financing investment in mongolia 2009

8/13/2019 Financing Investment in Mongolia 2009

1/41

Financing Investmentin Mongolia

Europe Mongolia Investors Forum

Randolph S. KoppaPresident

Trade and Development Bank of Mongolia

EBRD Headquarters, London December 3, 2009


2/41

Mongolia

Wedged between two powerful neighborsWedged between two powerful neighbors

With a vast market close at hand, Mongolia seeks the help of theseWith a vast market close at hand, Mongolia seeks the help of these

two, plus third neighbors, to help make it happen.two, plus third neighbors, to help make it happen.

Page 1


3/41

Scope of presentation

Magnitude of future investment needs, by sectorMagnitude of future investment needs, by sector

InfrastructureInfrastructure EnvironmentEnvironment

SocialSocial

Agriculture and IndustryAgriculture and Industry

Sources of financeSources of finance

DomesticDomestic

ForeignForeign

Page 2


4/41

Focus on South Gobi

Page 3

Source: World Bank


5/41

Major South Gobi opportunities

Source: World Bank

Page 4


6/41

Storyline

Copper: OT investment $Copper: OT investment $44 billionbillion

$$22 billion annual revs. (Net: $billion annual revs. (Net: $00..55-- $$11 bn.)bn.) Coal: TT and other investmentCoal: TT and other investment 11-- 22 billionbillion

$$33 billion annual revs. (Net: $billion annual revs. (Net: $ 11..44 billion)billion)

Gold, Zinc, Iron, Fluorspar, Uranium,Gold, Zinc, Iron, Fluorspar, Uranium,Petroleum investment $Petroleum investment $22+ billion+ billion

$$22+ billion annual revs. Net: $+ billion annual revs. Net: $00..55 billionbillion

Page 5


7/41

Storyline ( cont.)

GDP of Mongolia to double withinGDP of Mongolia to double within 55 yearsyears

Growing GDP lifts Mongolian people out ofGrowing GDP lifts Mongolian people out ofpovertypoverty

Mongolia eventually becomes a wealthyMongolia eventually becomes a wealthycountry along the lines of Norway or Qatarcountry along the lines of Norway or Qatar

Page 6


8/41

How to get there

Infrastructure:Infrastructure:

a enges an pportun t esa enges an pportun t es

PowerPower

RailroadsRailroads

Roa sRoa s

Urban DevelopmentUrban Developmenta era er

SocialSocial

Agriculture and IndustryAgriculture and Industry

Page 7


9/41

Power

Source: World Bank

Page 8


10/41

Power

Need to double capacity in next five yearsNeed to double capacity in next five years

$$22..22 billion investment neededbillion investment needed

Mine site plants can be project financedMine site plants can be project financed

Financing of UB plants?Financing of UB plants?

s can e ps can e p

Page 9


11/41

Railroad

Source: World Bank

Page 10


12/41

Railroad

Line from TT to Chinese border $Line from TT to Chinese border $687687 mnmn..

Financing from ChinaFinancing from China

Line fromLine from NariinNariin SukhaitSukhait to Chineseto Chinese

border $border $250250 mnmn. Financing from China. Financing from China

Other lines from mines to mainline or UBOther lines from mines to mainline or UB

-- .. nn eac . nanc ng rom uss aeac . nanc ng rom uss a

Page 11


13/41

Roads

South Gobi:South Gobi: 10001000 km. $km. $300300 millionmillion Source: World Bank

Elsewhere:Elsewhere: 20002000 km. $km. $700700 millionmillion

Page 12


14/41

Urban development

UB and major cities:UB and major cities: 100100,,000000 housinghousing

units: $units: $55 billionbillion

Cities needed in South Gobi as populationCities needed in South Gobi as population

triples totriples to 120120,,000000: $: $11 billionbillion

Other Urban development needs: $Other Urban development needs: $11 billionbillion

Page 13


15/41

Water

Source: World Bank

Page 14


16/41

Water

Water resources for South Gobi:Water resources for South Gobi:

$$300300 million for ground watermillion for ground water

Diverting from elsewhere:Diverting from elsewhere:

nee s:nee s:

Page 15


17/41

Environment

Land degradationLand degradation

ne ec ama onne ec ama on

PollutionPollution

Grazing accessGrazing access

DeforestationDeforestation

Water qualityWater quality

Costs to address:Costs to address: 11-- 22 billionbillion

Page 16


18/41

Social

EducationEducation

MigrationMigration

Community involvementCommunity involvement

Wealth distributionWealth distribution

HealthHealth

Estimated costs: $Estimated costs: $11 billionbillion

Page 17


19/41

Agriculture and Industry

Grain self sufficiencyGrain self sufficiency

Value added processingValue added processing

SmeltingSmelting

Coal asificationCoal asification

Estimated costs: $Estimated costs: $22 billionbillion

Page 18


20/41

Summary of Investment needs

Major minesMajor mines $$77 billionbillion $$1010 billionbillion

PowerPower $$22 billionbillion

RailroadsRailroads $$44 billionbillion RoadsRoads $$11 billionbillion

UrbanUrban DevelDevel.. $$77 billionbillion

WaterWater $$00..55 billionbillion

..

SocialSocial $$11 billionbillion

--------------------------------------------------------

TotalTotal $$3030 billionbillion -- $$3535 billionbillion

Page 19


21/41

Sources of financing

Domestic Banking SectorDomestic Banking Sector

Domestic Capital Market BudgetDomestic Capital Market Budget

Foreign BorrowingForeign Borrowing

oc ar eoc ar e

Foreign Capital MarketsForeign Capital Markets

ss DonorsDonors

Page 20


22/41

Foreign Investment

4

USDbillion

will be fundedwill be funded3

3,5

investmentinvestment2

2,5

0,5

1

,

0

2007 2008 2009 2010 2011 2012 2013 2014

Page 21


23/41

Banking sector

Banking sector is small compared to otherBanking sector is small compared to otheremerging countries:emerging countries:

Mongolia bank loans to GDP onlyMongolia bank loans to GDP only 3434%%

USA, Korea, China overUSA, Korea, China over 100100%%

To reach CEE level inTo reach CEE level in 55 years will require $years will require $200200million of outside equity capital as GDP doublesmillion of outside equity capital as GDP doubles

Banks could provide $Banks could provide $11..55 billion in investmentbillion in investmentfinancing, apart from working capital funding.financing, apart from working capital funding.

Page 22


24/41

Banks capital needs

Page 23


25/41

Stock Market

Mongolia stock market very small: approx. $Mongolia stock market very small: approx. $400400million market ca which ismillion market ca which is 2424% of domestic% of domestic

bank credit and $bank credit and $150150 per capitaper capita Develo in countries ratios aroundDevelo in countries ratios around 5050% or% or

$$30003000 to $to $55,,000000 per capitaper capita

Develo ed countries market ca e uals bankDevelo ed countries market ca e uals bankcredit, with $credit, with $4040,,000000 or more per capitaor more per capita

PotentiallPotentiall 22 billion or more could be raisedbillion or more could be raised

under properly organized stock exchange asunder properly organized stock exchange asmarket cap reachedmarket cap reached 4040% of domestic credit% of domestic credit

Page 24


26/41

Public debt

Mongolia has virtually no public debtMongolia has virtually no public debt

Mongolia needs to establish a domestic capitalMongolia needs to establish a domestic capital

marketmarket

This will enable a forward rate which willThis will enable a forward rate which will

attract foreign investorsattract foreign investors

Up toUp to 2020% of GDP should be possible based on% of GDP should be possible based on

other emerging countriesother emerging countries

This would mean up to $This would mean up to $22 billion could bebillion could be

raisedraised

Page 25


27/41

Investment by businesses

Spending by business on fixed assets willSpending by business on fixed assets willincrease from current estimatedincrease from current estimated 55% of GDP% of GDP

General level of developing countries isGeneral level of developing countries is 2525%%

Moving toMoving to 2525% of GDP will generate over $% of GDP will generate over $66,, ..

could be provided by domestic banks. Thecould be provided by domestic banks. Thebalance requires funding from profits or capitalbalance requires funding from profits or capital

mar ets an ore gn sources.mar ets an ore gn sources.

Page 26


28/41

Budget

Current Budget expenditures approx $Current Budget expenditures approx $11billion with small deficitbillion with small deficit

Increased revenues from mining can enableIncreased revenues from mining can enable

infrastructural needsinfrastructural needs

Fund aims to use surplus mining revenuesFund aims to use surplus mining revenuesto meet such needsto meet such needs

Estimate: $Estimate: $11 billion or morebillion or more

Page 27


29/41

Foreign Debt

Mongolia has less than $Mongolia has less than $22 billion in foreignbillion in foreign, ,, ,

aboutabout 4040% of GDP.% of GDP.

There is capacity to raise sovereignThere is capacity to raise sovereign

commercial debtcommercial debt

WithinWithin 55 years, additional $years, additional $33 billion couldbillion could

e ra se an eep e ra o e owe ra se an eep e ra o e owof GDPof GDP

Page 28


30/41

Bilateral

China has already expressed interest on upChina has already expressed interest on upto $to $33 billion in bilateral financing aimed atbillion in bilateral financing aimed at

rail, mining and mining infrastructurerail, mining and mining infrastructure

Russia has also targeted a similar amountRussia has also targeted a similar amount

Mongolias borrowing on debt marketsMongolias borrowing on debt markets

Page 29


31/41

Summary

The Domestic sources could provide about oneThe Domestic sources could provide about onethird of the investment needs or $third of the investment needs or $1010 billionbillion

FDI in mining should provide $FDI in mining should provide $1010 billionbillion

erer oo onon

From Sovereign and Bilateral loans $From Sovereign and Bilateral loans $33 to $to $55onon

Foreign Lenders, such as IFIs and InternationalForeign Lenders, such as IFIs and International

an s w nee o cons er up oan s w nee o cons er up o onon Donors and NGOs $Donors and NGOs $11 to $to $22 billionbillion

Page 30


32/41

A reachable goal?

Consider: OT and TT alone will generate $Consider: OT and TT alone will generate $33

Additional mining projects will add $Additional mining projects will add $11 to $to $22on a year n expor son a year n expor s

High rate of GDP growth should continueHigh rate of GDP growth should continue

Preconditions are political stability and strongPreconditions are political stability and strong

GovernanceGovernance

Page 31


33/41

What can you do?

Mongolia is on the RADAR SCOPE and warrantsMongolia is on the RADAR SCOPE and warrants

For example: City of LondonFor example: City of LondonAccountinAccountin

LawLaw

BanksBanksStock ExchangeStock Exchange

Investment BanksInvestment Banks

r va e qu yr va e qu yInsurance and PensionInsurance and Pension

Page 32


34/41

Shall we make a deal?

Page 33


35/41

If yes,

Page 34


36/41

Mongolias leading bank

Mongolias leading corporate bankMongolias leading corporate bank

TDB is the largest corporate lender in Mongolia withTDB is the largest corporate lender in Mongolia with 2525%%corpora e en ng mar e s ares. serves approx ma e ycorpora e en ng mar e s ares. serves approx ma e y

major Mongolianmajor Mongolian corporatescorporates in all major business sectors.in all major business sectors.

ea er n nternat ona an ngea er n nternat ona an ng

Having established overHaving established over 8080 correspondent relationships withcorrespondent relationships with

international financial institutions and correspondentinternational financial institutions and correspondent

offers a wide range of international banking services designedoffers a wide range of international banking services designedto appeal to both domestic and international clients.to appeal to both domestic and international clients.Currentl TDB maintainsCurrentl TDB maintains 2525 nostronostro accounts inaccounts in 1414 currenciescurrencies

withwith 2020 top rated foreign banks oftop rated foreign banks of 1515 countries. Total amountcountries. Total amountof trade finance lines reached USDof trade finance lines reached USD115115 million.million.

Page 35


37/41


Leader in foreign exchange and money marketLeader in foreign exchange and money market

TDB is a leading player in the domestic money market ,TDB is a leading player in the domestic money market ,.. ..

also dominates Mongolias foreign exchange and gold bullionalso dominates Mongolias foreign exchange and gold bullionmarkets with amarkets with a 4040% and% and 6060% market share respectively.% market share respectively.

First Mongolian issuer of debt on the international publicFirst Mongolian issuer of debt on the international publicmarketsmarkets

In JanuaryIn January 20072007, TDB successfully completed the first ever, TDB successfully completed the first everpublic placement of debt by Mongolian bank in the internationalpublic placement of debt by Mongolian bank in the internationalcapital markets with a USDcapital markets with a USD7575 mlnmln. Senior unsecured bond issue. Senior unsecured bond issuewithin a USDwithin a USD300300 mlnmln. EMTN program, arranged by ING Bank.. EMTN program, arranged by ING Bank.

by Moodys Investor Services. Despite the world economic andby Moodys Investor Services. Despite the world economic andfinancial turmoil, TDB recently has prepaid successfully overfinancial turmoil, TDB recently has prepaid successfully over4545% of its debit.% of its debit.

Page 36


38/41


Mongolias longest established bankMongolias longest established bank

TDB was established in OctoberTDB was established in October 19901990 and over past decade hasand over past decade hasecome a ea ng an ng an nanc a serv ces prov er necome a ea ng an ng an nanc a serv ces prov er n

Mongolia, offering overMongolia, offering over 6060 types of international standard andtypes of international standard anduniversal banking products. As the longest serving commercialuniversal banking products. As the longest serving commercialbank in Mon olia the bank acts as a rimar lender to most of thebank in Mon olia the bank acts as a rimar lender to most of thecountrys leading corporations.countrys leading corporations.

Investment bankingInvestment bankingAs the first Mongolian company issued bonds in the internationalAs the first Mongolian company issued bonds in the internationalcapital market, TDB enhanced its reputation on the internationalcapital market, TDB enhanced its reputation on the internationalmarket. As a result the bank became able to offer its corporatemarket. As a result the bank became able to offer its corporate

active participation in syndication financing.active participation in syndication financing.

Page 37


39/41

Financial Results

(mln.USD)(mln.USD) 2006 2007 2008 2009/3Q

Total Asset 336.3 444.5 520.3 510.3

Total Loans 198.7 307.2 347.4 302.9

Total Deposits 256.1 362.6* 404.6* 372.3**

Total Equity 32.9 47.5 54.0 50.3

Net Profit 9.3 12.9 12.9 6.5

Capital Adequacy 19% 13.8% 14.7% 13.8%

ROAA 3.1% 3.5% 2.8% 1.5%

ROAE 27% 32% 24.9% 16%

MNT/USD = 1426.01*

09 30 2009

million bonds

** Including $41 millionbonds

Page 38


40/41

Bank Ratings by Moodys

Senior Unsecured EMTN (foreign currency)Senior Unsecured EMTN (foreign currency) BaBa33

LT/ST Bank Deposits (foreign currency)LT/ST Bank Deposits (foreign currency) BB22/NP/NP

LT/ST Bank Deposits (domestic currency)LT/ST Bank Deposits (domestic currency) BaBa33/NP/NP

Subordinated ObligationsSubordinated Obligations BB11

Bank Financial StrengthBank Financial Strength DD--

Page 39


41/41

THANK YOU

Trade and Development Bank of MongoliaTrade and Development Bank of Mongolia

uu c nuu c n reeree --

BagaBaga ToiruuToiruu -- 1212Ulaanbaatar, MongoliaUlaanbaatar, Mongolia

Tel:Tel: 976976--1111--31 99 4331 99 43

Fax:Fax: 976976--1111--31 24 1831 24 18

http://www.bankcard.mnhttp://www.bankcard.mn

http://www.mongolianbusinessguide.comhttp://www.mongolianbusinessguide.com

ma : corr an ng m.mnma : corr an ng m.mn

Page 40

financing investment in mongolia 2009

Documents