source. For example, in its developer role, FONSIS, together with the International Finance Corporation (as part of the its Scaling Solar program), led the early-stage development of two solar power plants located in Kael (Diourbel) and Kahone (Kaolack). As part of its m andate to hold Senegalese interests in the project, FONSIS actively participated in the project’s structuring, coordinated with relevant government stakeholders, and was involved, as an investor, in negotiating the financing package. It was estimated that these solar projects would have a cumulative nominal capacity of 60 megawatts Source: World Bank; see FONSIS case study in appendix A.
and would represent 37 percent of the total installed solar capacity in Senegal when finalized. The cost for the two projects totaled €47.5 million. FONSIS contributed cash equity and some subordinated debt (in the form of quasi equity), and it holds a minority stake of 20 percent in both projects. A c onsortium composed of Meridiam, a global infrastructure fund based in Paris, and Engie Development, selected as the project’s p rivate developer after tender adjudication, c ontributed the rest of the equity. A pool of lenders comprising the European Investment Bank, the International Finance Corporation, and French development finance institution Proparco provided commercial loans. The projects will sell power to national utility company Senelec under a 25-year power purchase agreement. The projects also benefit from a government guarantee c overing Senelec’s obligations under the power purchase agreement.
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