advisory china
TRANSCRIPT
www.industreams.com
CHINA CASE SOURCING MARKETS & INVESTORS
Industry expert advisory with InduStreams
July 2012
www.industreams.com
China at a glance
11 Of the worlds 20 biggest ports and 50+ large
“secondary” ports
>30% Of world container
throughput
>60% Of world iron ore demand
1.3 Billion people
10 Trillion USD
PPP adjusted GDP
>400 Mill. tons
of crude oil demand + target to further increase oil supply
reserves
10% Consistent growth last 30 years – may overtake the US by
2030
www.industreams.com
Sample approach
Sourcing Investments
Sourcing Investors & Partners
La4n America Europe East Asia
Deal
Develop
Engage
Focus
Process We advise on the elements of ge?ng to goal quickest possible from scoping relevant targets to closing agreements. We don’t do elaborate and 4me was4ng analy4cal work. Geography We have associates in many key geographies that are able to add local insight to the specific sector in ques4on. Examples include China, Panama, Nigeria, Italy and many others. Sector We advise primarily on the sourcing of investors and investments as well as strategic partnerships.
+
+
www.industreams.com
Investor perspecZve
Sourcing Investments
Sourcing Investors & Partners
La4n America Europe East Asia
Assignment example An investor is looking to source port infrastructure investments in China. Our role Step one to help the investor get a market overview and scope relevant regions and ports based on a set of criteria: -‐ Green field or brown field -‐ Investment size preference -‐ Bulk, container or oil sector -‐ Individual terminal investments
or partnership in the whole port -‐ Etc. +
www.industreams.com
Investor perspecZve (2)
Deal
Develop
Engage
Focus
Focus/scoping Within 50 prospec4ve ports 10 port projects have been iden4fied and shortlisted.
Engagement Facilita4on is provided to engage in the form of advise on approach and introduc4on to relevant contacts in our network.
Development Input is provided to iden4fy the key value value drivers to carry out valua4on and related analysis.
Deal Support is given to set nego4a4on strategy in a Chinese JV context as well as facilita4on to close relevant agreements.
www.industreams.com
Owner perspecZve
Sourcing Investments
Sourcing Investors & Partners
La4n America Europe East Asia
Assignment example An owner of an oil terminal in Zhejiang Province, China is looking to solicit investors and strategic partners from Europe. Our role Step one to help the owner and overview of the investor universe based and scope relevant par4es based on a set of preferences: -‐ Investment proposi4on -‐ Funding requirement -‐ Target investor role (opera4onal,
financial, etc) -‐ Majority/minority investor -‐ Etc.
+
www.industreams.com
Owner perspecZve (2)
Deal
Develop
Engage
Focus
Focus/scoping For the client iden4fy 30-‐40 prospec4ve European investors and partners and shortlist the most immediately relevant (e.g. 5-‐10).
Engagement Facilita4on is provided to engage in the form of advise on approach and introduc4on to relevant contacts in our network.
Development Any help needed to facilitate a speedy process on the investor side.
Deal Support is given to set nego4a4on strategy in a European fund context as well as facilita4on to close relevant agreements.
www.industreams.com
Our advisory proposiZon
ü Big and diverse project/asset owner and local industry networks (1,000+ execu4ves in the community and increasing)
ü Insight to both the industry and investor communi4es allowing us to convey proposi4ons accurately and with the right context of the poten4al value these have
ü Simple and effec4ve process to advise on the key items that maaer that maaer from market scoping through to closing the deal
www.industreams.com
Risk free engagement
We talk to new funds, investors and industrials every week and as policy are commiaed to listening to anyone who wishes to further explore the possibility to invest in or seek investors for the infrastructure market – no strings aaached! Our primary objec4ve is to provide access to opportuni4es that might otherwise not be available to you and your company. If advisory or facilita4on might be relevant to you or your company we encourage you to reach out to any of our representa4ves or on:
www.industreams.com
Disclaimer This presenta4on is issued for informa4on purposes only and does not cons4tute an agreement, offer, obliga4on or invita4on to enter into transac4ons or investment business. With this presenta4on, INDUSTREAMS LIMITED does not act in any way as your advisor. This presenta4on is not intended as, nor should it be, a subs4tute for consul4ng with INDUSTREAMS LIMITED. Whilst this presenta4on has been produced from sources believed to be reliable, the informa4on, views and opinions expressed in this presenta4on are provided as of the date of this presenta4on and remain subject to verifica4on, comple4on and change without no4ce. No representa4on or warranty whatsoever (whether express or implied) is or will be made as to, or in rela4on to, the accuracy, reliability or completeness of the informa4on contained herein or in the appendices to this presenta4on. Furthermore 3rd party company names, logos and similar do not cons4tute any representa4on of such companies or indica4on of any affilia4on or contractual rela4onship – they are used purely for illustra4ve purposes. INDUSTREAMS LIMITED will not be liable towards you or any third party for any eventual damage you may incur, caused by the informa4on contained in this presenta4on and its appendices.
www.industreams.com
Private oil storage terminal (example)
Principal purpose
Development and opera4on of storage tanks and jeay for oil, petrochemical products or other liquid cargo to service amongst others oil tankers, oil majors, oil traders and others.
Investment size
A smaller private facility of up to 500,000 cbm capacity could be in an investment range of $75 to $100 million.
Target return
Varies greatly from product to product, type of customer contracts and geography, for a private smaller facility in a strategic oil trading loca4on it could be anywhere from 10% to 20%+ (IRR).
www.industreams.com
Greenfield container develop. (example)
Principal purpose
Gateway hub to facilitate the growing export and imports to and from a developing country serving a cap4ve local market.
Investment size
Substan4al capacity of 1-‐2 million TEU as well as general cargo berths with expected investment requirement above $500 million.
Target return
15-‐20% IRR assuming upfront securing of anchor tenants and reasonable 4me to market from construc4on is ini4ated.
www.industreams.com
Port group partnership (example)
Principal purpose
Consolida4ng all container cargo ac4vi4es in a new port area to boost segment growth and op4mize port opera4ons.
Investment size
A secondary port looking to develop ini4al smaller dedicated facility with 3 berths on 700 meters with capacity of 500,000 TEU could require investment in range of $100-‐150 million.
Target return
15%+ IRR assuming the right entry price and management structure.
www.industreams.com
Government infrastructure PPP (example)
Principal purpose
Key marine infrastructure such as locks providing access to inner ports.
Investment size
$1.0 – 1.5 billion to be invested for the development and management of the needed infrastructure (likely to be a consor4um of investors, construc4on and other companies).
Target return
6-‐10% government guaranteed IRR (fixed payments done by government on regular basis – no commercial risk).
www.industreams.com
Pension fund example ObjecZves
Pension and insurance funds typically invest to secure long term stable returns (e.g. 5-‐10%).
Typical investment size
Typically look to invest $100-‐200 million as minimum per investment for their own share and therefore total investment size target ooen above $500 million.
Role and shareholding target
Ooen limited to that of a “financial” investor and thus typically looking only to take a minority posi4on and for many are not allowed to have the main managing role.
Investment stage and holding period
In general look for acquisi4on opportuni4es or constella4ons whereby they mi4gate development and commercial risk and look to hold assets for long periods (30+ years). Emerging trends include pension funds seeking to take ownership along side en4re port owners (landlords) as that further diversifies their risk across more assets.
ProposiZon to asset/project owners
Primarily bring lower cost of capital to the table (can live with lower returns) but also some4mes specific capabili4es and global brand.
www.industreams.com
Operator example ObjecZves
Operators and some developers typically seek to grow their porrolio as primary objec4ve and require medium to high returns (e.g. 10-‐15%).
Typical investment size
Most investment sizes are relevant ranging all the way from $10-‐20 million to above $1 billion (although in laaer case it might only be a few in the industry that would want to do that alone).
Role and shareholding target
Most operators would like majority and management and an opera4onal role ooen a must have.
Investment stage and holding period
Do green fields as well as acquisi4ons ooen without any specific holding strategy, but most tend to just “hold on” once they secure an investment.
ProposiZon to asset/project owners
Operators typically bring significant know-‐how and skill and some4mes actual business to their projects.
www.industreams.com
Infrastructure fund example ObjecZves
Many infrastructure funds (including private equity funds) invest on behalf of other funds (e.g. ins4tu4onal funds such as pension fund) and look to achieve strong returns over a shorter period (e.g. 15-‐20%), but are typically also willing to take on greater risk.
Typical investment size
As with operators such funds invest in small, medium as well as very large scale investments (substan4al diversity).
Role and shareholding target
Many funds are looking to take majority but for most however minority is also an op4on. Some of the more sector specific ones would look to have a strong opera4onal role as well whereas others would not have opera4onal capability or interest.
Investment stage and holding period
Most constella4ons and stages are relevant for such, but acquisi4ons are gaining popularity, and ooen look to hold the asset for 8-‐10 years.
ProposiZon to asset/project owners
Very mixed value proposi4on depending on the fund in ques4on but do have the benefit of being very focused (once they raise a fund the money has to be spent over a short 4me period or the clients will withdraw the funds again) and thus tend to work effec4vely and with urgency.
www.industreams.com
Sovereign wealth fund example ObjecZves
Sovereign wealth funds and other government type funds have many different agendas but of course mostly to further the interests of the na4on they have been mandated by. Consequently they also operate on a very wide return range (e.g. 0-‐20%).
Typical investment size
Work almost exclusively with larger scale investments, most in excess of $500 million and ooen more than $1 billion.
Role and shareholding target
Almost exclusively look for a pure financial stake but may well want extensive influence.
Investment stage and holding period
Green fields and brown fields are all scope, however projects ooen need to be among key projects na4onally or within the region they invest in.
ProposiZon to asset/project owners
Given the government leverage and wide return spectrum SWF’s can come with many different kinds of proposi4ons and some4mes fit where no others are relevant.