Inter-American Investment Corporation. Investor Presentation March 2016

Transcription

1 Inter-American Investment Corporation Investor Presentation March 2016

2 About the IIC

3 Who we are The Inter-American Investment Corporation, member of the IADB Group, is a multilateral development bank committed to strengthening the private sector in Latin America and the Caribbean. We work with clients to achieve financial results while creating social and environmental value. We operate across sectors to provide financing and advisory that meet the evolving demands of the region s private sector. $1.5 billion Total assets, as of Dec 31, 2015 $857 million Total capital, as of Dec 31, country offices in Latin America and the Caribbean, Asia and Europe 45 member countries from America, Asia and Europe are our shareholders 3

4 A member of the IDB Group Governance Common ownership: 45 of the 48 IDB member countries are IIC shareholders. The President of the IDB is ex-officio chairman of the IIC s Board of Directors IDB focused on operations with the public sector, IIC dedicated to the development of the private sector IDB Group Operational and Financial relationship Committed US$300 million credit facility from the IDB IDB provides services to the IIC, creating significant synergies As part of the most recent capital increase of the IIC, IDB and IIC Governors authorized transfers to IIC from IDB (on behalf of IDB shareholders) of $725 million. 4

5 What we offer Traditional products Senior loans Subordinated loans Syndicated loans & private placements Blended finance + Partial credit guarantees Risk sharing guarantees Quasi-equity Equity Enhancements Non-financial products strengthen project design, capacity building, knowledge generation, replicability and scalability. Increased local currency capacity reduces swap-related costs. Increased flexibility in structured finance and equity investments ensures instruments better address client demand and risk. Outcome-based structures provide financial incentives to projects with positive development performance. 5

6 Market recognition IDB Group private sector operations AWARDS FOR IDBG PRIVATE SECTOR OPERATIONS IN RECENT YEARS Americas Renewable Deal of the Year - Chaglla Latin American Power Deal of the Year Chaglla Power Deal of the Year - Chaglla Multilateral Development Bank of the Year -IDB Project Finance Deal of the Year - Chaglla Deal of the Year by Trade Finance Magazine - Chaglla Deal of the Year - L2 Metro Lima Financing Deal of the Year CMSA Container Terminal Manzanillo World Bank PPP Infrastructure Resource Center, Best Practice - BaniProject Top 100 green projects by Por Un Chile Verde -Subsole Best in Agency Coordination; Deal of the Year - Etileno XXI Latin American Transport Deal of the Year - Embraport Latin America Deal of the Year, Petrochemicals & Overall Latin American Deal of the Year - Etileno XXI Multilateral Development Bank of the Year - IDB Best Infrastructure Financing Central America Deal of the Year Reventazon Best Power Finance Chaglla Best Renewable Energy Financing Chaglla Best Infrastructure Financing Andes Deal of the Year Chaglla

7 Rating agencies highlight the IIC s strong financial profile and shareholder support CURRENT RATINGS AND EXCERPTS FROM THE LATEST RATING REPORTS AA Outlook: stable Inter-American Investment Corp. (IIC) recently announced a $2.03 billion capitalization plan to support the consolidation of private-sector lending from the Inter-American Development Bank Group into IIC. We believe this signals increased commitment to strengthen IIC's footprint in the region in the coming years. We are affirming our 'AA/A-1+' long- and short-term issuer credit ratings on IIC. Standard and Poor s Press Release, Apr 7, 2015 Aa2 Outlook: positive The key drivers of today's outlook change are the following: 1. Substantial capital increase that will support the IIC's expanded mandate; 2. Increased member support following IADB and IIC Boards of Governors decision to consolidate private sector operations of the IADB Group at the IIC. 3. Moody s expectations that the Corporation s various credit metrics will continue to outperform higher-rated MDB s (...) as the IIC expands over the next few years. Moody s Press Release, April 14, 2015 AAA Outlook: stable Fitch Ratings has affirmed Inter-American Investment Corporation's (IIC) long-term Issuer Default Rating (IDR) at 'AAA'. The Rating Outlook is Stable. [ ] IIC has one of the highest equity/adjusted assets among MDBs rated 'AAA' by Fitch. [ ] The IDRs and senior debt ratings have been affirmed given IIC's stable financial performance and risk profile. Fitch Press Release, February 18,

8 Growing shareholder base THE NUMBER OF MEMBER COUNTRIES HAS MORE THAN DOUBLED SINCE INCEPTION. Argentina Barbados Bolivia Brazil Chile Costa Rica Dominican Rep. Ecuador France Guatemala Guyana Honduras Jamaica Japan Nicaragua Panama Peru Switzerland Trinidad y Tobago United States Venezuela Austria Bahamas Colombia El Salvador Germany Mexico Paraguay Spain Uruguay Israel Netherlands Haiti Italy Denmark Suriname Belize Sweden Finland Norway Portugal Belgium Korea New shares issued China Canada Number of Member Countries 8

9 A remarkable demonstration of shareholder support: The IDB Group private sector consolidation This historic consolidation will enable the IDB Group to make better use of our resources and become the preferred source of knowledge and credit for companies that are accelerating development in each of our member countries. Luis Alberto Moreno, President of the IDB During the IDB and IIC Annual Meeting in Busan, Korea, in March 2015 the Boards of Governors of the IDB and the IIC approved the consolidation of the IDB Group s private sector activities into the IIC. As requested by the Governor s resolution, effective January 1 st,2016,theoperational and administrative functions dedicated to the private sector at the IDB were transferred to the IIC. Cross-booking: during a 7 year period, certain operations of IIC will be booked wholly or in part on the IDB s balance sheet, subject to strict eligibility criteria and risk management guidelines agreed between both institutions. The Boards of Governors also approved an increase of the IIC s capital stock of $2.03 billion, of which $1.3 million will be subscribed by member countries and paid over a 7 year period, and $725 million will consist of transfers from the IDB on behalf of its shareholders over 8 years. IDB transfers are subject to annual approval by the IDB Board of Governors. 9

10 Strong shareholder support DEVELOPMENT OF PAID-IN CAPITAL OVER THE NEXT 10 YEARS (US$ MILLION) 2,521 2,593 2,665 2,736 2,326 2,126 1,866 1,576 1, Transfers from the IDB New capital contributions Total Paid-in Capital 10

11 Preferred creditor treatment IIC loans have never been included in a sovereign debt rescheduling, nor have payments to the IIC ever been permanently interrupted by a general debt-servicing moratorium or foreign exchange crisis. Venezuela (1994) Foreign Exchange controls Argentina ( ) Financial Crisis and default on external debt Peru (1980 s) Moratorium on external debt payments IIC s Rating Bolivia (1998) HIPC Initiative Ecuador (2008) Default on several bonds AA AA- AA Mexico (1994) Tequila Crisis Asia (1997) Financial Crisis Venezuela (2003) Oil Strike USA (2007) Subprime Mortgage Crisis Russia (1998) Default on debt Europe (2009) Sovereign debt Crisis None of these events have affected payments to the IIC 11

12 Financial Profile

13 Strong balance sheet as a result of conservative financial and risk policies AS OF DECEMBER 31, 2015 (US$000) Assets Liquid Assets 528,607 Loan and Equity investment (net of $36,746 loan loss allowance) 954,002 Net Loans 924,526 Equity Investments 29,476 Other Assets 22,687 Total Assets 1,505,296 Liabilities and Capital Borrowings 598,456 Other Liabilities 49,516 Total Liabilities 647,972 Paid-in Capital 703,163 Retained Earnings and OCI 154,161 Total Capital 857,324 Total Liabilities and Capital 1,505,296 13

14 Strong capitalization and low leverage AS OF DECEMBER 31, 2015 (US$000) Equity to Total Assets Strong Capitalization The IIC operates exclusively with fully paid in capital 52% 43% 48% 43% 57% Equity to Total Assets ratio of 57% Equity + Provisions coverage of 90% of IIC s investment portfolio Low leverage The IIC operates with a very conservative Debt to Net Worth ratio, well below the institutional limit of 3x capital Debt to Equity Ratio of 0.8 : 1 Leverage (Debt/Equity) 3.0x 2.0x 0.8x Actual Prudential Target Charter Limit 14

15 Ample liquidity coverage and a high quality liquidity portfolio Conservative Liquidity Profile Main liquidity metric: Operational Liquidity Coverage (OLC), reflects available liquidity versus projected net cash outflows in months. OLC target range: months. Liquid assets to gross debt ratio 74% 78% 79% 84% 88% High quality Treasury Portfolio Conservative investment guidelines: Minimum Rating A+ Maximum Portfolio Duration: 4 years Maximum tenor and limit amount linked to issuer rating No exposure to ABS/MBS/CDO Treasury portfolio rating composition BBB+ 3% AAA 5% AA+ 2% A 14% A+ 18% AA 13% AA- 45% 15

16 High asset quality STRONG ASSET PERFORMANCE AND HIGH PROVISIONS COVERAGE Impaired loans to Gross Loans 455% 449% 270% 282% 366% Impaired Loans to Gross Loans Provisions to impaired loans 1.7% 1.7% 1.0% 1.0% 1.0%

17 Diversified investment portfolio GROSS LOAN AND EQUITY INVESTMENT PORTFOLIO AS OF DECEMBER 31, 2015 Composition by Country Nicaragua 3.26% Uruguay 3.21% El Salvador 3.44% Colombia 8.49% Ecuador 8.24% Argentina 3.00% Others 7.31% Paraguay 2.47% Brazil 11.23% Construction, Materials, and Fixtures 2.70% Transportation and Logistics 3.19% Composition by Sector 3.37% Energy and Power 5.93% Small Financial Institutions 9.50% Fertilizers and Distribution and Agricultural Retail Services 1.47% 2.29% Hotels and Tourism 1.52% Agricultural Products Others 6.38% Food and Beverages 1.31% Wood, Pulp, and Paper 1.23% Livestock and Poultry 1.16% Chile 9.10% Peru 10.64% Mexico 9.23% Costa Rica 10.09% Panama 10.28% Large Financial Institutions 59.96% 17

18 One of the strongest financial profiles of any Multilateral Development Bank PEER GROUP COMPARISON OF SELECTED FINANCIAL RATIOS MDB Assets Long Term Issuer Credit Rating 57% Risk Adjusted Capital Ratio 1 IIC 1,989 AA IADB 106,159 AAA EBRD 63,488 AAA CAF 27,418 AA- CABEI 7,537 A IFC 84,130 AAA 22% 25% 16% 15% 12% IIC IADB EBRD CAF CABEI IFC Gross Debt / Equity 2 Liquid Assets / Total Assets 330% 230% 200% 200% 210% 48% 43% 33% 51% 130% 26% 26% IIC IADB EBRD CAF CABEI IFC IIC IADB EBRD CAF CABEI IFC (1) RAC: Adjusted Common Equity / Risk Weighted Assets (%) (2) Gross debt / Adjusted Common Equity (%) Source: Standard & Poor s Supranationals Special Edition Data for each institution reported through the end of its latest fiscal year. For the IFC, this is June 30, For all other institutions, this is Dec 31,

19 A consistent track record of profitability NET INCOME (US$000) 83,473 39,409 13,735 13,913 5,211 12,447 10,305 5,560 19,206 13,334 3,

20 Funding

21 Funding strategy The IIC follows a diversified funding strategy with three main funding sources: Term Notes under its Euro Medium Term Note Program, Local Currency Bonds and bilateral or syndicated loans. Established in 2012, the Euro Medium Term Note Program has quickly become IIC s main funding instrument, with $800 million issued since inception. Historically, loans used to be the main source of funding for the IIC, and still play a role in its funding mix to date. Domestic bond issues are important funding sources for local currency loans and the IIC remains committed to local currency issues in the future Colombia COP 150 billion IIC Funding Mix USD millions, as of Dec 15 EMTN 400,000 67% Bilateral Loans 198,763 33% IIC Local currency issues 2007 Mexico MXN 480 million 2011 Mexico MXN 800 million 2012 Mexico MXN 800 million 21

22 Euro Medium Term Note Program Over 50 investors have participated in IIC s EMTN issues, providing a highly diversified investor base. IIC s spreads have tightened in the secondary market allowing for tighter new issue levels over time. Increased name recognition and potential rating upside provide a compelling investment proposition. 3 Year new issue spreads over LIBOR (Q4 2014) IIC 0 10/02/17 Corp IADB 0 10/15/2017 Corp IFC 0 02/02/2018 Corp IIC 10/02/17 Source: Bloomberg IADB 10/15/17 IFC 02/02/18 0 Source: Bloomberg 22

23 2016 Funding Program 2016 Funding needs: ca. $1bn Main funding instrument: EMTN Floating Rate Notes Preferred Tenor: 3-5 years Preferred Currency: USD Local currency issues in Mexico and other Latin American markets depending on customer demand and market conditions Outlook: annual funding needs of around $1 billion are expected in the next 2 years. 23

24 Project briefs

25 Mainstreaming sustainability in airport expansion Juan Santamaría International Airport Key features The airport is the second busiest in Central America, serving approximately 3.5 million passengers annually through 48 nonstop destinations. Costa Rica s main industries of tourism, agriculture and electronics rely heavily on air transportation. The loan finances the first two expansion phases of the airport. Works to be completed include a terminal extension to permanently house security, immigration and customs processing and additional holding rooms and parking. Additional improvements include placement of a hold pad at the end of the taxiway, treatment to repair asphalt in key circulation areas, rehabilitation and expansion of the main terminal and construction of six hold rooms and respective boarding. Developmental impact An infrastructure sustainability assessment (based on a Harvard University methodology) found the project improved the quality of life of communities, stimulated job creation, improved tourism and agroindustries and minimized use of energy and water. The total operating revenues to the airport increased by almost 10% during the first half of 2015 ($46.4 M) compared with the same period in After the investment, the Airports Council International ranked the Juan Santamaria Airport as the 3rd best in Latin America.

26 Redefining urban mobility in Peru Metro Lima 2 and 4 - Peru Investment Summary Client: Metro de Lima Línea 2 S.A. Country: Peru A-loan: $450 million ($50 million from China Co-financing Fund for LAC) IDB sovereign loan: $300 million Total project cost: $5.8 billion Tenor: 15.5 years Objective Improve mobility and mass transit in Lima Key features The emergence of Peru s middle class coupled with the expansion of Lima s metro area led to an uptick in the use of personal automobiles. This increased traffic congestion, pollution and GHG emissions. By 2009, the number of vehicles in the Lima metro area represented 37% of the vehicles in the country. Thanks to the loan, line 2 and sections of line 4 of the Metro of Lima are being built, improving the quality of the public transportation system and increasing mass transit coverage. The project will reduce travel times, cut transportation service operating costs, improve connectivity and security and reduce greenhouse gas emissions. Developmental impact The project will include the construction of 32 additional stations that will serve 660,000 passengers daily. New lines will traverse 13 districts, that is around 1 million people who will benefit from job creation, access to a safe, reliable, quality public transit system and the appreciation of properties adjacent to the metro. Emissions of GHG will fall as the project aims to take 660,000 passengers a day off the road by 2020, including diesel-fueled public buses and personal automobiles. The project is executed by the consortium Metro de Lima Línea 2 S.A.. It also received financing from the IDB ($300 million). The local counterpart included $3.8 billion.

27 Partnering for clean energy solutions Pozo Almonte and Calama Solar Photovoltaic Plants Investment Summary Country: Chile Client: Solarpack A-loan: $20.7 million Co-loans: $20.7 million Canadian Climate Fund; $24.6 million Proparco Total project cost: $84 million Tenor: 19 years Objective: Diversify Chile s energy matrix by capturing solar power Key features With energy consumption in Chile expected to grow annually 6-7%, Chile s northernmost electrical grid has one of the highest emissions in Latin America. To address energy demand in a climate-friendly way, the IDB Group provided financing for the construction, operation and maintenance of three solar photovoltaic (PV) plants in the Atacama Desert in northern Chile. This represents the first commercial-scale solar PV plants with a combined capacity of 26.5 MW. Development impact These solar plants will replace fossil fuels with renewable energy for the mining industry, which consumes 18% of the country s electricity. In sum, the project will avoid 56,000 tons of carbon dioxide emissions per year. Additionally, this project created 152 new jobs and provided on-the-job training for 140 employees. These plants provide locally-sourced energy that is clean, competitive in price and abundant to supply to the Collahuasi and Codelco mining companies.

28 Financing renewables through capital markets Reventazón Hydroelectric Plant Key features Costa Rica s economy has steadily grown in the last decade, driving an increase in electricity demand. To create more sustainable sources of energy, we supported the design, construction, operation and maintenance of a MW hydroelectric plant and its associated facilities including transmission lines, substations and access roads in the Province of Limon. In addition to the IDB Group s $200 million loan, a B-bond was sold into the private placement market and brought in $135 million from institutional investors. Co-lenders included the International Finance Corporation (IFC) and four local banks, Banco Nacional de Costa Rica, the Banco de Costa Rica, the Banco de Desarollo Popular and Banco de Crédito Agricola, which participated in local currency. The project sponsor Instituto Costarricense de Electricidad invested $475 million in equity. Investment Summary Client: Fideisomiso Planta Hidroeléctrica Reventazón Country: Costa Rica A-loan: $200 million B-bond: $135 million Co-loans: $569 million Tenor: 20 years Total project cost: $1.443 billion Objective: Promote renewable hydropower energy in Costa Rica Developmental impact Once completed, the plant will represent approximately 10% of total installed capacity of Costa Rica, generate an average of 1,407 gigawatt-hours (GWh) of electricity per year and become the largest renewable energy project in Central America. TheprojectisthefourthtobebuiltontheReventazonRiver and the first river offset in Latin America. The project includes a special program to protect the Jaguar Corridor, a critical pathway where jaguars roam from Mexico to Argentina.

29 Greening financial products in Panama Banco General Green Line Investment Summary Country: Panama A-loan: US$20 million Technical assistance: Green line feasibility study and product development Tenor: 5 years Objective: Mitigate climate change by supporting bank on-lending to green sectors Key features Banco General sought to finance borrowers seeking to invest in energy efficiency and renewable energy, however, it did not have the internal capacity to do so. It came to the IDB Group for technical assistance and financing to extend loans with green use of proceeds. The goal was to develop green financial products and a portfolio of green loans for General. Technical assistance strengthened General s ability to screen, assess and structure transactions. Development impact Banco General created a portfolio of 10 sub-borrowers with $58.9 million in outstanding investments by During the life of the loan, General originated five LEED certified buildings; three small run-of-the-river hydroelectric plants; and energy efficient machinery, houses, schools and wastewater treatment plants. This was the first green line for Banco General and for the country of Panama. In sum, the project will avoid 68,724 tons of carbon dioxide emissions per year for the sub-borrowers of the line. This project had a demonstration effect, and 13 additional green lines followed, three of which in Central America.

30 Factoring promotes financial inclusion Incofin Investment Summary Country: Chile A-loan: US$4.5 million Tenor: 5 years Objective: Mitigate climate change by supporting bank on-lending to green sectors Key features Development impact As SMEs in the region seek to access financing to compete and grow, one solution is leveraging the reach and scale of local financial institutions. Incofin is a Chilean financial institution that buys accounts receivable from local SMEs and provides them with cash on the spot. Incofin received its first loan from the IIC in 2013 as a US$3 million, 1 year revolving credit line. Incofin sought to increase its line to match the longer tenors of its leasing portfolio which averaged 36 months. As part of the Financing Program for Small Financial Intermediaries (IFIP), an uncommitted facility to support small and medium-sized financial institutions, we extended Incofin a $4.5 million A-loan for Since IFIP was introduced in early 2015, the IIC has approved ten loans under the new program totaling $32.5 million. Incofin was one of the first financial institutions to receive financing under IFIP. The $4.5 million loan disbursed in September 2015 aims to finance more than 250 Chilean SMEs.

31 Greening dairy operations for competitiveness Estancias del Lago Dairy Farm Key features Uruguay s exports rely heavily on agribusiness. The sector employs around 16% of the workforce and contributed to 12.6% of the GDP in The dairy industry is particularly competitive, and investing in this sector is key for the country s economic growth. An $65 million A-loan allows Estancias del Lago to develop a highly-efficient free-stall dairy facility for 8,800 milking cows, a dry lot facility for 2,000 milking cows, a powdered milk plant and a biogas plant that generates thermal energy. In addition, the loan financed the construction of an effluent treatment plant, a fertilizer production plant and a grain milling and oil extraction plant. The company expects to produce up to 20,000 tons of powdered milk annually. Additional non-reimbursable resources were destined for feasibility studies on biodiesel production and energy efficiency. Investment Summary Client: Estancias del Lago S.A. Country: Uruguay A-loan: $65 million Co-loan: $40 million Total project cost: $105 million Tenor: 10 years Non-financial product: Biodiesel feasability studies Objective: Develop fully-integrated, highly efficient dairy operation Development impact The biogas plant produces more environmentally-friendly thermal energy to power operations. So far, the project has contributed to the economy of the City of Durazno, creating direct jobs and providing on-the-job training to almost 1,000 locals.

32 Boosting fruit production through workforce engagement Subsole Shared Value Project Investment Summary Client Subsole S.A. Country: Chile A-loan: $32 million Tenor: 10 years Non-financial product: Renewable energy study and shared value appraisal Objective: Support agricultural and industrial expansion and the use clean and renewable energy to support fruit production Key features Subsole, the largest Chilean-owned fruit exporter in Chile, sought support to expand production and finance capital expenditures. The IDB Group loan coupled with non-financial products allowed Subsole to increase production, expand cold storage and processing facilities and create jobs throughout its supply chain. Feasibility studies assessed a plan for solar photovoltaic energy and energy efficiency opportunities, and a shared value appraisal identified solutions to stabilize and retain Subsole s seasonal workforce by improving productivity, reducing operating costs and including more women in agriculture. Development impact Much of the fruit the company packages, refrigerates, and exports comes from small and medium independent producers. The project is now supporting almost 2,000 SMEs. The company has increased its output by 21% and created more than 3,500 jobs. More than 5,000 people have benefitted from on-the-job training. As part of the project, the company built a solar plant to power irrigation systems in Chile s Copiapó Valley. The project was selected among 100 most sustainable projects by Chile Verde 2012, a leading public-private initiative to highlight sustainable projects in Chile.

33 Disclaimer THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY FOR USE AT AN INVESTOR PRESENTATION AND IS PROVIDED AS INFORMATION ONLY. THIS PRESENTATION DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS MATERIAL TO AN INVESTOR. BY ATTENDING THE PRESENTATION OR BY READING THE PRESENTATION SLIDES YOU ACKNOWLEDGE AND AGREE TO THE FOLLOWING: This document and its contents are confidential and proprietary to the Inter American Investment Corporation ( IIC ) and may not be reproduced, redistributed, published or passed on (or the contents otherwise divulged) to any other person, directly or indirectly, in whole or in part, for any purpose. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. This presentation and the information contained herein are not an offer of securities for sale in the United States. This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to sell securities of the IIC, or the solicitation of an offer to subscribe for or purchase securities of the Issuer, and nothing contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. 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34 Contact information Rocio Palafox Chief of Finance and Administration Phone: (202) Eusebio Garre Chief Financial Officer Phone: (202) Jose Mauro Barros Senior Treasury Officer Phone: (202) Investor Website: Bloomberg IICORG Corp <GO>