ifc: financing solutions for the power sector financing solutions for the power sector platts...
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IFC: financing solutions for the Power Sector
PLATTS Caribbean Energy Conference 2013
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Introduction to IFC
IFC Overall Caribbean Region
Provides equity, quasi-equity, debt, risk mgt and advice in member countries
Benefits from 103 offices worldwide and industry expertise
Only focuses in emerging markets
4 Offices: T&T, Jamaica, DR, Haiti 14 Countries of Operation:
• Antigua & Barbuda
• Bahamas* • Barbados* • Belize • Dominica • Dom Rep • Grenada
• Guyana • Haiti • Jamaica • St Kitts &
Nevis • St Lucia • Suriname • T&T
Largest global multilateral for private sector in developing economies
IFC FY12 Highlights •S&P, Moody’s AAA
•Portfolio $45.2 billion
•Committed $15.4 billion
•Syndicated $3.5 billion
•# of client cies 1,825
•# of countries 103
IFC Equity Initiatives • Equity mobilization: IFC Asset Management Company, Global
Infrastructure Fund
IFC invests in generation, transmission and distribution as well as equipment supply chain
200+ power investments in 57 countries since 1967
Power represents one of IFC’s largest exposures: $4.8bn committed portfolio or 10% of IFC’s total as of June 2012. Close to $1.4bn commitments (including mobilization) in 38 transactions in FY12
Many 1sts: wind farms in LAC and SE Europe, solar farm in SE Asia, merchant wind farm, etc
Power Sector
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IFC is a lead financier in the power sector $7
.8 b
n or
27,
852
MW
$4
.7 b
n or
14,
048
MW
Cumulative commitments since 1967
Outstanding portfolio
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Robust and growing renewable business: IFC RE investments increased 3x since 2007; now 70% of new power business
Increasing technology diversification: hydro and wind historically. Also, more recently, geothermal, solar, and biomass
Investments in financial intermediaries and funds allow us to support smaller companies/projects
In-house technical expertise allows us to appraise faster investments in new and emerging technologies / prototypes
Local, regional and global players as IFC Partners over the years
Half our business is with global clients – We have forged long-term partnerships with key clients – Recent trend of partnering with renewable energy
companies expanding into emerging markets
We support local clients to become global clients – Local power companies investing in their own country or
expanding into other emerging markets – Local industrials expanding into the power sector – Our local clients are becoming a larger share of our
business as market reform increases opportunities for private investment in the power sector
We work with emerging renewable energy companies – We have supported newly started local renewable energy
firms, as they begin to build their first projects
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6
IFC’s Approach to Financing Solutions
Up to 20 yrs, typically 8-14 yrs Loans in all major currencies and several
local currencies Variable or fixed interest rates Senior or subordinated
Up to 20% of company equity + AMC (49%) Minority, passive shareholder with
standard minority owners rights Right to Board representation
IFC requires client companies to be in the effective control of the private sector IFC takes project risks, including commercial and political risks No international competitive bidding of goods & services required but transparent procurement IFC does not accept government guarantees of IFC financings IFC provides corporate or project financing. Use of proceeds of IFC financing include: capital
expenditure, acquisition, reasonable development fees, interest during construction, etc.
IFC Value Added
LT Partnership. Tailor-made solutions. Mobilization capacity. Global sector expertise. Local authorities knowledge. Brand enhancement. In-house technical expertise (engineering, insurance,
environmental/social)
IFC Debt Financing IFC Equity Financing
Key Features of IFC’s Financing
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IFC Funding Capacity for its Own Account:
Leveraging the World Bank Group’s Special Privileges and Immunities: As lender of record, IFC can share its immunity from taxation
More generally: IFC can syndicate (on best efforts basis) 100% of the debt financing based on a preapproved financial plan
Greenfield & total cost<$50m
Greenfield & total cost >$50m
Expansion or rehabilitation (corporate finance)
All projects
Up to 35% of project cost
Up to 25% of project cost
Up to 50% of project cost
Up to 25% of client’s capitalization
+
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IFC can deliver a complete financing package to clients
Complemented by IFC’s Mobilization Capacity:
What we do…
Types of Political (Country) Risk Coverages 1. Inconvertibility and Transfer Restriction …protects against Inability to convert local currency into foreign exchange within the host country Transfer/excessive delays in acquiring Forex Currency depreciation is not covered
2. Expropriation …protects against Nationalization and confiscation Interference with ownership, control and material rights Inability to exercise collateral Discriminatory license cancellation Creeping /Partial expropriation (expropriation of funds) 3. War and Civil Disturbance …protects against Damage/disappearance of tangible assets (including revolution, insurrection, coups d'état, sabotage, and terrorism) Business interruption Acts must have a primary intent of achieving a political objective
4. Breach of Contract …protects against Breach or repudiation of a contract between the investor/project company and the host country authorities Non-enforcement of an arbitration/judicial award, or no recourse to judicial/arbitral forum, or decision by forum not rendered in reasonable time May cover sub-sovereign obligations and obligations from SOEs
5. Non-Honoring of Sovereign Financial Obligations For unconditional financial payment obligations No arbitration required
What MIGA does… Non commercial risk insurance for investors and lenders
Dispute resolution services for guaranteed investments
Research and knowledge services (World investment and Political Risk Report, PRI-Center)
Support the multi-donor Investment Climate Advisory Services of the World Bank Group
• MIGA at a Glance
•Guarantee holder can choose any combinations of these coverages…
Supportive country environment and legal framework
Well-structured and clear regulatory / contractual framework, providing for :
– adequate mechanism of tariff adjustment and/or strong LT PPA from creditworthy utility/off-taker
– Government’s commitment (lenders’ rights and security, termination provisions, financial equilibrium)
Committed and experienced investor/operator/developer
– Sufficient equity at risk
– Transparent procurement
– Good integrity
Robust financial structure
Good business case (promising market / competitiveness of power generation project in merit order/ Secured input supply - hydrology, intermittent supply risk of some RE) and realistic market expectations
Construction cost control
What does IFC look for in Power Investments?
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IFC’s Track Record
IFC’s Caribbean Investments
43%
47%
1% 5% 4% IFC FY11 Commitments by Sector
Financial Markets Infrastructure
Oil, Gas & Mining Manufacturing
Information Technology
Since FY09, IFC has committed $516 million and mobilized $209 million in the Caribbean
$73 $38
$133
$345
4 7
15
17
024681012141618
$0$50
$100$150$200$250$300$350$400
FY08 FY09 FY10 FY11(YTD)
Volu
me
$
IFC Commitments in the Caribbean Volume $
Project #
The Caribbean Energy Sector is an IFC focus
• Basic Energy, DR: $20m A loan in 2007 • Linea Clave, DR: $5m C loan in 2010 • Jamaica Energy, Jamaica: $20m A loan, $45m B loan and $8m C loan in 2005 • West Kingston Power, Jamaica: $13m A loan, $33m B loan and $9m C loan in
2010 • JPSCo, Jamaica: $45m A loan in 2003 and $30m A loan in 2010 • E-Power, Haiti: $16.24m A loan and $11.21M B loans in 2009 and subsequently
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IFC Caribbean Priorities:
crisis response
increased competitiveness
regional integration
climate change
IFC has strong track record in power equity investments
South East Europe
•South Eastern Energy Capital
Indonesia
•MEDCO Energy
$25,000,000
Equity investment on IFC’s own account out of $112 million equity
package.
March 2012
MedcoEnergi is an integrated oil & gas
exploration company with operations in
Indonesia as well as the United States, the
Middle East, and North Africa. Listed on the
Jakarta Stock Exchange.
189 MW
Gas power projects in Indonesia)
India
•Aura Mira Energy
$8,000,000
Equity investment on IFC’s own account.
September 2010
Renewable Energy (“RE”) focused
company, currently developing 100+MW projects in Biomass,
small hydro and wind.
17.5MW
(two current biomass projects)
MENA Region
•Creative Energy Resources
$50,000,000
Equity investment on IFC’s own account.
July 2009
Investment holding company that will acquire, develop,
build, own and operate power sector
projects (i.e., generation,
transmission and distribution)
1,178 MW
(mainly combined cycle projects)
Brazil
•ENDESA Brazil
$50,000,000
Equity investment / convertible loan on IFC’s own account.
July 2006
Holding of companies that work with
distribution, generation,
transmission and commercialization of
energy. Present in four states of Brazil services
around 5.1 million clients.
3,105 MW
(multiple technologies)
Brazil
•CPFL Energia
$40,000,000
Equity investment / convertible loan on IFC’s own account.
February 2004
Holding company that controls three
distribution companies and has majority
ownership in several generation projects. CPFL is the largest
power company controlled by local
investors.
2,379 MW
(multiple technologies)
$88,700,000
Equity investment on IFC’s own account.
February 2008
Joint venture promoted by
ContourGlobal of the U.S. and the Public Power Corporation
,Greece’s state-owned power company,
focused on generation, transmission and
distribution.
2,379 MW
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Selected IFC investments in renewable energy in LAC
Guatemala
El Canada
$27,000,000
Loan project financing and Mobilization
Hydro, 43 MW
Mandated Lead Arranger
December 2002
Colombia
Caruqia and Guanaquitas
$15,500,000
Senior & subordinated
project financing
Hydro, 20 MW
Lender
October 2008
Chile
La Higuera
$160,000,000
Senior & subordinated
project financing x
Hydro, 155 MW
Mandated Lead Arranger
May 2007
Chile
Norvind
$61,500,000
Senior project financing
Wind, 50 MW
Mandated Lead Arranger
February 2009
Mexico
Eurus
$375,000,000
Senior & subordinated
project financing x
Wind, 250 MW
Mandated Lead Arranger
June 2010
Mexico
Eléctrica del Valle
$138,000,000
Senior & subordinated
project financing xx
Wind, 67.5 MW
Mandated Lead Arranger
August 2010
Nicaragua
San Jacinto
$160,000,000
Senior & subordinated
project financing xx
Geoth., 72 MW
Mandated Lead Arranger
November 2010
Peru
Cheves
$250,000,000
Senior project financing
Hydro, 168 MW
Mandated Lead Arranger
December 2010
Panama
Pando y Monte Lirio
$183,000,000
Senior & subordinated
project financing xx
Hydro, 85 MW
Mandated Lead Arranger
June 2010
Chile
La Confluencia
$208,000,000
Senior project financing
Hydro, 158 MW
Mandated Lead Arranger
October 2007
Dom. Republic
Basic Energy
$42,650,000
Loan financing and guarantee
Wind & other
Lender
June 2005 / June 2007
IFC has financed around 4,000 MW of hydro capacity globally and more than 1,350 MW in LAC
Chile
Hidromaule
$19,700,000
Senior & subordinated
project financing
Hydro, 20 MW
Mandated Lead Arranger
June 2007
Jamaica
JPS Co
$30,000,000
Senior project financing
Wind, 3 MW / Hydro 6 MW
Lender
November 2010
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KEY CONTACTS FOR INFRASTRUCTURE
Gabriel Goldschmidt Senior Manager, Infrastructure, Latin America & Caribbean
[email protected] Tel: 1 (202) 473 7732
Miguel Toledo Principal Investment Officer, Infrastructure, Latin America & Caribbean
[email protected] Tel: 1 (202) 473 4185
Catherine Gourdin Senior Investment Officer – Infrastructure, Caribbean
[email protected] Tel: 1 (868) 628 5074
Judith Green Senior Investment Officer – Jamaica Country Office
[email protected] Tel: 1 (876) 960 0459
Omar Zacarías Investment Analyst – Infrastructure, Caribbean
[email protected] Tel: 1 (809) 566 6815
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Annexes
Major Investor in Thermal Generation
Long track-record in all thermal sub-sectors
Most recent investments include Cameroon, Chile, Colombia, Haiti, India, Jamaica, Pakistan, Turkey, Togo
To date, IFC
Financed more than 70 thermal projects totaling 21,000 MW of capacity
Is more selective in its thermal investments:
Increased focus on natural gas
Climate friendly measures, e.x. energy efficiency, gas flaring reduction
Diesel and heavy fuel oil where limited generation alternatives exist
Project finance and/or corporate holding company finance, equity and/or debt
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IFC’s Long Standing Experience in Hydro
IFC has financed key private sector hydro projects in Chile, Guatemala, Nepal, India, Philippines, Uganda, Turkey and Pakistan, among others
IFC has made over 40 hydro investments totaling more than 4,500 MW of capacity
IFC supports hydro projects by:
Providing long maturities to match asset life
Taking on full or partial merchant risk
Assisting with managing E&S issues
Taking construction risk
Creating innovative bundling for small hydros
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IFC is a Leading Investor in Emerging Markets Wind
IFC has made 15 wind investments in more than 1,200 MW of capacity
Key transactions in Chile, Mexico, Bulgaria, Turkey, Romania, China, Sri Lanka, and India
Experience with both equity and debt financing
Can mobilize donor financing where appropriate
IFC leverages its strong expertise to appraise/support wind projects
Relationships with top technical consultants
Experience with a wide range of turbine manufacturers/models
Innovative structuring to optimize leverage, e.x. flexible subordinated tranches that can “absorb” wind variability
Understanding of regulatory support mechanisms
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IFC Investment in Solar Generation
IFC has made 9 solar generation investments in Thailand, Philippines, India and China
Projects in new markets/regulatory regimes
Experience with both equity and debt financing
Can mobilize donor financing where appropriate
IFC invests in technology and scale to reduce cost of solar energy:
Financing utility-scale solar plants in emerging markets
Investing in best-in-class start up developers
Developing relationships with suppliers
Following emerging solar technologies to be ready for first opportunity
Investing in solar power development private equity funds
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IFC supports this difficult but promising sector through:
Innovative structuring allowing for stage disbursement to full resource completion
In-house technical expertise allowing for greater comfort with resource-related issues
Understanding of sector-specific challenges related to resource risk and long project cycle
IFC has made geothermal investments in Guatemala, Nicaragua, and Philippines
Experience with corporate finance, as well as project finance of both integrated (steam+plant) and plant-only projects
Experience with both equity and debt financing
IFC Invests in Geothermal Companies and Projects
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IFC Experience in Distribution and Transmission
IFC has made over 35 distribution and transmission investments
Recently invested in distribution companies in Albania, Brazil, Jordan, Macedonia, Turkey and Uganda
Investments in transmission in Argentina, Bolivia, Chile, India and Peru
IFC works with clients to tailor investment to capital needs and regulatory environment
IFC has been able to deliver several “first of a kind” transactions:
Providing financing to for capital expenditure programs for distribution companies, including recently privatized companies – e.g. Sedas (Turkey), Umeme (Uganda) and rural electrification concessions – e.g. Comasel (Senegal)
Supporting financing of greenfield private transmission assets – e.g. Powerlink (India) and privatized transmission assets (e.g. TDE, Bolivia)
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IFC Caribbean Example: West Kingston Power Partners (Jamaica)
- 66MW power generation tender awarded pre-crisis on a BOO basis by the
independent regulator to Jamaica Energy Partners (JEP), an IFC IPP client - Project developed as greenfield land-based HFO diesel IPP
- Objective: Provide severely needed upgrade to Jamaica’s aging generation capacity
Issues
• Project financed greenfield (construction risk) with no recourse to owners
• Vulnerable macroeconomic environment in the crisis, making $77m syndication challenging
• No long-term commercial bank financing alternative available
Mitigants
• Sector well regulated (price cap method and fuel cost passed through)
• Project undertaken by JEP, an experienced IPP
• $1.3bn IMF Stand-by-Agreement in early 2010 facilitated syndication
Risk
Ass
essm
ent
IFC provided $22m for its own account and mobilized $77m from other financial institutions: Bank of Nova Scotia Jamaica, First Caribbean International Bank, CAF, CIFI, Finnvera, as well as CJAP Partners: FMO and DEG
Successful mobilization
Plant is 75% more efficient than the old existing generation plants it displaces. It reduces the sector’s overall fuel imports, saving annually: 0.18m tons of CO2 emissions and net costs of $35m
Power Efficiency
Plant can be run, at a marginal investment cost, on natural gas, once supply becomes available in Jamaica M
erits
of t
he P
roje
ct
Back
grou
nd
Provides 60 full time jobs near impoverished downtown Kingston neighborhood
Diversifying Power Sources
Employment
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