Development finance institutions announce financial close of pioneering Addax Bioenergy project in Sierra Leone

FMO Press Release

The Hague, the Netherlands, December 21, 2011 — The Addax Bioenergy project in Sierra Leone has reached financial close. It is the first bioenergy project to be brought to financial close in Africa, and the largest post-conflict agricultural project to be developed in Sierra Leone. The project is widely recognized as a leading example in its field due to the integration of renewable energy with a successful agriculture project, its compliance with high environmental and social standards, and the transparent dialogue and consultation process that preceded it.

The project, sponsored by the diversified energy group of companies the Addax and Oryx Group (AOG), received the financial support of a consortium of major development finance institutions (DFIs) active in Africa.

The total size of the investment for the Addax Bioenergy project is €267 million. FMO (the Netherlands Development Finance Company) and the Emerging Africa Infrastructure Fund (EAIF) acted as co-lead arrangers for the debt financing of around €142 million provided by the following DFIs: the African Development Bank (AfDB), EAIF, FMO, DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH ), the South African Industrial Development Corporation (IDC), the Belgian Investment Company for Developing Countries (BIO), together with Cordiant-managed ICF Debt Pool. Sweden’s development finance institution Swedfund and FMO joined the Addax and Oryx Group as equity partners.

The financing partners have been instrumental in structuring this transaction, maximising local development potential and ensuring that the transaction complies with European Union and other international bioenergy, environmental and social standards. Moreover, an on-going monitoring system has been implemented to ensure that the project fully meets its commitments.

The project covers some 14,000 hectares of mostly unused land near Makeni, in Sierra Leone and includes the development of a Greenfield sugarcane plantation, the construction of an ethanol refinery and a biomass fuelled power plant. Sugarcane will be converted into bioethanol to principally meet demand in Europe, as well as domestic markets in Sierra Leone, helping replace dependence on fossil fuels and reduce greenhouse gas emissions. The project is expected to earn carbon credits under the United Nations Clean Development Mechanism. The project’s power plant will provide renewable electricity for the ethanol refinery and will supply energy for approximately 20% of Sierra Leone’s national grid, developing and diversifying the country’s energy base.

In addition, the project incorporates measures to contribute to food security and socio-economic development in one of the poorest regions in Sierra Leone. The project’s 2,000 hectare farmer development programme has so far received commendations from the United Nations Food and Agricultural Organisation (FAO) and local Members of Parliament as a major food producer. The Sierra Leone ministry of agriculture, forestry and food security has ranked it as the biggest single private sector rice producer in the country after the government itself.

The project was preceded by three years of rigorous evaluations of the potential social, environmental and economic impacts. Development of the project took place alongside one of the most extensive and transparent dialogue and consultation processes ever carried out in Sierra Leone, according to the country’s Environmental Protection Agency and local NGOs. The project and land owners in the project area, assisted by a lawyer, agreed on a share in the land lease payments that goes far beyond national legal requirements.

The location of the fields and irrigation systems within the sugarcane plantations has been carefully selected to protect existing farmland and biodiversity. Less than one third of the leased area will actually be used by the project, minimizing adverse impacts. Consequently, resettlement is kept to a minimum and where unavoidable is compensated in line with the highest international standards. In addition, people in the project area are prioritized for employment and community skills development programs. The economic activity resulting from the project development is already yielding positive effects, such as enhanced food security, housing construction, small business creation, health and education.

Construction of the ethanol refinery and power plant will begin in November, with first production expected by the end of 2013. The project now employs over 700 people and will create over 2,000 jobs once fully operational.

“The Addax project is truly built on partnerships, alliances and international cooperation.
Let me also use this opportunity to register our appreciation of the support provided by the seven Development Finance Institutions,” said president H.E. Koroma of Sierra Leona at the groundbreaking ceremony.

“We are delighted to achieve this milestone after four years of intensive collaboration with our investment partners,” said Nikolai Germann, Managing Director of Addax Bioenergy S.A.. “We are committed to following the most stringent social and environmental standards, and we are convinced that this pioneering project will become the example for sustainable investment in Africa.”

“Addax Bioenergy has done excellent work managing this project, FMO’s largest in Sierra Leone so far,” said Jurgen Rigterink, CIO of FMO. “The support of the population in and around the area has been very strong; a clear vote of confidence for the project, which benefits all parties concerned and is set to become a model for sustainable investment in Africa.”

Tony Lea, Chairman of EAIF, said “EAIF believes the project may pave the way for further investment in Sierra Leone and is an example of the success of the country in attracting foreign investment since it has opened up to international business after putting its period of civil unrest well behind it. The project is the largest single investment in the country outside the mining sector in the last decade. It will help diversify the economy and create a new agricultural skill set and industry in a country with significant agriculture potential.”

About FMO
FMO (the Netherlands Development Finance Company) is the Dutch development bank. FMO supports sustainable private sector growth in developing and emerging markets by investing in ambitious entrepreneurs. FMO believes a strong private sector leads to economic and social development, empowering people to employ their skills and improve their quality of life. FMO focuses on four sectors that have high development impact: financial institutions, energy, housing, and agribusiness. With an investment portfolio of EUR 5 billion, FMO is one of the largest European bilateral private sector development banks.

About EAIF
EAIF is a Public Private Partnership able to provide long-term USD or EUR denominated debt or mezzanine finance on commercial terms to finance the construction and development of private infrastructure in sub-Saharan Africa. EAIF provides loans to projects across a wide range of sectors including telecoms, transport, water and power, amongst others. The fund is advised by Frontier Markets Fund Manager a division of Standard Bank. FMFM also advises GuarantCo, a guarantee fund which credit enhances local currency debt issuance by private, municipal and parastatal entities for infrastructure projects in lower income countries around the World.

About the African Development Bank
The AfDB Group’s mission is to help reduce poverty, improve living conditions for Africans and mobilize resources for the continent’s economic and social development. With this objective in mind, the institution aims at assisting African countries – individually and collectively – in their efforts to achieve sustainable economic development and social progress. Combating poverty is at the heart of the continent’s efforts to attain sustainable economic growth. To this end, the Bank seeks to stimulate and mobilize internal and external resources to promote investments as well as provide its regional member countries with technical and financial assistance.

About BIO
BIO is a Development Finance Institution (DFI) established in 2001 in the framework of the Belgian Development Cooperation to support private sector growth in developing and emerging countries.BIO finances the financial sector, enterprises and private infrastructure projects. Endowed with a capital of EUR 465 million, BIO provides tailored long-term financial products (equity, quasi-equity, debt and guarantees) and finances technical assistance programmes and feasibility studies. BIO also encourages its business partners to implement environmental, social and governance standards. BIO operates as an additional partner to the traditional financial institutions and looks for projects with a balance between return on investment and development impact.BIO is a member of EDFI (European Development Finance Institutions).

About Infrastructure Crisis Facility Debt Pool
The ICF Debt Pool addresses the continuing restricted availability of financing for emerging market infrastructure caused by the retraction of major commercial financial institutions from emerging markets as they continue to re-focus their lending activities on their home markets. The ICF-DP is a €500 million fund of loans supported by the German Government, and funded by KfW Entwicklungsbank under a guarantee of the German Government. The ICF-DP was launched in October 2009 and is managed by Cordiant Capital Inc, a manager of emerging market investment funds. Cordiant was selected by the IFC and the ICF-DP after an international competitive tender, based on their excellent track record in emerging markets fund management and their demonstration of the highest ethical and regulatory standards. Cordiant is a signatory to the UN Principles for Responsible Investment.

About Swedfund International AB
Swedfund International AB offers risk capital and know-how for investments in Africa, Asia, Latin America and Eastern Europe (non-EU members). Swedfund´s vision is to contribute to the development of viable businesses thereby stimulating sustainable economic development in its investment countries. Swedfund is specialised in the field of complex investment environments with a high level of country risk. With a broad spectrum of financial solutions, combined with knowledge and experience, Swedfund enables its partners to invest more successfully.

Industrial Development Corporation of South Africa Limited
The IDC is a self-financing South African national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles. The IDC mission is to be a primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent.