PARTNERING WITH IFC (KOREA CASE STUDIES) MAXIMIZING FINANCE FOR DEVELOPMENT

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Brett Lambert
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1 PARTNERING WITH IFC (KOREA CASE STUDIES) MAXIMIZING FINANCE FOR DEVELOPMENT

2 1 1. IFC Korea Introduction

3 IFC AND KOREA: OVER 45 YEARS OF PARTNERSHIP st investment in Korea: Korea Development Finance Co. IFC co-invests to establish KIFC (now Hana Bank) IFC invests in Gold Star (now LG Electronics) IFC invests in an oil exploration project in Cote d Ivoire with SK E&C IFC invests in companies such as Moorim Paper, Halim and Kookmin Bank during the financial crisis Partners with its long-term client Hana Bank to invest in an Indonesian bank Ministry of Strategy and Finance becomes official donor partner to IFC World Bank Group office opens in Korea early 2000s IFC supported growth of companies which now have become premier Korean companies, such as Goldstar (now, LG Electronics), KIFC ( 한국투자금융 - now, Hana Financial Group), and Longterm Credit Bank (merged with Kookmin Bank) 1999-early 2000s IFC played a strong counter-cyclical role by investing in Korean companies during the Asian Financial crisis, by providing US$780 million in nearly 20 companies to rebuild investor confidence mainly in the financial institutions (Kookmin Bank), trade finance, and also in key industries such as manufacturing (LG Electronics) and agribusiness (Halim) Today IFC is now actively promoting and developing partnerships with Korean enterprises looking to invest in emerging markets, such as KOEN and Daelim (Case Studies) 2

4 3 IFC S WORK WITH KOREA

4 SUCCESSFUL INVESTMENT DEALS - EXAMPLES Latin America and the Caribbean East Asia and

Bogota Country: Colombia Sector: Telecoms, Media, & Technology Technology : LG CNS

InfraV Upper Trishuli 1 Country: Nepal Sector: Power (Hydro) Sponsor: Korea South East

Sponsor: SK E&C Project: Kirikale (928MW) Country: Turkey Sector: Power (Gas)

East West Power Other Sectors of Interest & Pipeline deals Project: Peru LNG Country:

5 4 SUCCESSFUL INVESTMENT DEALS - EXAMPLES Latin America and the Caribbean East Asia and the Pacific South Asia Sub-Saharan Africa Middle East and North Africa Project: Recaudo Bogota Country: Colombia Sector: Telecoms, Media, & Technology Technology : LG CNS Project: Hana Indonesia Country: Indonesia Sector: Banking Sponsor: Hana Bank Project: InfraV Upper Trishuli 1 Country: Nepal Sector: Power (Hydro) Sponsor: Korea South East Power Project: Bloc CI-11 RI Country: Cote d Ivoire Sector: Oil, Gas, and Mining Sponsor: SK E&C Project: Kirikale (928MW) Country: Turkey Sector: Power (Gas) Sponsor/EPC: Samsung C&T Project: E-Power Country: Haiti Sector: Power Sponsor: Korea East West Power Other Sectors of Interest & Pipeline deals Project: Peru LNG Country: Peru Sector: Gas Sponsor: SK Energy Renewable Energy Steel and Manufacturing Chemicals Textiles Power Oil, Gas, Mining

6 5 SAMPLE DEALS WITH KOREAN SPONSORS / EPC CONTRACTORS Project Country Description Sponsor / EPC Size (US$) IFC (US$) Oil & Gas Power - Gas Power - Solar Power - Hydro Telecom Chemicals Peru LNG Peru 4.45MT LNG plant SK Energy $3.9 bn Debt: $300m Kirikale Turkey 928MW gas plant Samsung C&T $1 bn Arabia One Solar Star Hydro Upper Trishuli-1 (*) Recaudo Bogota Egyptian Refinery Company Debt: $125m B loan: $75m Jordan 10 MW Solar Hanwha E&C $28m Debt: $10m Pakistan Nepal Colombia Egypt 147MW hydro plant 216MW hydro plant Public Transportation IT System 100,000 bpd refinery K-Water, Daewoo E&C, Sambu KOSEP, Daelim, Kyeryong LG CNS $400m Debt: $60m $500 m Equity: $4m $176 m Equity: $25m (**) Debt: $30m GS E&C $3.7 bn Equity: $85m (*) Development stage - IFC participating as co-developer (**) Unsecured, subordinated income participating loan

7 2. IFC s Innovative Financing Approach in Frontier Markets - Case Studies on Projects with Korean Partners 6

7 Nepal in it for the long-haul Market Overview Key Challenges Strong market opportunity: i. Nepal has been facing prolonged, acute electricity shortages ii.

8 7 Nepal in it for the long-haul Market Overview Key Challenges Strong market opportunity: i. Nepal has been facing prolonged, acute electricity shortages ii. Electricity demand is expected to grow at a CAGR of 7.5% p.a. over the next 15 years iii. The country is endowed with 43,000 MW of economically viable hydropower potential Project Agreements (Concession, PPA) absence of standard agreement forms Off-taker risk is high due to the sector issue Political and regulatory risk Environmental and social risk Large financing needs 7 IFC Value Add Contract structuring and negotiation support to ensure bankability of the project agreements Facilitation/ coordination with other World Bank entities for potential use of a riskmitigation facility Political and regulatory support through IFC/WBG s sector expertise and relationships with the Government of Nepal Environmental and social support by in-house E&S specialists Mobilization of capital from other DFIs and commercial banks as Lead Arranger for debt financing

8 Nepal in it for the long-haul The Project Co-development of 216MW run of river Upper Trishuli-1 (UT-1) hydropower project with a project cost of US$550-600mil - and will be largest

9 8 Nepal in it for the long-haul The Project Co-development of 216MW run of river Upper Trishuli-1 (UT-1) hydropower project with a project cost of US$ mil - and will be largest FDI in Nepal. Co-developers/Shareholders include IFC, KOEN (KOSEP; main sponsor); Daelim Industrial and Kyeryong Construction Industrial (also EPC contractors); and a local partner 8

10 9 Pakistan 20 years of partnership 9 Market Overview Key Challenges IFC Value Add Large market opportunity: i. Severe power deficit averaging 4,000-5,000MW, with average load shedding of over 6 hours/day. ii. Peak power demand expected to grow at over 5.5% annually. iii. Need over 10,000 MW of new generation capacity with investments of around US$20 billion in the next five years Established IPP Framework: Pakistan has a 20-year track record in the IPP industry with a regulatory regime that has been stress-tested many times; IPPs are based on long-term and bankable PPAs, with payment guaranteed by the government Pakistan Country Risk: i. weak macroeconomic environment ii. volatile political situation / security risk iii. project is located in a politically sensitive area Challenges in Pakistan Power Sector: i. tariffs below full cost recovery levels ii. moderately high transmission and distribution losses iii. reliance on fiscal subsidies, and a build up of large payables Unparalleled Pakistan power sector experience since 1995 IFC has financed over 3,500 MW in generation capacity in Pakistan, including four hydro projects Local presence providing political and regulatory support IFC has two offices in Pakistan (Islamabad and Karachi) with more than 40 staff on the ground Environmental and social support by in-house E&S specialists Mobilization of capital

10 Pakistan 20 years of partnership The Project A 102MW run of river hydropower project (Gulplur) with a project cost of US$352mil in the Azad Jammu & Kashmir ( AJK ) area, in the Pakistani

11 10 Pakistan 20 years of partnership The Project A 102MW run of river hydropower project (Gulplur) with a project cost of US$352mil in the Azad Jammu & Kashmir ( AJK ) area, in the Pakistani administered semiautonomous region Gulpur was developed by Mira Power Limited ( MPL ), which is owned by three South Korean entities: 76% by Korea South East Power ( KOSEP ), 18% by Daelim Industrial ( Daelim ), and 6% by Lotte Engineering ( Lotte ). EPC contractors were Daelim (75%) and Lotte (25%), and O&M contract was with KOSEP NTDC PPA equity 25% 75% loans GO AJK GOP AJK IA & AJK WUA IA Guarantee MPL EPC Contractor O&M Contractor 10

11 Bangladesh unlocking access to capital Market Overview Large market opportunity: i. 6.2% GDP growth over the last ten years ii. Large population of 160 million people iii.

12 11 Bangladesh unlocking access to capital Market Overview Large market opportunity: i. 6.2% GDP growth over the last ten years ii. Large population of 160 million people iii. ~70% electrification rate iv. Government target to add 13.5 GW of new capacity by 2020 Key Challenges Political Risk: i. political tension between the two leading parties ii. Some recent incidents have given rise to security concerns for foreign investors Challenges in Bangladesh Power Sector: i. fuel availability (mitigated recent by LNG infrastructure co-developed by IFC) ii. off-taker is a loss-making entity supported by the government Shallow domestic equity markets IFC Value Add Conceptualization and structuring of the first of its kind transaction, moving the Company to Singapore to access international capital and regional deal flows. Mobilization of two co-investors: IFC Emerging Asia Fund and EMA Power (a joint venture between Daelim Energy and IDB Infrastructure Fund II) Value creation through active portfolio management (e.g., representation on the Company board, global and local knowledge sharing, investors introduction, environmental, social and governance standards setting) 11

13 12 Bangladesh unlocking access to capital The Project US$175.5mil convertible loan financing to an offshore holding company of Summit s power business, the country s leading IPP, with an existing portfolio of 1.4 GW of gas/hfo power plants as well as future LNG and FSRU projects An innovative, first-of-its-kind nature of the proposed transaction where a Bangladeshdomiciled company will raise capital in Singapore IFC mobilized equity capital with EMA Power (joint venture between Daelim Energy and the ASMA Capital-managed Islamic Development Bank Infrastructure Fund II) and the IFC Emerging Asia Fund Pre- Transaction Post-Transaction (after conversion) Bangladesh Bangladesh Singapore Minority Shareholders 20% Power project SPVs Family 100% Bangladesh HoldCo 80% Minority Shareholders 20% 100% Power project SPVs Bangladesh HoldCo 80% Family FamilyCo (Own/IFC EAF) >51% Singapore HoldCo 100% 100% (future) Power project SPVs 12

14 13 THANK YOU

Paving the Way for Public-Private Partnerships in Sub-Saharan Africa Cameroon s Power Sector Example: Kribi 216 MW Gas-fired Power Plant

Paving the Way for Public-Private Partnerships in Sub-Saharan Africa Cameroon s Power Sector Example: Kribi 216 MW Gas-fired Power Plant Alain Ebobisse Chief Investment Officer, IFC Global Infrastructure