September Board Meeting: Priorities renewed and newer
At its September meeting, OPIC’s Board of Directors kept the agency’s focus trained on priority sectors – renewable resources; food security and safe drinking water; and small and medium size businesses (SMEs) – and added another: the growing middle class in emerging markets, which stand to transform developing countries in the coming years.
Be it Africa, where 100 million households are expected to reach annual incomes above $3000 by 2015, up from 40 million in 2011; or Russia, which recently surpassed Brazil, Mexico, Spain, and Italy as the world’s eighth-largest retail market, these markets have been largely neglected by investors – at their own peril, if trends continue.
With an eye to supporting their growth, OPIC’s Investment Funds Department designed three new investment funds targeting consumer segments in those two markets, and Indonesia as well. The Board approved a total of $360 million in financing for the funds.
Here are profiles of projects approved by the Board:
Renewable Resources/Energy Security
Solar power in South Africa
OPIC financing will support construction of a 60-megawatt solar power plant that will help South Africa move away from its heavy reliance on coal, displace 140,000 tons of GHG emissions in its first year alone – and support the country’s Black Economic Empowerment program.
‘Peaker plant’ for Jordan
OPIC financing will help build a 240-megawatt electrical power plant providing Jordan with reliable energy during peak usage periods – such as evening hours and summer months – and meet demand that has grown since the Arab Spring decreased the country’s ability to import gas from Egypt.
Renewable energy/energy efficiency investment in Turkey
OPIC financing will support investment in renewable energy and energy efficiency projects in Turkey, as well as SME lending – sectors with great potential but little access to long-term capital. The project is also available to support a U.S. Department of Energy program called the Near Zero Zone, designed to illustrate how energy efficiency can make industry more profitable, reduce dependence on energy imports, bolster energy security, and cut carbon emissions.
Spotlight on Ghana
Greater food security…
Nearly $120 million in OPIC political risk insurance will help modernize Ghana’s agricultural equipment, bringing much-needed food security to the country and supporting its effort to become a regional food exporter. Agriculture accounts for over 25 percent of Ghana’s GDP and 56 percent of its labor force, but despite recent economic growth, nearly two million people in Ghana struggle to maintain consistent access to sufficient, safe and nutritious food. The project will reduce post-harvest losses and increase agricultural productivity, leading to greater food surpluses.
…and more clean water
An amendment to a project approved by the Board in March will increase OPIC insurance from $150 million to $180 million for a project that is rehabilitating nearly half municipal water purification systems in Ghana, adding seven additional water treatment facilities in the process. The project addresses a sanitation problem that causes an estimated 70 percent of Ghana’s diseases and reduces its GDP by more than two percent annually.
Investment Funds Focus I: Emerging Markets’ Growing Middle Classes
Emerging middle classes in Africa, Indonesia and Russia – all fast-growing markets with lucrative return potential – received a boost when the Board approved $360 million in financing for three investment funds targeting consumer populations in each.
African Development Partners II, L.P. (Development Partners International LLP) will invest in such sectors as financial institutions, pharmaceuticals and hospitals, telecommunications, food service and agribusinesses, consumer goods, education, engineering and construction sectors in Africa.
Falcon House Partners Indonesia Fund I, L.P. will invest in Indonesia’s consumer-driven industries, including retail, food products, personal care products and health care.
Elbrus Capital Fund II, L.P. will invest in the consolidation of middle-market companies in rapidly-growing industries in Russia, helping to build competitive businesses that respond to unsatisfied demand across a number of critical needs: changing consumer patterns, need for consumer and business infrastructure, efficient use of natural resources, and the increasing need for high-quality health care and education.
Investment Funds Focus II: India
The Board approved $135 million for two investment funds that will support SMEs and industrial logistics parks in India – two sectors capable of driving economic growth in the country but which have to date lacked the capital to do so.
BanyanTree Growth Capital II will invest in SMEs, particularly in sectors overlooked by investors. The fund’s strategy is to bring quality management and environmental, social and governance best practices to targeted SMEs, enabling them to grow into sustainable businesses.
IndoSpace Logistics Parks II will address India’s significant demand for quality logistics parks by investing in warehouses, distribution centers, cargo handling facilities and other infrastructure in order to create more efficient and expansive supply chain networks, lower logistics costs, and reduce waste. The fund’s investments could generate more than 25,000 local jobs and catalyze U.S. job creation as well: the vast majority of its target tenants are large multi-national corporations, including US-based firms.