11.30 michel folliet, international finance corporation
DESCRIPTION
11.30 Michel Folliet, International Finance CorporationTRANSCRIPT
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IFC experience in financing and advising cement companies in emerging markets
Michel Folliet, IFC Global Manufacturing
Cemtech Conference, Dubai March 6, 2011
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CONTENTS
- IFC AT A GLANCE
- IFC IN THE CEMENT SECTOR
- IFC PROJECT TRANSACTION CYCLE
- Q & A
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IFC: Our Reputation and Value
• IFC is the world’s largest multilateral private sector investor in the
emerging markets.
• Total Committed Portfolio: US$49 Billion at June 30, 2010
• AAA rating
• 3,350 employees in 86 countries worldwide (55% in the field)
• In-house syndications department working with over 200 banks
• Strong advocate and brand on environmental and social issues
• Climate Change mitigation is a key priority for IFC/World Bank
• Political risk mitigation
• Preferred creditor status
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FY 2010 IFC Investments by Industry
Global FinancialMarkets 53%
Commitments for IFC’s Account: US$12.7 BillionAdditional Resources Mobilized: US$5.4 Billion
Global Information and Communication Technologies 4%
Global Manufacturing and Services 11%
Infrastructure 12%
SubnationalFinance 1%
Health and Education 3%
Oil, Gas, Miningand Chemicals 8%
Private Equity and Investment Funds 3%
Agribusiness 4%
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FY 2010 IFC Investments by Region
Sub-Saharan Africa 19%
US$2.4 billion in Sub-Saharan Africa
US$1.5 billion in Middle East and North Africa
Europe and Central Asia 23%Latin America and the Caribbean 24%
Middle East and North Africa 12% Global 1%
East Asia and the Pacific 12%
South Asia 8%
Access to finance
IFC helps to increase the availability and affordability of financial services, particularly to micro, small, and medium enterprise clients.
Portfolio of 238 projects in 68 countries, valued at $290 million.
Sustainable Business
Building on IFC’s environmental and social performance standards, we promote sustainable business practices among firms in infrastructure, extractive industries, manufacturing, agribusiness, and services.
Portfolio of 263 projects in 70 countries, valuedat $255 million.
Investment Climate
IFC helps governments implement reforms to improve their business environment and encourage and retain investment, thus fostering competitive markets, growth, and job creation.
Portfolio of 144 projects in 67countries, valuedat $185 million.
Public-Private Partnerships
IFC advises governments on structuring publicPrivate partnership transactions in infrastructure
and other public services.
Portfolio of 91 projects in 53 countries, valued at$130 million.
IFC ADVISORY SERVICETotal Spending in FY 2010: $268 Million
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IFC offices in Africa
IFC HubsIFC Country Offices
ATLANTICOCEAN
MediterraneanSea
INDIANOCEAN
Cape Town
JohannesburgMaputo
Antananarivo
Lusaka
Freetown
NairobiKigali
Douala
N’Djamena
LagosAccra
Ouagadougou
Abidjan
Dakar
CairoAmmanJerusalem
Beirut
Algiers
Rabat
Sana’a
Dubai
Monrovia
Kinshasa
Addis Abala
IFC IN THE CEMENT SECTOR
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IFC Cement Sector Portfolio of Investments:
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US$1.4 billion in 28 companies and 26 countries (30 October 2010)
IFC Cement Portfolio is Composed of Global and Local ClientsOver 4 billion US$ invested since inception
Albania (2)Kazakhstan (1+1)Russia (1)Armenia (1)
China (3)
Vietnam (1+1)Indonesia (1)Laos (1)
India (2+1)
Turkey (1)Algeria (1)Yemen (2)Morocco (1)Egypt (1)
Libya (1)Iraq (1)Croatia (1)
Senegal (1)Ethiopia (1)Angola (1)Ghana (1)Togo (1)Liberia (1)
Mozambique (1)Congo (1)
Mexico (1)Trinidad & Tobago (1)Dominican Republic (1)Paraguay (1)Brazil (1)
Blue: Committed InvestmentsRed: Under mandate or strong lead
Haiti (1)South Africa (1)
Local Clients 47%
GlobalClients
53%
Bangladesh (1)
Recent Transactions (FY2007-FY2010)
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Year Country Project NameInvestment
AmountUS$ million
2007 India OCL 50 2007 Yemen AYCC 125 2007 World Region Italcementi 200 2007 Turkey Sanko Cement 75 2007 Angola Secil Lobito 27 2008 China Tianrui Cement 85 2008 Senegal Vicat-SOCOCIM 26 2008 Ethiopia Midroc Derba 55 2008 China Shanshui III 110 2009 Albania Antea - Titan 41 2009 Algeria ASEC Algeria 50 2009 Kazakhstan Jambyl Cement- Vicat 175 2009 Vietnam Nghi Son II - Taiheiyo 67 2009 Morocco Ynna Asment 27 2010 Africa Region Heidelberg Africa 180 2010 Egypt Titan Egypt 120 2010 Mexico Eurus-Cemex 55 2010 India VicatSagarCement 75
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Selected Cement Sector TransactionsGhanaDiamond Cement
US$6 millionLoan, Equity
MauritaniaBSA Cimint
US$11 millionLoan
EthiopiaMidroc
US$55 millionLoan
KazakhstanVicat/Jambyl Cement
US$185 millionA/B Loan, Equity
SenegalVicat-SOCOCIM
US$26 million, LoanUS$42 million, IFC Local Currency Bond
AlgeriaACC Cement
US$45 millionLoan
YemenAYCC
US$125 millionA/B Loan
AlbaniaFushe Kruje / Seament
US$30 millionLoan
Bosnia and HerzegovinaLukavec / FCL
US$12 millionLoan
GlobalItalcementi
US$200 millionLoan, Equity
TurkeySanko Cement
US$175 millionA/B Loan
Dominican RepublicDomicem
US$56 millionLoan
Trinidad and TobagoTCL Group
US$37 millionLoan, Risk Management
BangladeshLafarge Surma
US$60 millionA/B Loan, Equity
ChinaShanshui Cement
US$58 millionLoan, Equity
ChinaTianrui Cement
US$71 millionLoan, Equity
IndiaOCL India Ltd.
US$50 millionLoan
PhilippinesHolcim
US$27 millionLoan, Equity
VietnamNhi Son Cement (Taiheyo)
US$56 millionA/B Loan
ChinaAnhui Conch
US$86 millionLoan
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CEMENT SECTOR STRATEGY / PRIORITIES Reinforcing relationship with global players and supporting their efforts primarily in high-risk countries,
especially in current post-crisis environment
Partnering with emerging players developing regionally, promoting South-South investments
Focusing on frontier markets which are sufficiently large and are underserved: 50% of IFC’s cementportfolio is in frontier countries
Share IFC’s experience and understanding of local business conditions
Promoting Environmental and Social high standards
Improving energy efficiency and reducing CO2 emission: technology, waste heat recovery, natural gasusage, blended cement and energy efficiency
Deal selection is based on project competitiveness (lowest delivered cost producer), IFC sector regionalexposure and IFC additionality (developmental impact, energy efficiency and environmental/socialperformance improvements)
Favoring equity and quasi-equity in cement which is appropriate in the current market environment,especially in light of the solid track record of portfolio
Maintain consistency (approach and people) and confidentiality
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IFC VALUE ADD AND COMPETITIVE FACTORSWilling to assume risks through equity/quasi-equity investments
Provide long term financing adapted to the capital intensity and cyclicality of the industry
Syndicate B Loans through extensive banking network, and under the IFC umbrella (preferred creditor
status); also leverage our experience to work with DFIs and mobilize DFI loans through new Master
Cooperation Agreement
Can play a role in supporting a client’s sustainability objectives – potentially a key differentiating factor in
the industry.
Help client improve environmental/social performance of its project – compliance with IFC Performance
Standards is valued and well regarded by many project stakeholders and other financiers.
Identify and finance energy efficiency initiatives or energy related projects in the sector - e.g. waste heat
recovery based power, wind or alternative fuel projects etc.
Contribute to dissemination of international best practices.
Political risk mitigation – e.g., contribute to stability of project agreements with local authorities
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HOW DO WE PROCESS A CEMENT TRANSACTION?
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Industry andlocal knowledge
& contacts
Sensitivityto government
priorities
Commercial and technical expertise
in emerging markets
IFC’s Products and ServicesSenior Debt Structured Finance Mezzanine
FinancePrivate Equity
• On-lending
• Liquidity management
• Acquisition financing
• Warehousing facilities
• Syndicated loans
• Partial credit guarantees
• Securitization
• Bond underwriting
• Convertible debt
• Subordinated debt
• Other Tier II instruments
• Common shares
• Preferred shares
• $2 billion program
• Guarantees to issuing banks
• 46 issuing banks in 24 countries
• Corporate governance
• Risk management
• Small and medium business banking
• Housing finance
• Energy efficiency finance
Global Trade Finance Program
Advisory Services Sustainable Finance
• Carbon finance
• Sustainable energy
• Supply chain financing
• Corporate governance financing
IFC: A DEVELOPMENT BANK WITH THE FLEXIBILITY OF A COMMERCIAL BANK
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Key Success Factors in the Cement SectorApplying IFC Experience: Key Lessons and Success Factors
Market/Industry Competitiveness FactorsMarkets are regional or local in nature with clear regional price differentials, high entrybarriers due to capital intensity and expensive transportation/logistical costs.Careful analysis of import price parity .Location of facility in relation to the market and raw materials, infrastructure fortransportation and assessment of existing or upcoming cement capacityEnergy efficiency (40% of production cash cost); best technologylow capital investment cost (in Africa US$125-175/ton cement)
Sponsor Commitment and ValuesDue to capital intensive and cyclical nature of the industry, Sponsor’s strong commitmentand financial strength are critical to a client’s ability to survive adverse conditions.Conservative gearing and financial structure for greenfield projects (40-50% equity)Good governance principles and reputation, and environmental and social commitmentsustain economic success.
Sponsor Management and ExperienceExperienced management team with good industry and technical knowledge
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• Vertical shaft kiln (“VSK”)• Wet kiln or long-dry kiln• Exceptions to the above only if the client commits to
close kilns upon commissioning of replacement best practice technology
A key objective is to minimize the carbon intensity of cement
Dealbreakers Best Practice Technology
• 5-stage or 6-stage pre-heaters (unless high raw materials moisture)
• Vertical roller mill, Horomill, roller press• Waste-heat recovery power generation• Efficient fans and motors, variable speed drives• Dry-cooled condensers in captive power plants
1. Maximize Use of Blended Cement
Target: Clinker/cement factor between 0.68 to 0.89 (following local regulations)
2. Minimize Fuel Use in Clinker Production
Target: Fuel use of 2,900 -3,300 MJ/ton of clinker
3. Minimize Use of Electricity in Cement ProductionTarget: 80 – 105 kWh/ton of cement
4. Encourage Use of Renewable Energy and Alternative Fuels and Raw MaterialsBiomass(Jatropha plantations); wind farm; solar
Benchmarks to limit CO2 emissions to maximum of 650-750 kg/ton cement
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IFC: Project Transaction Cycle
Early Review
• Client needs determined
• Contribution of project to development assessed
• Project screened for potential problems
• Site visit
• Mandate letter
Due Diligence Negotiation DisclosureInternal
Approvals and Commitment
Disbursement
• Assessment of business potential, risks, and opportunities
• Evaluation of financial and economic soundness
• Compliance with IFC’s social and environmental performance standards reviewed
• Conditions of disbursement and covenants, performance and monitoring requirements, and action plan agreed
• Environmental and social information disclosed
• Opportunity for public comment
• Board consideration
• Board approval
• Legal review
• Signing of legal documents
• Loan disbursed on agreed schedule according to negotiated terms and conditions
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What IFC brings to an investment Multinational Regional Local
Quality stamp of approval
Country risk mitigation
Exposure to country risk volatility
Good contacts/knowledge
Competitive cost
Long tenors
Access to local currency funding
Complementary funding source
What is important about IFC to a client company?
Always
Often
Sometimes
IFC Customer Profile: Multinationals, Regional and Local
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THANK YOU
QUESTIONS
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Contact InformationInternational Finance Corporation
Global Manufacturing, Agribusiness & Services2121 Pennsylvania Avenue, NW
Washington, DC 20433 USA
Michel FollietChief Industry SpecialistPhone: 1.202.473.4614E-mail: [email protected]
Eric SiewChief Investment OfficerPhone: 1.202.458.9625E-mail: [email protected]