PORT AND LOGISTICS DEVELOPMENT: Working with IFC

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Bennett Davidson
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1 PORT AND LOGISTICS DEVELOPMENT: Working with IFC

2 IFC: A MEMBER OF THE WORLD BANK GROUP IBRD IDA IFC MIGA ICSID R O L E T A R G E T P R O D U C T International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment and Guarantee Agency International Center for Settlement of Investment Disputes Est Est Est Est Est 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 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 Risk Management Advisory Services To reduce political investment risk Foreign investors in member countries Political Risk Insurance To provide dispute resolution to mitigate non-commercial risks International investors Tribunals Arbitration Dispute Resolution Shared Mission: To Promote Economic Development and Reduce Poverty 2

3 IFC: WHAT WE OFFER INVESTMENT SERVICES ADVISORY SERVICES IFC ASSET MANAGEMENT COMPANY Equity Loans Syndications Trade Finance and Supply Chain Securitized Finance Risk Management Blended Finance $55 bn Committed Portfolio (FY17) Firm-level advice Investment Climate PPP transaction advice In partnership with World Bank, advice on broader market development and enabling environment for private sector Over 700 projects valued at $1.5 bn (FY17) Wholly-owned subsidiary of IFC Private equity fund manager Invests third-party capital alongside IFC $9.8 bn under management (FY17) 3 Note: IFC year-end is June 30 th. Note: IFC year-end is June 30 th.

OVER $245 BILLION INVESTED SINCE 1956 Over six decades of experience in emerging markets Largest global development institution focused on private sector Founded in 1956 with 184 member countries

4 OVER $245 BILLION INVESTED SINCE 1956 Over six decades of experience in emerging markets Largest global development institution focused on private sector Founded in 1956 with 184 member countries AAA-rated by S&P and Moody s Equity, quasi-equity, loans, risk management and local currency products Takes market risk with no sovereign guarantees Promoter of environmental, social, and corporate governance standards Resources and know-how of a global development bank with the flexibility of a merchant bank Infrastructure and Natural Resources accounted for 18.1% of commitments in FY17 FY 2017 Commitments by Region FY 2017 Highlights East Asia & the Pacific 15% Middle East & North Africa 8% Global 1% Latin America & the Caribbean 23% Portfolio (IFC s account) New Commitments Core Mobilization* $55 billion $11.9 billion $7.4 billion 4 South Asia 17% Europe & Central Asia 18% Sub- Saharan Africa 20% # of Companies 2,006 # of Countries 78 * Includes 3rd parties Note: IFC year-end is June 30 th

5 IFC S GLOBAL REACH Global presence through 100+ regional offices in 94 countries, AAA credit rating 3,860 staff (56% are based outside Washington, DC) 5

6 IFC SUPPORT FOR PORT AND LOGISTICS DEVELOPMENT What can we do for the public sector? Consulting on Public-Private Partnership Projects Advising the public sector partner Turn-key project development: Project identification Selection of the project structure Development of the legal documentation Presentation of the project to potential investors Negotiations and financial closing Development of the project monitoring mechanism for the public partner Example: TIBAR BAY East Timor 6

7 IFC SUPPORT FOR PORT AND LOGISTICS DEVELOPMENT What can we do for the private sector? Equity (including early equity InfraVentures) Quasi-equity Loans (including in certain local currencies) Syndication / mobilization Risk Management Blended Finance Financing of Investment Projects Plus selective lending to state-owned enterprises 8 7

8 IFC PORT INVESTMENTS WORLDWIDE 8 Total Investments: US$4.4 billion since 2005

MPS TEMA PORT Construction and operation of a new container terminal in the Port of Tema, approximately 30 km east of Accra, Ghana.

FY16, IFC committed US$195 million for its own account and mobilized US$472 million in funds from commercial banks as part of a US$1.

Sub- Saharan Africa Given its strategic location in relation to Accra, Tema handles over 90% of the country s container traffic and serves as an

9 MPS TEMA PORT Construction and operation of a new container terminal in the Port of Tema, approximately 30 km east of Accra, Ghana. After project completion, the Port will have capacity for 1 million TEUs 35-year concession granted by the Ghana Ports and Harbors Authority In FY16, IFC committed US$195 million for its own account and mobilized US$472 million in funds from commercial banks as part of a US$1.4 billion project cost PROJECT OVERVIEW PROJECT HIGHLIGHTS IFC s largest port investment to date and the largest debt mobilization committed in Sub- Saharan Africa Given its strategic location in relation to Accra, Tema handles over 90% of the country s container traffic and serves as an outlet for landlocked neighbors (i.e. Burkina Faso, Niger, Mali) Development Impact: Improving logistics to reduce transportation costs and increase Ghana s competitiveness 9

SEMEIKHON (SMK) RIVERSIDE PORT Construction and operation of a new riverside port with cargo and container capacity along the bank of Ayeyarwady river

85 million in early stage development equity and also provided experienced project development support for the port s construction PROJECT OVERVIEW

investment is in line with IFC s strategy to support Myanmar s infrastructure to enable it to do business more efficiently and unlock the country s

10 SEMEIKHON (SMK) RIVERSIDE PORT Construction and operation of a new riverside port with cargo and container capacity along the bank of Ayeyarwady river southwest of Mandalay, Myanmar s second largest city In FY18, Infraventures, IFC s infrastructure project development fund, invested US$3.85 million in early stage development equity and also provided experienced project development support for the port s construction PROJECT OVERVIEW PROJECT HIGHLIGHTS The finished container port will feature warehousing and a mixed use Industrial Zone to help create an integrated logistics hub The investment is in line with IFC s strategy to support Myanmar s infrastructure to enable it to do business more efficiently and unlock the country s potential for international trade The investment will also help develop the use of the Ayeyarwady river as a viable alternative to long-haul trucking within Myanmar 10

SNOWMAN LOGISTICS One of the leading cold chain logistics providers in India, operating a network of temperaturecontrolled warehouses and refrigerated trucks IFC has made several investments in

11 SNOWMAN LOGISTICS One of the leading cold chain logistics providers in India, operating a network of temperaturecontrolled warehouses and refrigerated trucks IFC has made several investments in Snowman, supporting its expansion In FY09, IFC invested US$5.4 million for a 20% equity stake In FY12 and FY13, IFC invested US$6.6 million and US$ 2.8 million in two 8-year corporate loans Snowman has grown from a storage capacity of 9,142 pallets in 2007 to 98,000 pallets in 2016 PROJECT OVERVIEW PROJECT HIGHLIGHTS IFC provided the first round of private institutional capital to a small but market-leading company in a nascent, rapidly growing sector, which signaled confidence in the company s management and helped with subsequent fundraising Snowman completed an IPO in 2014, 60x oversubscribed and IFC presence as an equity investor was crucial Provided long-term financing when the company was in the process of implementing a turnaround Improved environmental and social standards 11

CONTINENTAL WAREHOUSING CORPORATION Integrated logistics player with 7 operational multi modal terminal facilities and an express logistics / 3PL business CWC has 4 Container Freight Stations around

US$ 35 million A-loan, to finance the expansion of 2 new inland terminals and refinance existing debt, aligning it to projected cash flows PROJECT OVERVIEW PROJECT HIGHLIGHTS IFC s investment will

12 CONTINENTAL WAREHOUSING CORPORATION Integrated logistics player with 7 operational multi modal terminal facilities and an express logistics / 3PL business CWC has 4 Container Freight Stations around major ports in India and 3 rail-linked inland terminals, which will cater to container and bulk traffic for both Exim and Domestic purposes In FY16, IFC invested US$ 25 million equity and provided a US$ 35 million A-loan, to finance the expansion of 2 new inland terminals and refinance existing debt, aligning it to projected cash flows PROJECT OVERVIEW PROJECT HIGHLIGHTS IFC s investment will help increase rail transportation in India, which is cheaper, safer and more efficient over long distances This represents an alternative to existing dilapidated government-run freight terminals and complements public investment in new railway lines to encourage freight movement on the rail network 12

13 WHAT IFC LOOKS FOR IN POTENTIAL PROJECTS: Commercially Sound IFC invests exclusively in for-profit projects and charges market rates for its products and services Market Catalyst IFC generally finances no more than 25-50% of total project cost Never the largest shareholder, typical stake up to 20% Typical ticket size $20-50m, but can go to $100m + Able to mobilize additional debt (B loan program) and equity funds (AMC) Long-term Horizon IFC invests for the medium-to-long term Environmentally & Socially Responsible Corporate Governance Each investment assessed for E&S risks by in-house team of experts, and action plan put in place to mitigate risks Increasingly relevant for clients, i.e. land acquisition, carbon footprint, community buy-in Facilitates debt raising (Equator Principles) Detailed corporate governance assessment carried out (dedicated internal resources) Work on governance issues with companies pre-ipo and those already listed Roster of quality independent directors Facilitates exit, especially in public markets 13

14 14 Annex

15 WHAT CLIENTS VALUE ABOUT IFC Long-Term Partner Role Financing Not Readily Available Elsewhere Stamp of Approval Ability to Mobilize Additional Funds Advice based on Global Expertise and Knowledge Worldwide presence Affiliation with the World Bank Group Social, Environmental and Corporate Governance Expertise 15

16 IFC INVESTMENT GUIDELINES Main Guidelines Project Greenfield, Type total cost less than $50 million Greenfield, total cost more than $50 million Expansion or rehabilitation Up to 35% of project cost for IFC s own account Up to 25% of project cost for IFC s account Up to 50% of project cost IFC s total financing (for its own account) must be less than 25% of total company capitalization IFC can also mobilize additional financing through: B-loans from international commercial banks Parallel loans from development financial institutions Portfolio colending 16

17 ENVIRONMENTAL & SOCIAL STANDARD SETTING IFC Performance Standards 1 Assessment and management of environmental and social risks and impacts 2 Labor and working conditions 3 Resource efficiency and pollution prevention 4 Community, health, safety and security Land acquisition and involuntary resettlement Biodiversity conservation and sustainable management of living natural resources Indigenous peoples Cultural heritage 17

18 IFC SYNDICATION S PROGRAM Overview Benefits to Borrower Oldest and largest syndicated program amongst MDBs, established in 1957 Over US$50 billion mobilized from more than 500 financial institutions for over 1,000 projects in more than 115 emerging markets Co-financiers from developed and emerging markets, include commercial banks, funds, insurance companies, development finance institutions (DFIs), and emerging market central banks As of June 30, 2017, IFC s syndicated loan portfolio under management totaled US$16 billion Enables loans with longer tenors No withholding tax Completes financial package Introduces new banking relationships IFC s stamp of approval IFC s environmental and social leadership IFC is the Lender of Record: May allow lenders to reduce their provisioning requirements 18

19 SYNDICATIONS PRODUCTS Different Products Target Different Investors Types of IFC Syndicated Lending B Loans Parallel Loans Unfunded Risk Participation(s) MCPP Loans Type of Investor Commercial Banks, Funds Development Finance Institutions & Sovereign Entities Insurance Companies Institutional Investors (public and private) Investment Approach Active Deal-by-Deal Selection Active Deal-by-Deal Selection Active Deal-by-Deal Selection Passive Portfolio Participation in Eligible Projects Investor s Strategy Follow their own client strategy Developmental Mandate (DFIs) Follow their own credit strategy Follow IFC s Strategy Investment Process Investor makes credit approval Investor makes credit approval Investor makes credit approval Full delegation to IFC post mandate Tenor Generally shorter than A Loan Generally matching A Loan Matching IFC A Loan Tenors Matching IFC s A Loan Tenors Portfolio Rights Yes Yes Limited voting and consultation Follow IFC s Decisions Documentation B Loan Participation Agreement Parallel Loan with a Common Terms Agreement Unfunded Risk Participation Agreement Administration Agreement/Common Service Agreement 19

SAMPLE INVESTMENTS IN PORTS Brazil Nigeria Ukraine Ghana Myanmar Brasil Port Logistica $27,300,000 Senior Loan $20,400,000 MCPP OIS Indorama Port $52,500,000 Senior Loan $21,000,000 Syndication MV

20 SAMPLE INVESTMENTS IN PORTS Brazil Nigeria Ukraine Ghana Myanmar Brasil Port Logistica $27,300,000 Senior Loan $20,400,000 MCPP OIS Indorama Port $52,500,000 Senior Loan $21,000,000 Syndication MV Cargo $37,000,000 Senior Loan MPS Tema Port $195,000,000 Senior Loan $472,000,000 Syndication Myanmar Industrial Port (MIP) $40,000,000 Subordin. Loan Arranger and lender FY 2017 Arranger and Lender FY 2017 Lender FY 2017 Arranger and Lender FY 2016 Lender FY 2016 Mexico Egypt Togo Mexico Colombia Contecon de Manzanillo $65,000,000 Senior Loan $52,500,000 Syndication Arranger and Lender FY 2016 Sonker Bunkering Co. $70,000,000 Senior Loan $21,800,000 Subordin. Loan $21,800,000 Syndication Arranger and Lender FY 2016 Lome Container Terminal $133,644,500 Senior Loan Lender FY Port of Lazaro Cardenas $100,000,000 Senior Loan $200,000,000 Syndication Arranger and Lender FY 2014 Terminal Contenedores Buenaventura $54,000,000 Senior &Subord. Loan $187,000,000 Syndication Arranger and Lender FY Brazil Peru Turkey Ukraine Pakistan BTP Santos $140,000,000 Senior Loan $582,000,000 Syndication Callao Norte Port $75,000,000 Senior Loan $142,000,000 Syndication Asyaport $75,000,000 Senior Loan HPC Odessa $32,000,000 Senior Loan Qasim International Container $40,000,000 Senior Loan Arranger and Lender FY Arranger and Lender FY 2013 Lender FY 2013 Lender FY 2012 Arranger and Lender FY

SAMPLE INVESTMENTS IN LOGISTICS China Brazil China China Brazil Huochebang $7,500,000 Equity Loggi $2,500,000 Equity Best Logistics Technologies Ltd.

21 SAMPLE INVESTMENTS IN LOGISTICS China Brazil China China Brazil Huochebang $7,500,000 Equity Loggi $2,500,000 Equity Best Logistics Technologies Ltd. $10,000,000 Equity Zhengming $10,000,000 Senior Loan $5,060,000 Equity Vix Logistica R$200,000,000 (Equiv. $76,000,000) Equity Investor FY 2017 Investor FY 2017 Investor FY 2016 Lender and Investor FY 2015 Investor FY 2015 India Central America Rwanda Snowman Logistics Transamerica Intraspeed $9,400,000 Corporate Loans $5,400,000 Equity $15,000,000 Subordinat. Loan $7,500,000 Subordinat. Loan Lender and Investor FY Lender FY 2008 Investor FY

22 THANK YOU! Contacts Ian Twinn Global Head Washington, DC Herb Lai Chief Investment Officer Washington, DC Sergei Mytarev Principal Investment Officer Moscow, Russia

IFC SUPPORT TO THE PRIVATE SECTOR STRATEGY AND INSTRUMENTS

IFC SUPPORT TO THE PRIVATE SECTOR STRATEGY AND INSTRUMENTS IFC: A MEMBER OF THE WORLD BANK GROUP IBRD IDA IFC MIGA ICSID International Bank for Reconstruction and Development International Development