BUSINESS MODEL

To improve institutional capacity of

Southern oil and gas producing countries

to effectively manage the sector through

South-South cooperation,

ensuring that resulting

revenues are used

to achieve sustainable

development for!their

citizens.

Photo: Sven Torfinn/Panos Pictures

ContentsBackground ii

Purpose of the Document 2

Government Membership to the SSEI 4

Sustainability Revenue Model and Value-Added!Services 8

Vendor Selection 9

Vendor Groups 10

Vendor Participation Levels and Associated Costs 10

Governance and Transparency 11

Advisory Services 12

Capital Markets Financing 12

Partnership Firm 13

Management Costs and Fees 14

Governance and Oversight 14

Table 1: Budget Forecast 16

Table 2: Revenue Forecast 18

Relationship Between SSEI, Vendor Platform and!International!Financial Services 20

Way Forward 22

ib

MISSION

The South-South Energy Initiative (SSEI) is a capacity-building programme that will culminate in the creation of an international organization, owned and managed by Southern stakeholders through a dedicated secretariat, to promote sustainable and equitable progress in the oil and gas sector for countries of the global South. The SSEI builds on the tradition and knowledge of the first international effort of Southern oil-producing and exporting countries in the 1960s to manage their oil and gas resources. The focus then was on markets, pricing for maximum leverage and the contribution of oil and gas to their macroeconomic development frameworks. Today, the SSEI will complement the contributions of organizations such as the Organization of Petroleum Exporting Countries (OPEC), the Gas Exporting Countries Forum (GECF), the African Petroleum Producers’ Association (APPA) and the Latin American Energy Organization (OLADE). It will enhance the way these resources contribute to financing for national development, while centralizing human development underpinned by good governance, protecting and meeting environmental challenges, and ensuring sustainable and equitable development for the citizens of its member countries.

The SSEI will establish a formalized structure for oil- and gas-producing countries of the global South. It will be guided by several fundamental principles, which include learning, sharing existing knowledge, producing new knowledge through innovative ideas, building capacity, undertaking research and policy dialogue, and developing an inventory of data and intelligence on the energy sector. Membership into the SSEI will be open to all emerging and established oil- and gas-producing countries of the global South. The SSEI will endeavour to uphold these principles and in so doing, grow into an organization in which membership becomes a privilege. The SSEI will create a business environment for its member countries based on a policy that incorporates South-South principles and that generates reliable and robust information that can!be used to achieve new growth opportunities for its Southern stakeholders.

The primary objectives of the SSEI are threefold:

• Support its member countries in the management of their hydrocarbon resources, thus increasing access to energy and ensuring more equitable and sustainable development;

• Facilitate South-South cooperation, collaboration and communication among emerging and more established oil and gas economies of the global South; and

• Assist its member countries to build institutional capacity and competence in the governance!of their hydrocarbon resources.

The SSEI Secretariat, based in Accra, Ghana, will manage the relationships with member countries and will be entrusted with day-to-day activities to deliver products and services that will meet these objectives and enable member countries not only to boost much needed capacity through the sharing of South-South knowledge and experience, but also to foster sustained commercial engagement across the global South.

The United Nations Office for South-South Cooperation (UNOSSC), in its mandated role as a facilitator, will incubate the SSEI in the initial phase, ensuring that partners and resources are brought together to establish a strong Southern-owned institution, and will exit at the appropriate time. UNOSSC has commissioned this business model to outline the financial underpinnings of the SSEI, which will enable the SSEI to flourish in a sustained manner over the!long-term.

Photo: curraheeshutter/shuttershock 1ii

BACKGROUND

Photo: Yosef Hadar/World Bank

The primary purpose of this document is to outline the parameters and provide a

roadmap to guide countries of the global South to join the SSEI. It complements the

Programme Document1 that describes in detail the development of this capacity-building

initiative for the global South. The primary focus of this capacity-building venture is the

establishment of the SSEI as a robust, self-sustaining, Southern-owned, autonomous

institution. This new organization will assist oil and gas economies of the global South to

harness the benefits of their petroleum resources so as to create broad-based, equitable

and sustainable development gains for the citizens of their countries. As such, this

corresponding document lays out a sustainable revenue-generating business model that

will ease the reliance on SSEI member countries for the sustainability of the organization

through the provision of value-added products and services administered through the

SSEI Secretariat. Two key areas will be addressed in the document: membership into the

SSEI, and its revenue-generating services. All other aspects of the SSEI are not dealt with

herein, as they have been covered in the Programme Document and its accompanying

annexes and reports.

1 Programme Document is available on www.ssei.org

32

PURPOSE OF THE DOCUMENT

As an international organization owned by member countries, the primary revenue base of the SSEI will derive from annual membership fees from member countries. In assessing the appropriate membership fee structure, several considerations were made, including a member country’s participation in other international organizations as well as the services that they receive from these organizations. Member countries of the SSEI will fall into three categories as described below: Founding Member, Full!Member and Observer Member.

Membership Category Levels

a. Founding Member status will offer several advantages, including a permanent seat on the Board of Directors as discussed in section Governance and Oversight and the opportunity to serve as chair of the Board. Founding Members will have voting rights on all issues relating to SSEI rules and regulations as well as benefits and policies of the organization. The admittance of new member countries to the SSEI is contingent on the positive vote of the Founding member countries. Founding Members will also have unlimited access to data and intelligence housed by the SSEI Secretariat. The number of Founding Members will be limited to 20.

b. Membership as a Full Member will carry with it several of the benefits of a Founding Member, with the primary exception being the right to chair the Board of Directors. Moreover, while Full Members sit on this Board, they will not exercise a vote. However, they will have voting rights1 on all matters of general interest at annual meetings. They will also have the opportunity to become a Founding Member within the first three years of the operation of the SSEI, provided that their application is accepted by the Board of Directors and their addition will not exceed the maximum number of Founding Members, currently set at 20.

c. All Founding Members and Full Members are from the global South. Countries outside the global South can, however, join the SSEI as Observer Members under certain conditions, which include having interests and objectives similar to those of the SSEI and its member countries. Observer Members cannot sit on the Board of Directors nor do they have voting rights. They may, nevertheless, be invited to participate in Board meetings, annual conferences and other SSEI functions and they will be entitled to several of the services and facilities of the SSEI, including its!publications and library, as well as its expertise.

1 The voting rights of the Full Members do not include issues related to rules and regulations, or policies and benefits of the SSEI; those issues are reserved for Founding member countries. Full members will have a vote on all other issues of general interest that concern the SSEI.

Photo: Giulio Napolitano/FAO 54

GOVERNMENT MEMBERSHIP TO THE SSEI

Membership Fees

Based on the budget and projected capital requirements (Table 1), each Founding Member will pay an initial, one-time fee of US$ 250,000 for the start-up costs of the SSEI. A Full Member country will pay an initial, one-time fee of US$ 100,000. Observer Members will pay a one-time start-up fee of US$ 175,000. An annual membership fee will also be required upon entry as a SSEI Member country. Each Founding Member will pay an annual fee equal to five percent of the approved annual budget of the SSEI, while a Full Member will pay an annual fee of two percent. Observer Members will pay an annual fee of US$ 60,000 paid through the SSEI Foundation, discussed in section SSEI Foundation.

Governance and Oversight

The SSEI will establish a High-level Advisory Panel consisting of six well-respected and acknowledged leaders and officials in the area of international development, business, and oil and gas management. The Panel will have no legal responsibilities but will be responsible for giving advice and making recommendations to the organization’s Board of Directors and management team. Activities of the High-level Panel will focus on fundraising, high-level policy advice and public advocacy for SSEI. UNOSSC will have a permanent observer seat on the High-level Panel.

The SSEI will be governed by a Board of Directors (i.e the 20 Founding member countries) with fiduciary and operational oversight of the organization. The Board will be charged with the responsibility of securing resources for the SSEI to fulfil its mission and ensuring that it is financially self-sustaining over time. The Board will ultimately be responsible for adherence to legal standards and ethical norms. It will also have to ensure that the SSEI quickly establishes strong monitoring and evaluation and reporting procedures; such a function has particular importance for a start-up institution that is unproven, without reputation and initially reliant on multiple sources of financial!support.

The day-to-day management of the SSEI will be handled by the Secretariat based in Accra, Ghana. The management team will be led by an Executive Director, with supporting staff. The structure, function and human resource profiles of the Secretariat are detailed in the Programme Document2.

2 Programme Document is available on www.ssei.org

As stipulated in the statute of the SSEI, Founding member countries will have a voting seat on the Board of Directors. Founding Members will have the opportunity to chair the Board of Directors for a term of two years. The rotation of the chair position will occur in chronological order, based on the date that each Founding member country joins the SSEI. This succession method will ensure that every Founding Member participates in this critical governing function of the SSEI. In view of the fact that the SSEI’s Secretariat will be hosted in Ghana, Ghana will serve as the first chair. The chair will have an absolute tie-breaking vote and will choose the location of the annual meeting of all SSEI members. Full member countries will hold non-voting seats on the Board of Directors. Observer Members will occasionally be invited to Board meetings and other functions of the SSEI as determined by the Board; however, their status will remain that of Observer with no voting rights at any meeting, including Board meetings. Figure 1 illustrates the organizational structure of the SSEI. UNOSSC will have a permanent observer seat on the board with no voting rights.

Figure 1: Structure of the SSEI Secretariat

Head of Programmes

Head of Communication,

Marketing & OutreachHead of

Finance & OperationsHead of

Research & Analysis

Head of Investments

Head of Private Sector Partnerships

High Level Advisory Panel

Board of Directors

Executive Director

Deputy Executive Director

PUBLIC!PRIVATE INITIATIVE

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Historically, international organizations have generated a sizeable portion of their revenue from the membership dues of their member countries. Given current global financial and fiscal pressures, it is increasingly difficult to sustain organizations solely through reliance on government budgets that pay for membership fees. In an effort to reduce dependence on such revenue streams, the SSEI will supplement the income from membership dues with a sustainable revenue model in which value-added services will be designed to capitalize on resources and capital in the private sector. This will be managed as a special initiative under the leadership of the SSEI Executive Director, referred to as the Public-Private Initiative. The sustainability revenue model is composed of three revenue-generating services: a vendor platform, international financial and advisory services, and a foundation.

Vendor Platform

Oil- and gas- producing countries of the global South continue to grapple with the challenge of growing their local goods and services companies, while bolstering gainful and competitive participation of their citizens and private-sector actors in the industry. To respond to this issue of paramount importance to the SSEI, this revenue-generating arm of the Public-Private Initiative will address this challenge by establishing a vendor platform that will attract, through a rigorous vetting process, companies of the global South that will provide a high-level of services, products and technologies to all member countries of the SSEI. The vendor platform is designed to promote local content, boost private-sector participation, and provide a dedicated means through which local businesses in the oil and gas industry can export their services across the global South and beyond. Participating vendors will be held to superior standards and in turn will propagate the image that selection for the SSEI vendor platform represents an industry seal of quality and excellence.

Vendor SelectionThe selection of vendor partners for the SSEI vendor platform will be one of the factors critical to the success of the SSEI. All corporations in the energy, oil and gas or allied industries will be eligible to join the SSEI vendor platform, provided that they meet the standards, categories and subcategories as defined in the international Standard Industrial Classification System (SIC). Potential vendors from the global South will have priority in view of SSEI’s objective to promote and support local populations and businesses.

The vetting process (also referred to as the screening process) will be the same for all potential vendors, regardless of their government’s membership status in the SSEI. The SSEI will use the screening process – an important risk-management tool – to implement a stringent, transparent policy, both to ensure its integrity and to encourage member countries to align themselves with vendors that have proven track records and that can meet their contractual obligations. In today’s environment, thorough screening of vendor partners is critical for a safe, secure, and efficient organization. Used effectively, the vetting process will reduce time, increase the likelihood of project completion, and provide assurance that the selected vendors have the requisite skills, certifications, licences, capital and business acumen to work with the SSEI and its member countries.

VendorPlatform

SSEIFoundation

International Finance and Advisory Services

MemberCountries

Secretariat

Sources of Revenue

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SUSTAINABILITY REVENUE MODEL AND VALUE-ADDED!SERVICES

All potential vendors will be required to complete the same documentation in their application process. For full transparency, all vendor applications will be subject to a third-party verification process. The SSEI will enlist a qualified, external service provider that has competent screening capabilities and that can ensure the integrity of the entire screening process from information submission to approval.

Vendor GroupsThe SSEI vendor partners will comprise two groups. Each of these groups will, in turn, have the ability to participate at one of two participant levels as described in Vendor Participation Levels and Associated Costs. The two categories of participating!vendors!are:

• Companies from member countries of the global South

• Companies from member countries outside the global South

Two important factors were considered in establishing these categories: (a) it allows for easy codification and classification of credible southern oil and gas which in turn, enhances opportunities for the global South to compete regionally and globally and (b) it provides the space for vendors external to the global South, to interact and work more deliberately with their southern counterparts, thereby ensuring that better and more fruitful partnerships have a chance to be built, as well as encourage more effective transfer of knowledge, skills and technology.

Vendor Participation Levels and Associated CostsVendors that are selected to join the SSEI will participate in the organization at one of two levels, each with its respective associated cost. The two levels are: Founding vendor partners and general vendor partners.

a. Founding vendor partners are those vendors from the SSEI Founding member and Full member countries. These vendors will have membership benefits that accompany their status. These benefits include, where possible, direct access to decision makers from member countries and the ability to provide input in meetings and conferences with member country decision makers on critical issues that affect them. Founding vendor partners will have access to the international financial services network of project-financing specialists; participation at events with open calls for papers; nomination as distinguished lecturers at SSEI annual meetings; and access to Member country-level programmes not accessible to the second level of vendor partners. In addition, founding vendor partners will have access to a global coalition of environmental and social organizations, access to expert stakeholders on issues surrounding the energy, oil and gas sectors; access to SSEI vendor-only previews of leading reports on emerging sustainability issues, trends, and member country initiatives; access to SSEI’s vendor-only webinars; mentorship programmes; opportunities for networking, professional development and continuing education; membership referrals; exclusive global business networking events; special recognition as well as preferential fees and placement at all SSEI events. Founding vendor partners, once approved, will pay a one-time application fee of US$ 50,000 and an annual fee of US$ 25,000. Each Founding member country and Full member country will be allowed to nominate up to 10 potential vendor partners; however, there will be no preferential vetting process for these vendors. All vendors will have to meet the same criteria and are subject to the same vetting process whether selected by a member country or not.

b. General vendor partners comprise vendors from SSEI member countries holding Observer status. These vendors will pay a one-time application fee of US$ 30,000 and an annual fee of US$ 15,000. They will enjoy most of the same benefits as founding vendor partners; however, general vendor partners will not have access to proprietary information and data on SSEI Member countries.

In order for the vendor platform to work effectively as one of the SSEI sustainable revenue-generating services, a sales strategy, including a membership drive, budget and implementation plan, will need to be developed to ensure successful solicitation of potential vendors with the appropriate background and expertise.

Governance and Transparency The vendor platform and its services will be set up and managed as a Public-Private Initiative under the overall direction of the SSEI Executive Director. The Head of Private sector partnerships will be responsible for the day-to-day operations and activities of the vendor platform. As illustrated in Figure 1, s/he will report to the Executive Director of the SSEI. The SSEI Board of Directors will be responsible for ensuring that the highest standards of transparency, integrity and ethics are upheld in all aspects of the vendor platform.

International Financial and Advisory Services

It is estimated that resource-driven countries (i.e. countries with a dominant oil, gas and minerals sector) will require over $1.3 trillion annually in total infrastructure investment in the period from now to 2030 to meet projected economic growth1. Many of these resource-driven countries are developing countries and potential member countries of the SSEI. Access to such capital needs remains daunting for these developing countries, several of which are unrated by prominent credit rating agencies. In addition, public finance, fiscal pressures, market uncertainty and stringent bank regulations limit the ability to mobilize funding for large-scale projects from traditional financing instruments such as bank loans. Current global market conditions call for new financing solutions and innovative approaches to access the capital and investments available in the private sector, in particular capital markets financing. It is said that while infrastructure needs are too large for existing funding sources, they are trivial relative to world capital markets.2

Several multilateral institutions such as International Finance Corporation, (IFC), the Multilateral Investment Guarantee Agency (MIGA) and regional banks including the African Development Bank (AfDB) as well as international investment banks are recognizing the value of capital markets financing and are expanding their portfolios to cover this void. However, appraising and structuring bankable projects is a highly complex, lengthy and costly process, particularly for projects in the global South where political and commercial uncertainties constitute the greatest risks associated with undertaking such financing propositions. The complexity is exacerbated by the fact that the global South has historically lacked the know-how and experience to maximize the value of capital markets financing. It is therefore not surprising that no one institution is prepared and/or capable of providing all the elements necessary to raise the project funds. Sharing risks not only with the recipient governments but also with project sponsors and institutions through partnerships and collaborative approaches is therefore the way in which business has to be conducted.

1 McKinsey Global Institute, Reverse the curse: Maximizing the potential of resource-driven economies. December 2013.

2 “Unlocking Private Finance for African Infrastructure.” Social Europe Journal, November 2013.

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Given this growing need for SSEI member countries to develop the prerequisite infrastructure to gainfully expand their oil and gas sectors, and thereby realize their national development goals, and the financing gap that exists to achieve such goals, the SSEI, under its Public-Private Initiative, proposes to form a partnership with an international financial institution to address this long-known challenge that its member countries continue to face. In so doing, the SSEI will not only provide a dedicated avenue for its member countries to access capital for their domestic infrastructure financing needs but also assist SSEI member countries to develop their own capacities in capital markets financing. A possible ancillary result could be the eventual development and boosting of local and regional capital markets through South-South cooperation.

The Public-Private Initiative will capitalize on its support to member countries through customized project financing that will meet the growing demand for sustainable project-finance strategies in their respective oil and gas industries. The public-private partnership will provide a dedicated range of services that include tailored, project-specific financial structures and guidance to the SSEI member countries, using a collaborative approach in the global financial marketplace.

Advisory ServicesDevelopment projects need proper and adequate structure and packaging to guarantee that every aspect of the project is covered, and includes contingencies. Countries of the global South in general, have difficulty in packaging economically viable projects to present to potential sponsors. Often, this phase of the project preparation adds considerable time to the entire financing process.

Through this proposed partnership with an international financial institution, SSEI member countries will receive assistance and advice for packaging commercially bankable projects. In addition, SSEI member countries will be assisted in making rapid impact analysis of projects before they even launch into the assessment of project viability. This assessment will determine the likelihood of a project being funded (in the global market place) and will determine whether the Member country should proceed with the time, manpower and capital needed to move the project forward. The advisory services team will then work with the Member country to determine the key factors necessary to obtain funding.

Other advisory services provided to member countries will include evaluation of the overall project transaction structure, creation of strategies to fund difficult transactions, provision of risk mitigation strategies and general counsel on transaction-specific documents. The fees obtained from the advisory services will be channeled through the SSEI Foundation (see section SSEI Foundation) and eventually, these fees could contribute to reducing the annual membership dues of member countries.

Capital Markets FinancingA key objective of the partnership with a financial firm will be to assist SSEI member countries to raise funding through capital markets. To this end, the financial institution will underwrite transactions and bring bond issues to market on behalf of SSEI member countries. The firm will create and place project finance bonds and use a collaborative approach through a vast network of financial products and institutions that include: Credit Enhancements for non-rated, difficult to fund projects, Principal Protection Guarantees and Default Payment Guarantees.

Partnership Firm To provide these services to the SSEI member countries, the SSEI will solicit tenders from international financing firms and institutions with the following characteristics and!capabilities:

• A financing team with expertise and extensive international experience in managing large institutional project-finance activities and the capability to provide superior services to SSEI member countries, including comprehensive advisory services, project-finance information, education and support throughout the entire life cycle of!a transaction;

• A proactive and structured management approach, which is crucial to the ultimate success of creating capital for complicated projects, coupled with the flexibility to customize and manage project-finance transactions to meet member countries’ mandated objectives;

• A funding process emphasizing proactive capital sourcing and hands-on project structuring management that includes the development of structured products and professionally packaged projects;

• The capability to offer 100 % principal and payment protection for project debt;

• The capability to amortize project funds over much longer tenures (30 years, for example) than the typical 10-17 years offered by most financial corporations;

• The provision of sound project-finance structures and syndications, the use of a technology-based platform, and the securing of funds for member countries to further develop their oil, gas and energy resources;

• The capacity to arrange for funding commitment fees to be advanced to SSEI member countries and to pay for soft costs and “last-mile expenses” on approved transactions in order to allow the transaction to close in a timely manner;

• Financing new investments by structuring the financing around the projects’ own operating cash flow and assets without additional sponsor guarantees, so as to alleviate investment risk and raise funds at a relatively low cost;

• Access to resources of larger organizations through collaborative approaches, enabling the financial services team to concentrate on building and managing the project-finance transaction while at the same time delivering outstanding member!service;

• The ability to provide minimum transaction fees.

The financial firm that partners with the SSEI to provide these services will need to have a strong social conviction to meet the many challenges faced by SSEI member countries, such as raising the retainer and commitment fees to engage a project sponsor. It is envisioned that the SSEI Foundation (see section SSEI Foundation) will pay for such fees but it is the expectation that the financial firm contracted by SSEI, through its corporate social responsibility programme, for example, may waive these fees until the SSEI Foundation is operational.

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Management Costs and Fees The financial and advisory services rendered to SSEI member countries will generate revenue in the following ways:

• Project transaction fees: A project success fee of a nominal percentage will be assessed for each project closed through the partnership. This success fee will first cover the costs and fees associated with the transaction. The difference will be divided equally between the financial firm under contract to effect the transaction and the SSEI. The SSEI portion of fees will be held in trust by the SSEI Foundation (see section SSEI Foundation) for the benefit and growth of the SSEI.

• Advisory services fees: Every transaction is different and advisory fees will vary accordingly. Fees will be charged based on the services rendered. After all associated expenses are paid, the net profit from the advisory services fees will be split equally between the financial firm and SSEI.

Governance and OversightThe SSEI financial and advisory services will be delivered through a partnership with an independently owned and operated international financial services firm with the ability to provide a dedicated line of services to the SSEI member countries. The day-to-day interactions with the firm will be entrusted to the Head of Investments, who will report to the SSEI Executive Director. S/he will be assisted in the task of managing the relations with the financial firm by an oversight and compliance board to ensure that business activities are conducted in a fully transparent manner. The Financial Advisory Board will consist of six seasoned finance professionals (four from the global South and two from countries outside the global South) and will be expected to implement policy and strategy as determined by the SSEI and guided by international financial rules!and!regulations.

SSEI Foundation

The SSEI will accept contributions from countries outside the global South, from national and international oil, gas and energy corporations, as well as from philanthropists and other actors that wish to support the mission of the SSEI. These contributions will be received through the SSEI Foundation3, which will provide assistance to SSEI member countries in several ways, including payment of membership fees for member countries in difficult financial situations and assistance to!member countries seeking to package complicated projects. The SSEI Foundation will!provide an extra level of security by acting as an additional revenue stream to sustain the SSEI.

The SSEI Foundation will ultimately operate as a separate entity, with its own offices, staff and governing board. It is foreseen that the head of the foundation would have a direct reporting line to the SSEI Executive Director and the Board of Directors. A thorough study and project paper will be developed to guide the SSEI on the best approach to setting up and managing its foundation.

3 Contributions will be received and administered by the United Nations Development Group’s MultiPartner Trust Fund until the SSEI Foundation is operational.

EXCHANGING KNOWLEDGE AND EXPERIENCETO FUEL COLLECTIVE ECONOMIC GROWTH

COLLABORATINGTO ACHIEVE SUSTAINABLE ENERGY SOLUTIONS

ERADICATING POVERTYBY CAPITALIZING ON OIL AND GAS RESOURCES

WORKING TOGETHER IN THE GLOBAL SOUTHWITH COUNTRIES, REGIONS, CORPORATIONS, ACADEMIA, AND INSTITUTIONS

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Table 1: Budget Forecast

Staffing and other costs Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Executive Director 185,000 194,250 203,963 214,161 224,869 236,112 247,918 260,314 273,329 286,996

Deputy Executive Director 165,000 173,250 181,913 191,008 200,559 210,586 221,116 232,172 243,780 255,969

Department heads (4) 600,000 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797

Public Private Initiative heads (2) 300,000 315,000 330,750 347,288 364,652 382,884 402,029 422,130 443,237 465,398

Technical/Programme Specialists (6) 600,000 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797

Technical/Programme Analysts (6) — — 420,000 441,000 463,050 486,203 510,513 536,038 562,840 590,982

Administrative personel (4) 160,000 168,000 176,400 185,220 194,481 204,205 214,415 225,136 236,393 248,213

Rent — — — — — — — — — —

Utilities — — — — — — — — — —

Technology, communication supplies 70,000 73,500 77,175 81,034 85,085 89,340 93,807 98,497 103,422 108,593

Office supplies (including furniture) 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566

High-level meeting (biennually) 27,500 30,319 33,426 36,853 — 40,630 —

Board meetings (annually) 27,500 28,875 30,319 31,835 33,426 35,098 36,853 38,695 40,630 42,662

UNOSSC cost recovery 359,895 426,768 512,691 — — — — — — —

Total staffing and other costs 2,544,895 2,692,143 3,341,654 2,938,576 3,118,931 3,239,780 3,438,622 3,571,857 3,791,080 3,937,973

Programmatic costs Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

INA methodology (40 countries) 600,000 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797

INA data aggegation/analysis 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566

Global conference 500,000 525,000 551,250 578,813 607,753 638,141 670,048 703,550 738,728 775,664

Regional policy meetings (5 a year) 300,000 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797

Technical specialist workshops (4 a year) 250,000 262,500 275,625 289,406 303,877 319,070 335,024 351,775 369,364 387,832

Senior level specialized seminars (4 a year) 300,000 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797

Staff exchanges and secondments (30 a year) 450,000 472,500 992,250 1,041,863 1,093,956 1,148,653 1,206,086 1,266,390 1,329,710 1,396,195

Research, publications 50,000 52,500 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133

Database maintenance (including data warehousing and maintenance of secure member access) 20,000 21,000 22,050 23,153 24,310 25,526 26,802 28,142 29,549 31,027

Advocacy/communications/marketing (including website maintenance, print collaterial) 100,000 100,000 25,000 26,250 27,563 28,941 30,388 31,907 33,502 35,178

Total programmatic costs 2,620,000 3,376,000 4,016,050 4,216,853 4,427,695 4,649,080 4,881,534 5,125,611 5,381,891 5,650,986

TOTAL $5,164,895 $6,068,143 $7,357,704 $7,155,428 $7,546,626 $7,888,860 $8,320,155 $8,697,468 $9,172,971 $9,588,958

AssumptionsInflation: 5%Government of Ghana to pay rent+utilities as per Host Country AgreementUNOSSC costs present for first 3 years, 7% annual budget Year 3 onwards programmatic offerings double to numbers indicated in parentheses

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Table 2: Revenue Forecast

Government Membership dues Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Founding member countries (one time initial payment) 1,250,000 1,250,000 1,250,000 1,250,000

Founding member countries (annual membership fee) 1,291,224 3,034,071 5,518,278 7,155,428 7,546,626 7,888,860 8,320,155 8,697,468 9,172,971 9,588,958

Member countries (one time initial payment) 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000

Member countries (annual membership fee) 516,489 1,213,629 2,207,311 2,862,171 3,773,313 4,733,316 5,824,109 6,957,974 8,255,674 9,588,958

Observer country (one time initial payment) 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000

Observer country (annual membership fee) 120,000 240,000 360,000 480,000 600,000 720,000 840,000 960,000 1,080,000 1,200,000

Subtotal 4,027,713 6,587,700 10,185,589 12,597,600 12,769,939 14,192,176 15,834,264 17,465,442 19,358,646 21,227,917

Vendor Platform dues Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Founding vendor (one time initial payment) 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000

Founding vendor (annual fee) 250,000 500,000 750,000 1,000,000 1,250,000 1,500,000 1,750,000 2,000,000 2,250,000 2,500,000

General vendor (one time initial payment) 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000

General vendor (annual fee) 150,000 300,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,350,000 1,500,000

Subtotal 1,200,000 1,600,000 2,000,000 2,400,000 2,800,000 3,200,000 3,600,000 4,000,000 4,400,000 4,800,000

International Financial and Advisory Services Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Advisory fees 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000

Closed projects transaction fees 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000

Subtotal 700,000 700,000 700,000 700,000 700,000 700,000 700,000 700,000 700,000 700,000

Foundation 0 500,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

Total gross revenue (projected) 5,927,713 8,887,700 12,885,589 15,697,600 16,269,939 18,092,176 20,134,264 22,165,442 24,458,646 26,727,917

Annual commissions (10%) 120,000 160,000 200,000 240,000 280,000 320,000 360,000 400,000 440,000 480,000

TOTAL INCOME $5,807,713 $8,727,700 $12,685,589 $15,457,600 $15,989,939 $17,772,176 $19,774,264 $21,765,442 $24,018,646 $26,247,917

Assumptions5 Founding member country sales per year for 4 years for a total of 20 memberships5 Member countries sales per year for ten years 2 Observer countries per year for ten yearsAll member countries and observers paying dues annually for the ten years 10 Founding vendors sales per year for ten years10 General vendors sales per year for ten yearsAll vendors paying dues annually for the ten years Advisory service fees from 10 projects per year at $10000 per projectInternational Financial and Advisory services one $60MM transaction per year, 1% transaction fees

1918

The SSEI, as an independent, international organization owned by Southern member

countries, will be managed through a dedicated secretariat. The Secretariat will provide

all programme administration including substantive research and management, resource

mobilization, facilitation, advocacy, and monitoring and evaluation. The primary focus of

the SSEI secretariat will be to develop and support relations with the member countries

and serve as the link between the High-level Advisory Panel, the Board of Directors and

its member countries.

There is a clear delineation of responsibilities between the SSEI secretariat on the

one hand and the revenue-generating services of the SSEI – the vendor platform and

international financial and advisory services – on the other. The SSEI Executive Director

will have overall management responsibility to oversee the public-private initiatives; the

vendor platform will be managed in-house by the Head of Private sector partnerships.

The financial and advisory services will be led by the Head of Investments, who will

manage the partnership with the firm contracted to provide the services outlined in

section International Financial and Advisory Services. Both heads will report directly

to the Executive Director. The Board of Directors, as the oversight body of the SSEI, will

ensure that the Executive Director and his/her team perform to the highest standards.

Common synergies between the SSEI, the vendor platform and the international financial

and advisory services include a shared vision and aligned goals as well as a shared

commitment to fulfil the objectives of the SSEI. The vendor platform and the international

financial and advisory services will depend on the substantive and administrative support

services of the Secretariat to accomplish their mutual goals in providing value-added

services through public-private initiatives to SSEI member!countries.

Photo: Xalex73/Dreamstime 2120

RELATIONSHIP BETWEEN SSEI, VENDOR PLATFORM!AND!INTERNATIONAL!FINANCIAL SERVICES

This document has outlined a business model for the establishment and operationalizing

of the SSEI. It has focused primarily on the revenue-generating services that the SSEI

will provide to its members countries, including the vendor platform and international

financial and advisory services. Both of these revenue streams will be managed through

public-private initiatives in which the SSEI plays a leading role alongside the public sector

government actors and the oil and gas private-sector partners.

A number of steps are necessary for UNOSSC to move forward with this initiative. The

Government of Ghana, as the host of the SSEI, and UNOSSC will effect a concrete

membership drive that will not only raise awareness and interest in the new organization

among the global South oil- and gas- producing countries, but will also secure Founding

memberships ahead of the launch scheduled for first quarter of 2015. It will be necessary

to develop a dynamic sales strategy to attract potential vendors to join the vendor

platform being built by the SSEI. As for the international financial and advisory services

that the SSEI will provide, the firm with which the SSEI chooses to partner requires

comprehensive terms of reference that outline the financial and advisory services to

be offered to SSEI’s member countries. The SSEI Foundation should be established in

tandem with the membership drive so that the SSEI can begin to receive funds to support

its initial activities.

Photo: Dmitry Bairachnyi/Dreamstime 2322

WAY FORWARD

United Nations Office for South-South Cooperation

www.ssei.org