2013-10-07 16:52:21 - Recently published research from Business Monitor International, "Cote d'Ivoire Infrastructure Report Q4 2013", is now available at Fast Market Research
We maintain our view for strong construction sector growth of 13.6% in 2013, with this high rate to be sustained over the medium term, as additional projects enter the pipeline and progress is seen on existing ones. A number of high value projects are entering the construction phase over the near term. These projects, which are in the power and transport sectors, should provide support to the industry over the medium term (2013-2017), when we expect annual average real growth of 10.6%. A combination of government investment and growing private investor interest is culminating in strong sector potential. However, the security and political risks remain a very real threat, although a significant deterioration in the political climate is not our
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Construction growth is expected to make a strong rebound in 2013. Government investment into addressing the country's wide-reaching infrastructure deficiencies, following decades of underinvestment, is filtering through to projects. This is being supported by numerous debt cancellations, in addition to growing revenues from gold mining and cocoa production. There is also longer-term potential for growing oil production as offshore exploration takes off.
The country is looking to raise capital via a US$500mn Eurobond issue in October 2013, with funds to be directed into infrastructure investment. Whilst we have seen significant appetite for Sub-Saharan African Eurobonds, rising yields do raise a concern over the cost of capital. However, it remains a relatively cheap and quick way to raise infrastructure financing.
At the same time, the private sector is returning to growth, following years of political uncertainty. This drive for private investment in infrastructure is being support by development funding and, most crucially, the World Bank's Multilateral Investment Guarantee Agency (MIGA), which has been providing investor guarantees for flagship projects in the country.
Projects guiding our positive outlook:
* The Azito Power Plant: this project entered construction in March 2013 after securing funding earlier in 2013. The project includes converting a simple-cycle power plant to a combined cycle, increasing generation capacity to 430 megawatts (MW) from 288MW. The project will be executed on a buildfinance- operate basis by Azito Energie, which is formed of Globeleq and Industrial Promotion Services West Africa. In late December 2012 the African Development Bank (AfDB) approved a US $50mn loan for the expansion of the Azito power plant. This was followed by an investment guarantee by MIGA for the project in January 2013. MIGA's guarantee covers Globeleq's Holdings Ltd investment in the project for 20 years, insuring against a breach of contract by the government.
* The Soubre hydropower dam: a loan agreement with China Export Import Bank was signed in January 2012. The US$500mn loan will cover the majority of the US$600mn price tag. The loan was granted on generous terms, with a nine-year grace period and a 20-year repayment period, at a rate of 2%. The power plant will have a 274MW capacity, increasing current capacity by around 15%. Sinohydro started construction on the power plant on February 25 2013, and is due to complete it in 2017.
* Henri Konan Bedie Toll Bridge: the bridge was successfully tendered and secured financing in 2012. Bouygues was awarded the 30-year concession under a build-operate-transfer (BOT) model. The company will build and operate the 8km north-south connection, which includes a 1.5km bridge and a number of new access roads. Financing has been secured from a number of development banks. Vital support was also provided by MIGA, which unlocked key private investment by providing crucial insurance against political risk, including non-commercial risks to investment and dispute resolution for investments.
* Abidjan Port: in addition to Bollore's plans to invest US$80mn to double capacity at the container terminal it manages, China Harbour Engineering Company was awarded a US$933mn engineering, procurement and construction (EPC) contract to build a new container terminal, a roll-on/roll-off terminal and also to carry out dredging at the port. In June 2013 a consortium of Bollore, Bouygues and APM Terminals signed an agreement to construct and operate a second container terminal at Abidjan port, known as TC2. The tender was not without controversy, as the award was disputed by competing bidders based on competition grounds. The claim was rejected, but highlights some concerns over competition and tendering procedures in the country. The 21-year concession includes an investment of US$590mn, including expansion of the quay, improving intermodal connections and expanding the port to be able to receive ships with a capacity of 8,000 twenty-foot equivalent units.
* Cote d'Ivoire-Niger Railway: supporting the expansion of the port of Abidjan is plans for an upgrade and expansion of the existing rail line linking the port to Burkina Faso. Construction is due to start in 2014 on an extension into Niamey in Niger, as well as an upgrade to the existing line. Abidjan already serves 60% of the trade to Burkina Faso, Niger and Mali, and this line would open up further demand for the port.
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