managing risks & facilitating private investment in mexico ... · clients: products: to promote...
TRANSCRIPT
Anil Chandramani
Chief Investment Officer and Global
Relationship Executive, Chemicals & Fertilizers
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Managing Risks & Facilitating Private
Investment in Mexico’s
Chemicals & Petrochemicals Industry
ANIQ Conference
Mexico City October 15, 2015
The World Bank Group and IFC
IBRDInternational Bank for Reconstruction and Development
IDAInternational Development Association
IFCInternational Finance Corporation
MIGAMultilateral Investment and
Guarantee Agency
To promote institutional,
legal and regulatory
reform
Governments of poorest
countries with per capita
income of less than
$1,025
- Technical assistance
- Interest Free Loans
- Policy Advice
To promote private
sector development
Private companies in
member countries
- Equity/Quasi-Equity
- Long-term Loans
- Short-term Finance
- Risk Management
- Advisory Services
To reduce political
investment risk
Foreign investors in
member countries
- Political Risk Insurance
Est. 1945 Est. 1960Est. 1956 Est. 1988
Role:
Clients:
Products:
To promote institutional,
legal and regulatory
reform
Governments of member
countries with per capita
income between $1,025
and $6,055
- Technical assistance
- Loans
- Policy Advice
Private Sector Support Public Sector Support
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The Mission of IFC is to promote private sector investment in developing countries to reduce poverty and improve people's lives
Holding $50Bn Portfolio
IFC in FY14
S&P, Moody’s AAA
Committed 2014 $22.4 billion- Syndicated $5.1 billion- Own Account $17.3 billion
# of projects 599# of countries 98
Committed Portfolio (IFC balance) by region
Committed Portfolio (IFC balance) by sector
* Manufacturing includes the following subsectors: Chemicals/Petrochemicals, Construction Materials and Energy Efficient Machinery
� Largest multilateral source of loan and equity financing for the private sector in emerging markets
� Takes market risk with no sovereign guarantees
� Promoter of environmental, social, and corporate governance standards
� Resources and know-how of a global development bank + flexibility of a merchant bank
� Portfolio of over 2,000 companies worldwide
� Holds equity and quasi-equity in over 800 companies worldwide: Honest Broker Role
� Loans may be foreign currency or, in several countries, may be in local currency
Manufacturing,
Agribusiness
and Services
29%
Financial
Markets
43%
Infrastructure
and Natural
Resources
28%
East Asia and
the Pacific
14%
Europe and
Central Asia
21%
Latin America
and the
Caribbean
21%Middle East and
North Africa
10%
South Asia
11%
Sub-Saharan
Africa
15%
RoW
8%
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�US$6.5 billions invested (own
account)
�308 projects
�53 countries
Chemicals, Petrochemicals & Fertilizers Sector
Key Features
(historical)
Key Features
(historical)
Committed Amount by Sector
� In-house industry specialists with global experience in
the sector and benchmarking capabilities
� Strong regional knowledge with exclusive focus on
emerging markets
� Climate change strategy
� Promotion of sustainable economic growth and
competitiveness with creation of direct and indirect
jobs, know-how transfer
Committed Amount by Region
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Investments of about $1 Bn in FY14 in the IndustryInvestments of about $1 Bn in FY14 in the Industry
Engro Corporate, PakistanICS, Senegal: phosphoric acidIndo Jordan, Jordan: phosphoric acidEngro Chemicals, Pakistan: ammoniaTrigen II, Trinidad & Tobago: ammoniaFosfertil, Brazil: SSP, TSP, MSP, DAPGNFC, India: ammonia, ureaDeepak Nitrate, India: ammonia,Urea,DAPPQB, Bolivia: ammonium nitrateKuAz, Russia: ammonia, ureaIndo Egyptian, Egypt: phosphoric acidKoyo, China: ammonia, ureaAbocol, Colombia: ammonium nitrate,NPKJIFCO, Jordan: DAPJPMC, Jordan: phosphateEngro Emergency, Pakistan: ureaOCI Egypt: Corporate loan for fertilizersParadeep Phosphates, India: DAPItafos Brazil: PhosRock & Acid
A Sample of IFC’s Industry Experience
ERC Refinery, EgyptPSPC (Shell), PhilippinesStar Petroleum (Caltex), ThailandRefisan (Pecom), ArgentinaPetrotel-Lukoil, RomaniaAlliance Oil Company, Russia
Refineries
Petrochemicals
Continental Carbon of India Ltd.NPC, Thailand: gas crackerCopesul, Brazil: naptha crackerCopene, Brazil: naptha crackerSamsung, Korea: petrochem/aromatics
complex restructuringHMC Polymers, Thailand: PPPetroken, Argentina: PPPoliteno, Brazil: PEIpiranga I & II, Brazil: PE, PP Indelpro, MexicoProfalca, Venezuela: PPGrupo Zuliano, Venezuela: petrochem complexSuzhou, China: PVCVinythai, Thailand: PVCEngro PVC, Pakistan: PVCTuntex, Thailand: PTARhodiaco, Brazil: PTARhodia-ster, Brazil: PTA/PETOxiteno, Brazil: EO/MEG Girsa, Mexico: EO/MEGPralca, Venezuela: MEGGidesa, México: EG, PSTrikem, Brazil: PSInnova, Brazil: styrene/PSDaaboul, Syria: LABJose Methanol, Venezuela: methanolKuAz, Russia: caprolactamEleme Petrochemicals, Nigeria: PE, PPXinao, China: Coal-to-DMEDCM Shiram, India: PVCHimadri, India: Carbon Pitch, carbon blackGalaxy Chemicals, India: SurfactantsEIPET, Egypt: PET
Others/InfrastructureFertilizers
Inorganic Chemicals
Engro Polymers, PakistanKanoria Vizag, IndiaAtul Ltd, IndiaAlexandria Carbon Black, Egypt: Carbon blackContinental Carbon (CCIL), India: Carbon BlackMaanshan I & II, China: Carbon blackRain Calcining, India: calcined carbonPeroxythai, Thailand: hydrogen peroxideChengdu, China: potassium hydroxide & PVCProdesal, Colombia: caustic soda, chlorineMeghmani Finechem, India: ChlorAlkaliMagadi Soda, Kenya: soda ashLukovac Soda, Bosnia: soda ashKanoria Chemicals, India: ChlorAlkaliJiuda Salt, China: industrial salt
JPMC Terminal, JordanIFC / SCB FacilityEngro Vopak, Pakistan: Chemical terminalMesser, Trinidad & Tobago: industrial gasesOpet Petrolculuk, Turkey: fuel distributionAntai, China: metallurgical cokeEcogreen I & II, Indonesia: oleochemicalsDarong, China: specialty chemicalsUPL, India: pesticides, herbicidesGapco, Kenya: storage terminalZhong Chen, China: storage terminalGalnaftogaz, Ukraine: petroleum retailerDongyue, China: fluorine chemicals,
organicsiliconeAtul, India: Dye and pesticide intermediatesHikal, India: PharmaceuticalsVinati Organics (JV), India: specialty chemicals
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All Economics Is Driven By Politics……
IFC Chemicals 6
?
Political Risk: Far Away Issues Also Impact Us
Where is France Going?
?
What about
the Migrants
Crisis
US: Playing Political Games – With No Rules
Presentation Title 7
The New Normal : Shut the government down and flirt with debt default every 3 months?
Prospect Prospect Prospect Prospect of of of of prolonged and prolonged and prolonged and prolonged and
frequent frequent frequent frequent fights fights fights fights on on on on
Capitol Hill Capitol Hill Capitol Hill Capitol Hill
The next politicoThe next politicoThe next politicoThe next politico----economic crisis is just a few weeks away !! economic crisis is just a few weeks away !! economic crisis is just a few weeks away !! economic crisis is just a few weeks away !!
MIGA: Multilateral Investment Guarantee Agency
�Umbrella of deterrence
� MIGA’s Shareholders are the same as the Host Countries of investments
� Only a small proportion of MIGA-supported projects encounter difficulties
�MIGA guarantees provide downside protection on long-
term investments
� Equity covered up to 90%; Debt covered up to 95%
� Tenor covered up to 15-20 years
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•Political (Country) Risk Insurance
Currency
Transfer
Restriction and
Inconvertibility
Expropriation War and Civil
Disturbance
Breach of
Contract
Coverage
•Guarantee holder can pick any combinations of coverage
Non Honoring of
Sovereign
Obligations
�Facilitation of settlement of disputes
•Host Country is motivated to find a solution
•Project sponsors and financiers have a vested interest in continued success of project
•5 claims paid out of 980 guarantees for total of 616 projects since 1990
MIGA’s Risk Mitigation Solutions
China: Yuan versus Dollar
IFC Chemicals 9
Source: IMF, SEI
Chin
a:
Avera
ge B
ase
Meta
ls
Consu
mpti
on a
nd G
DP p
er
Capit
a
The Asian Giants: China and Japan
BOJs twin aims— generating inflation and bringing down yields—
may be somewhat contradictory
Bank of Japan
Due to economical & political instability
Volatility has been Increasing
IFC Chemicals 10
Source: IMF
Chinese Stock Market 2014-15
Emerging Markets are driving global growth. All Companies are increasingly focusing on EM.
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-1
0
1
2
3
4
5
6
Historical and Forecast GDP Growth
Source: IMF
-6
-4
-2
0
2
4
6
8
10
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
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World
Advanced economies
Emerging and developing economies
Economic Insights: We know Emerging Markets
As a member of the World Bank Group, IFC has unparalleled insights into Emerging Markets.
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Phosphatic Fertilizers : An example
Source: Fertilizer International, Deutsche Bank
Volume growth is volatile and pricing is often lagged to volumes
Cyclicality: we have to live with it
Counter-Cyclical Role: AAA-rated
•IFC has committed over $6.0 billion of local currency loans in a variety of currencies since 1999
•(31 currencies currently available)
13For more information see Annex 3
Local and Foreign Currency capabilities
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B-Loans & Parallel Loans
•A loan is for IFC’s own account
•B loan is for account of participant commercial banks
•Only one loan agreement, signed by the borrower and IFC
•IFC is the lender of record for the entire loan (A+B)
•IFC Loans exempt from withholding tax
Participants
IFCBorrower
Loan Agreement
A + B Loans
B LoanParticipation
Agreement
1. Calyon
2. Cordiant Capital
3. Citigroup
4. ING Bank
5. ABN AMRO
6. BayernLB
7. Societe Generale
8. HSBC
9. Natixis
10. KBC Finance Ireland
Top 10 IFC B-Loan Participants
IFC Mobilizes Others: Lenders & Equity Investors (AMC)
•Established in 2009 to manage third party capital in a private fund structure. •$8.1b •Assets under management
•27 •High Caliber
Investors
•$4.6b •Investment
Commitments by Funds
•8•Funds
•75• Staff
•65•Portfolio
Investments
• A wholly owned subsidiary of IFC
• IFC is an anchor investor in AMC funds,
• IFC also invests directly in underlying deals, and
• AMC funds invest in IFC’s proprietary transactions.
• AMC provides investors with a unique platform to invest in IFC’s proprietary transactions in emerging markets.
• AMC’s investors benefit from exclusive access to IFC’s
• Emerging markets deal origination capability and pipeline,
• On the ground footprint,
• Investment resources,
• Proven risk management.
• Different funds raised to focus on specific regions and sectors.
• Separate subsidiary for independent decision-making process.
•AMC Family of Funds: World Class Investments for World Class Investors
IFC Global Capitalization
Fund
Africa Capitalization
Fund
IFC Russian Bank
Capitalization Fund
IFC Global Infrastructur
e Fund
IFC African, Latin
American and Caribbean
Fund
IFC Catalyst Fund
Financial Markets$3bn
Financial Markets$182mn
Financial Markets$550mn
Infrastructure$1.2bn
Multi-region, Multi-sector
$1bn
Resource Efficiency$418mn
Selected AMC
Investors
IFC’S CHINA-MEXICO FUND & ASSET MANAGEMENT CO, LLC
•31
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Priorities Innovation hot spotsIFC Cleantech Clients
Clean energy & access
1▪ Solar
Industrial efficiency
3
Sustainable urbanization
2
Agriculture, water, and
forestry
4
▪ Water
▪ Energy storage
▪ Biomass
▪ Green Buildings
▪ Water
▪ Energy storage
▪ Energy efficiency
▪ Waste
▪ Biomass
▪ Energy efficiency
▪ Biomass
▪ Energy efficiency
IFC holds an annual Cleantech Workshop which is attended by 150 investors, companies, and IFC
staff to exchange ideas on innovation
IFC has also committed US$254 million in
12 climate funds
IFC has also committed US$254 million in
12 climate funds
IFC is pushing innovation via its new direct venture/growth capital investment program (US$136 million committed since 2009)
Strong Equity Track-Record: Different from PE
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0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010North America Latin America
Western Europe Central and Eastern Europe
Africa and Middle East Asia Pacific
Historical Global Chemical Capital Spending
(billions of dollars)
2010 Global Chemical Capital Spending and
as % of regional shipments
(billions of dollars)
� Fertilizer Plant (Amonia, Urea) costs $1-2bn
� A new Refinery costs $5-8bn, while a Polyethylene Plant
costs $2-4bn
� 2010 Capex was around $247bn in 2010
-20%
-10%
0%
10%
20%
30%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Growth Global Capital Spending Growth Global Shipments
0
50
100
150
200
250
300
350
400
Central and
Eastern
Europe
Latin America Africa and
Middle East
North
America
Western
Europe
Asia Pacific
19%
5%4%13%4%7%
Capital Spending vs. Shipments Growth
(%)
Include Pharmaceuticals
The Chemicals Industry is Capital Intensive
Long term player – On both debt and equity sides
• IFC would enter into Risk Sharing Agreements (“RSAs”) with one local banks in each
country, selected jointly by Client Company and IFC. Under each RSA, IFC would
share losses with the Bank on its portfolio of financings to Client’s distributors
and/or farmers in that emerging market, typically on a pro-rata and pari-passu basis.
• Under a separate Framework Agreement between Client and IFC, Client would
provide a pooled first loss cover and reimburse IFC for its payments under the RSAs,
up to a maximum cap to be agreed between them(“First Loss Amount”).
• Structures of individual RSAs can vary, depending on each banks’ requirements and
each target portfolio.18
Short Term Finance: Crisis Mitigation
Bank 2
Country 2IFCIFC Client
Company
FarmerFarmerFarmerFarmerFarmerFarmer
FarmerFarmerFarmerFarmerFarmerFarmer
DistributorDistributorDistributorDistributorDistributorDistributor
Bank 1
Country 1
Bank 3
Country 3
Global
Framework
Agreement
RSA
RSA
RSA
Risk Sharing Facilities
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In-house Technical and Market Expertise
The Global Economy is Highly Volatile
The Global Crises shook us
out of complacency.
The world continues to change dramatically.
It is Very Important to Understand and Manage Risks
Let your risk capabilities drive your strategy.
IFC’s mandate is to Builds Partnerships
to Share Its Expertise to Supplement
Risk Management Capabilities of Companies,
so they can Enhance Competitiveness
and Build Leadership positions. 20
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IFC Value Add: Tailored To Each Customer
� Equity
� Fixed/Floating Rates, Local Currencies
� Up to 15 year Loan Maturity
� Flexible Amortization Profile
� Catalyst for other Investors and Lenders
� Equity Participation
� Capital Mobilization
� 50 Years of Sector Expertise
� Greenfield
� Expansion/Modernization
� Corporate Strategy
� Access to International Investors
� Technical Advice
� Advice on Environmental and Social Best Practices
� Equator Principles Modeled after IFC Standards
� Local Consultation and Disclosure
� Local Supplier Development
� Environmental/ Social Advice
� Corporate Governance
� Local Economic Development
� HIV/AIDS Prevention
� Community Development Funding
Sustainability Toolkit
Environmental & Social Risk Management
GlobalChemicalsExpertise
Long-term Competitive Financing
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� Government Relations: 184 Finance Ministries form IFC’s BoD
� Neutral broker Role
� Reduced Risk of Expropriation, Breach of Contract, Convertibility
� World Bank Synergies
� Withholding Tax Benefit
� Partnership with MIGA
Country Risk Mitigation
� Extensive Local Office Network
� Local Transaction Experience
� World Bank Synergies
Regional Knowledge
In Summary
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How We Finance Projects
•Umbrella for participants in IFC’s syndication program: IFC lender of
record, immunity from taxation and provisioning requirements.
•IFC’s total financing must be less than 25% of total company
capitalization, and IFC does not manage or own largest stake.
Project Type IFC Investment
Greenfield, total cost
less than $50 million
Greenfield, total cost
more than $50 million
Expansion or rehabilitation
Greenfield, expansion,
rehabilitation
Up to 35% of project cost
for IFC’s account
Up to 25% of project cost
for IFC’s account
Up to 50% of project cost
for IFC’s account
100% project cost for IFC
and participating banks’
accounts
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IFC’s Works With A Broad Array Of Products and ServicesSeniorDebt
Global TradeFinance Program
StructuredFinance
MezzanineFinance
PrivateEquity
• On-lending
• Liquidity management
• Acquisition financing
• Warehousing facilities
• Syndicated loans
• Partial credit guarantees
• Securitization
• Bond underwriting
• Credit Enhancement
• Convertible debt
• Subordinated debt
• Other Tier II instruments
• Common shares
• Preferred shares
• $1 billion program
• Guarantees to issuing banks
• 46 issuing banks in 24 countries
• 92 confirming banks in 62 countries
• $579 million of issued guarantees in first 12 months
AdvisoryServices
• Corporate governance
• Risk management
• Small and medium business banking
• Housing finance
• Energy efficiency finance
• Privatization
SustainableFinance
• Carbon finance
• Renewable energy
• Supply chain financing
• Corporate governance financing
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Approaching IFC
• Foreign or Domestic Sponsors
� New venture or expansion; private sector majority ownership only
� Project must be developmentally sound and commercially viable
• Sponsor Commitment is Required
� Equity participation; pre-completion support/guarantees
• Submit Preliminary Business Plan or Feasibility Study
� Brief project description, incl. technical feasibility and market study
� Information on sponsors and operator
� Environmental studies
� Information on requirements, financing plan and cash flow projections
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IFC’s Project Cycle
Early Review
• Client needs determined
• Contribution of project to development assessed
• Project screened for potential risks & issues
• Site visit
• Mandate letter
Due Diligence Negotiation DisclosureInternal
Approvals and Commitment
Disbursement
• Assessment of business potential, risks, opportunities
• Financial and economic Evaluation
• Compliance with IFC’s social and environmental performance standards reviewed
• Terms and conditions of the IFC investment
• Action plan agreed
• Environmental and social information disclosed
• Opportunity for public comment
• Board consideration
• Board approval
• Legal review
• Signing of legal documents
• Fulfillment of conditions of disbursement
• IFC funds disbursed
We Agree on a Specific Timeline to Meet Client’s Needs
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INTERNATIONAL FINANCE CORPORATION
Anil Chandramani
Chief Investment Officer & Global Client Relationship Executive,
Chemicals & Fertilizers Sector
Washington DC
Phone: +1-202-473-4081
Cell Phone: +1 202 830 8398
E-mail: [email protected]
Cecilia Ocon
Senior Investment Officer; Manufacturing
Agribusiness & Services Department
Mexico City
Phone:+52 55 3098 0235
Cell Phone: +52 1 4188 8506
Email: [email protected]