ifu / ekf workshop - beyond bric
TRANSCRIPT
Finance your international activities with
IFU & EKF
Beyond BRIC, Copenhagen December 8, 2010
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Financing in emerging markets poses testing challenges:
• How will you manage credit risk to a rapidly expanding customer in Vietnam?
• How can you protect yourself from corrupt regional financial officials in Nigeria?
• How will you manage the risk of your Algerian infrastructure client reneging on the deal halfway through construction?
• Where will you find financing for your planned production site in Ethiopia when your Danish bank looks at you in horror?
1. IFU: who we are and how we can collaborate
2. EKF: who we are and how we can collaborate
3. What leads to success? Key lessons from emerging markets
Today’s agenda
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• IFU is a self-governing fund established in 1967 and owned by the Danish government
• Our purpose is to promote economic activity in developingcountries
• We advise and invest with Danish companies in developing countries and emerging markets
• We operate on commercial terms• Our Board mainly consists of members from Danish
companies• Our instruments are equity investments and loan financing
IFU - who we are
IFU offices
IFU’s footprint is oriented Beyond BRIC – 2/3 of our investments are made in non-BRIC emerging markets
IFU eligible countries*
PAGE 5 * IFU can only invest in countries with a GDP per capita below USD 3,156
Network & expertise• 40 years of experience from
developing countries and emerging markets
• Regional offices in Kenya, South Africa, and Ghana in addition to China and India
• Hands-on during preparation and implementation
Political “insurance”• Danish state “Quality mark”• Zero tolerance on corruption
Financing• Equity and loan financing• Financial risk sharing in
project
What does IFU bring to the table? What do we require from you?
• A strong business case
• Experience within the industry
• Solid management experience
• Organisational and strategic commitment
• Financial strength
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• Risk sharing and long-term strategy
• Share capital and/or loans
• Investment period 6-8 years
• Size of IFU’s investment:– Investments up to DKK 100m per
project– Although no more than our Danish
partner company
• Agreed exit terms at the outset
IFU’s investment
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• Legal set-up/requirements
• Financial structure
• Where to establish
• Negotiations with local partner, if any
• Dealing with authorities
• Member of project company board
• Additional financing
• Good governance and CSR policy
IFU as an advisor and partner
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Examples of Danish partners
1. IFU: who we are and how we can collaborate
2. EKF: who we are and how we can collaborate
3. What leads to success? Key lessons from emerging markets
Today’s agenda
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EKF ensures competitive financial terms for Danish business and industry in international markets
EKF covers extraordinary financial risks related to business of economic interest to Denmark
EKF operates on commercial terms and is guaranteed by the Danish state
EKF’s Mission Statement
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Project finance
Contract and Project delivery
Guarantee
Bond guarantees
Investment Guarantee - Equity - Loan
Export Credit Guarantees- Seller’s credit- Buyer’s credit
Export loans
ReinsuranceScheme
EKF Climate
L/C Guarantees
Traditional
New
Working Capital Scheme
EKF’s Products
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Project finance
Contract and Project delivery
Guarantee
Bond guarantees
Investment Guarantee - Equity - Loan
Export Credit Guarantees- Seller’s credit- Buyer’s credit
Export loans
ReinsuranceScheme
EKF Climate
L/C Guarantees
Traditional
New
Working Capital Scheme
EKF’s Products
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GuaranteeBank
ContractsCash
payment
Loan
• Two Danish companies, Cimbria Unigrain and Scanvægt, export equipment
• The importer is Ukraine’s biggest chicken producer, Myronovsky
• EKF garantees payments from Myronivsky to bank.
Export loan
Example – Export Credit Guarantee and Loan
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Project finance
Contract and Project delivery
Guarantee
Bond guarantees
Investment Guarantee - Equity - Loan
Export Credit Guarantees- Seller’s credit- Buyer’s credit
Export loans
ReinsuranceScheme
EKF Climate
L/C Guarantees
Traditional
New
Working Capital Scheme
EKF’s Products
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• Kosan Crisplant signs contract for USD 30m with Algerian customer
• Over a number of years, Kosan Crisplant must set up a range of gas filling stations
• Kosan Crisplant worries that the customer will cancel the contract before all filling stations have been installed
• EKF guarantees against losses due to unlawful contract cancellation
Example – Contract guarantee
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Project finance
Contract and Project delivery
Guarantee
Bond guarantees
Investment Guarantee - Equity - Loan
Export Credit Guarantees- Seller’s credit- Buyer’s credit
Export loans
ReinsuranceScheme
EKF Climate
L/C Guarantees
Traditional
New
Working Capital Scheme
EKF’s Products
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• X-Yachts produces luxury yachts • Exports about 90 % of turnover
• Seasonal fluctuations puts working capital under pressure
• Bank is willing to expand credit line with guarantee from EKF
>>> EKF provides guarantee to bank in periods with larger working capital needs
Example – Working Capital Guarantee
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Guarantee
Bank Cash payment
Loan
• A Danish company wishes to invest in factory in Vietnam
• Another Danish company supplies equipment to the factory
• IFU invests in company with DK Company 1
• EKF garantees export credit from bank to DK Company 2
Export loan
IFU & EKF in same project?
Supplier DK Company 2
Vietnameseproject company
InvestorDK Company 1
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1. IFU: who we are and how we can collaborate
2. EKF: who we are and how we can collaborate
3. What leads to success? Key lessons from emerging markets
Today’s agenda
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• The customer is creditworthy• The customer can raise min. 15 pct. pre-payment• There is a bank willing to lend – perhaps with EKF guarantee• Environmental and other CSR aspects are acceptable
When exporting…
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When investing…
• Projects require more financing than the business plan indicates• Projects take longer to establish than the business plan indicates• Country risks exist – the key is to identify them and anticipate them• The key to success: management, management, management• Be mindful of projects propped up by aid and subsidies• Collaborate with local partners – but think twice about sharing ownership
What leads to success? Key lessons