11850 Munetaka Horiguchi

11

Realigning risk profiles with Realigning risk profiles with

project financing to improve project financing to improve

project successproject success

21 May 200721 May 2007

Project Finance DepartmentProject Finance Department

Japan Bank for International Japan Bank for International Cooperation (JBIC)Cooperation (JBIC)

22

ContentContent

ⅠⅠ.. JBICJBIC’’ss ProfileProfile

ⅡⅡ.. Identifying list of risksIdentifying list of risks affecting affecting

project financeproject finance

ⅢⅢ..　　 Case StudyCase StudyーーMethanol ProjectMethanol Project

ⅥⅥ.. Possibility of other risk Possibility of other risk controllcontroll

-- Collaboration with IslamicCollaboration with Islamic　　

FinanceFinance

-- Cooperation with Asian ECACooperation with Asian ECA

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ⅠⅠ. . JBICJBIC’’ss ProfileProfile

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ProfileProfile

A Japanese Governmental Financial Institution. A Japanese Governmental Financial Institution.

JBIC is 100% owned by the Government of JBIC is 100% owned by the Government of Japan.Japan.

Established in October 1999 after the merger of Established in October 1999 after the merger of the Exportthe Export--Import Bank of Japan (JEXIM) and Import Bank of Japan (JEXIM) and the Overseas Economic Cooperation Fund the Overseas Economic Cooperation Fund (OECF).(OECF).

Operations :Operations :

1) International Finance Operations (IFO) 1) International Finance Operations (IFO) (previously, JEXIM Operations)(previously, JEXIM Operations); and ; and

2) Official Development Assistance (ODA) 2) Official Development Assistance (ODA) (previously, OECF Operations)(previously, OECF Operations)..

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ContCont’’d d –– ProfileProfile

1) Export loans2) Energy & Natural Resource

Loans3) Overseas

Investment loans4) Untied loans5) Bridge loans6) Equity participation

The primary objective of International Financial Operations is to contribute to the promotion of Japanese exports, imports and economic activities overseas, as well as the stability of international financial order.

1) ODA loans2) Private-Sector Investment

Finance3) Studies

The basic activity of Overseas Economic Cooperation Operations is to provide funds which encourage self-help efforts of developing countries for sustainable economic development.

InternationalFinancial

Operations

(IFOs)

OverseasEconomicCooperationOperations(OECOs = ODA)

•FILP*•Bond issues•Internal funds

•Government Investment funds•FILP*•Own funds, etc.

Sources Of

Funds

Sources Of

Funds

* Fiscal Investment and Loan Program

66

-- Comparison between JBIC and other MLAs Comparison between JBIC and other MLAs

in 2005in 2005　　

Volume of JBICVolume of JBIC’’s Financings Financing

0.0

5.0

10.0

15.0

20.0

WB ADB EBRD JBIC

com

mitm

ent

.

0.0

50.0

100.0

150.0

200.0

outs

tandi

ng

.

Commitment(US$ billion)

Outstanding(US$ billion)

*Exchange rate: \116=$1, $1.27=Euro1

Note: Each figures has been adjusted for comparison with JBIC’s relevant figures.

** JBIC’s amount is the total of IFOs and ODAs.

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Restructuring of Japanese Restructuring of Japanese

Governmental Financial InstitutionsGovernmental Financial Institutions

To restructure the Japanese Governmental Financial To restructure the Japanese Governmental Financial Institutions, the Japanese Government decided to reInstitutions, the Japanese Government decided to re--organize institutions, including such as JBIC.organize institutions, including such as JBIC.

International Finance Operations will be merged with (4) International Finance Operations will be merged with (4) other domestic financial institutions other domestic financial institutions –– that is: that is: (1)(1)Japan Small and Medium Enterprise Corporation (JASMEC),Japan Small and Medium Enterprise Corporation (JASMEC),

(2)(2)National Life Finance Cooperation (NLFC) ,National Life Finance Cooperation (NLFC) ,

(3)(3)Agriculture, Forestry and Fisheries Finance Corporation of Agriculture, Forestry and Fisheries Finance Corporation of Japan,Japan,

(4)(4)Okinawa Development Finance Corporation (ODFC).Okinawa Development Finance Corporation (ODFC).

JBICJBIC’’ss new missionnew mission-- 　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　(1)Securing natural resources,(1)Securing natural resources,　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　(2)Enhancing Japanese competitiveness,(2)Enhancing Japanese competitiveness,　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　(3)Responding to disruptions of financial order (3)Responding to disruptions of financial order in the international in the international 　　　　economy.economy.

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JBICJBIC’’ss financial products financial products

International Finance Operations:International Finance Operations:

Export Credit Loan Export Credit Loan

Overseas Investment Loan Overseas Investment Loan

Guarantee Guarantee

Untied LoanUntied Loan

Equity ParticipationEquity Participation

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Export Credit LoanExport Credit Loan

Provided to exporters or buyers of Japanese goods or Provided to exporters or buyers of Japanese goods or services.services.

Terms and Conditions of financing must be in line with Terms and Conditions of financing must be in line with OECD Guideline.OECD Guideline.

JBICProject Company (Overseas Importer)

Cross Border(Typical Example)

Commercial Bank(s) in Japan

NEXI

Insurance Cover

Direct Loan

Japanese Exporter(s)

EPC Contract

1010

Overseas Investment Loan (OIL) Overseas Investment Loan (OIL)

Applicable for Japanese firms, subsidiaries, joint ventures withApplicable for Japanese firms, subsidiaries, joint ventures with foreign foreign partners, who are investing in developing countries. partners, who are investing in developing countries.

Substantial involvement of Japanese business in project structurSubstantial involvement of Japanese business in project structure. e.

Procurement is not tied to Japanese goods and services.Procurement is not tied to Japanese goods and services.

OverseasSponsor(s)

(Typical Example)

JapaneseSponsor(s)

CommercialBank(s)

Project Company

JBIC

CommercialBank(s)in Japan

Direct Loan

EquityParticipation

Loan EquityParticipation

Cross Border

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Recent Project Finance RecordRecent Project Finance Record

<JBIC : Recent Project Finance Deals><JBIC : Recent Project Finance Deals>

USD 253 millionUSD 253 millionMay 5, 2007May 5, 2007BruneiBruneiBrunei Methanol projectBrunei Methanol project

USD 836 millionUSD 836 millionApril 26, 2007April 26, 2007QatarQatarMesaieedMesaieed A Independent Power Producer ProjectA Independent Power Producer Project

EUR 22.4 millionEUR 22.4 millionMarch 19, March 19,

20072007BulgariaBulgariaKaliakraKaliakra Wind Power ProjectWind Power Project

USD 110 millionUSD 110 millionMarch 15, March 15,

20072007JordanJordanAmman East IPP ProjectAmman East IPP Project

USD 593 millionUSD 593 millionApril 4, 2006April 4, 2006BahrainBahrainAlAl--Hidd Independent Water and Power ProducerHidd Independent Water and Power Producer


20062006BrazilBrazilEspadarte Floating Production Storage Offloading Espadarte Floating Production Storage Offloading

SystemSystem


20062006IndonesiaIndonesiaPaiton I Coal Fired Power Plant Equity AcquisitionPaiton I Coal Fired Power Plant Equity Acquisition

USD 2.5 billionUSD 2.5 billionMarch 2, March 2,

20062006KSAKSARabigh Refinery and Petrochemical ProjectRabigh Refinery and Petrochemical Project

USD 1 billionUSD 1 billionDec 22, 2005Dec 22, 2005QatarQatarQatar Gas III ProjectQatar Gas III Project

JBIC Financing JBIC Financing

AmountAmountSigning Signing

DateDateCountryCountryProjectProject

1212

JBICJBIC’’s General Approach to Project s General Approach to Project

AppraisalAppraisal

JBIC takes into account, interJBIC takes into account, inter--alia,:alia,:

(1) Extent of participation by Japanese companies,(1) Extent of participation by Japanese companies,

(2) Significance of interests for Japan,(2) Significance of interests for Japan,

(3) Trends in the relevant sector and supply(3) Trends in the relevant sector and supply--demand situation for target product,demand situation for target product,

(4) The host country(4) The host country’’s level of support,s level of support,

(5) The host country(5) The host country’’s legal framework,s legal framework,

(6) Ability to co(6) Ability to co--finance with private financial finance with private financial institutions, institutions,

(7) Environmental compliance.(7) Environmental compliance.

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ⅡⅡ.Identifying list of risks affecting .Identifying list of risks affecting project finance project finance

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Major commercial risks and Major commercial risks and

controllcontroll

・・long term contract basis.long term contract basis.

・・Guaranteed.Guaranteed.

ReserviorReservior/Feedstock/Feedstock

・・Sensitivity analysis.Sensitivity analysis.

・・Debt Service Reserve.Debt Service Reserve.

Cash flowCash flow

・・Contract basis. OffContract basis. Off--taking.taking.

・・Deferral, cash sweep.Deferral, cash sweep.

MarketMarket

・・longrtermlongrterm operation and maintenance.operation and maintenance.

・・Experienced operator.Experienced operator.

Operation Operation

・・Proven technology.Proven technology.TechnologyTechnology

・・EPC Contractor, experience.EPC Contractor, experience.

・・Sponsor support.Sponsor support.

CompletionCompletion

・・Main Main sponsor,Foreignsponsor,Foreign partner.partner.

・・Share retention.Share retention.

SponsorSponsor

PointPointRiskRisk

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Major political risks and Major political risks and controllcontroll

・・ legal framework.legal framework.

・・government supportgovernment support

Change in lawChange in law

・・ legal framework.legal framework.

・・government support.government support.

Contract breach by Contract breach by

governmentgovernment

・・legal framework.legal framework.

・・government support.government support.

ExpropriationExpropriation

・・legal framework.legal framework.

・・offshore escrow account.offshore escrow account.

・・USUS　　dollardollar

Currency Convertibility Currency Convertibility

and and

transfer, Foreign transfer, Foreign

exchange exchange

PointPointRiskRisk

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ⅢⅢ．． Case StudyCase Study　　　　　　　　　　　　　　　　　　　　　　　　　　

－－Methanol Project in AsiaMethanol Project in Asia--

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Brunei Darussalam Methanol Brunei Darussalam Methanol

(Brunei)(Brunei)

Methanol plant 850,000 tons per Methanol plant 850,000 tons per

year in Brunei sponsored by year in Brunei sponsored by

Mitsubishi Gas Mitsubishi Gas

Chemical(MGC),ITOCHUChemical(MGC),ITOCHU Corporation Corporation

and and PetroleumBRUNEI(PBPetroleumBRUNEI(PB).).

Stable supply of methanol resource Stable supply of methanol resource

to Japan.to Japan.

The first project finance deal in The first project finance deal in

Brunei.Brunei.

Strengthen the twoStrengthen the two--way relationship. way relationship.

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Structure of Methanol ProjectStructure of Methanol Project

MGC

Brunei Economic

Development Board

Project CompanyBrunei Methanol Company

Offtaker

(MGC)

Government

Debt Senior

Lenders

JBIC

Land leaseConstruction

of plant

Private Financial

Institutions

Project Support

Equity

Gas Supply

O&M

Technical Support

Sponsor

EPC Contractor

Mitubishi Heary

Industries

Brunei Shell Petroleum

Escrow Account

Debt Senior

(Limited Recourse) Sales Revenue

1919

IV. Possibility of other risk IV. Possibility of other risk

controllcontroll

2020

Project Finance within the Project Finance within the

framework of Islamic Lawframework of Islamic Law

ShariShari’’ahah principles are:principles are:

The charging of interest (The charging of interest (ribariba) is prohibited.) is prohibited.

Profits should not be assured and therefore fixed Profits should not be assured and therefore fixed

returns on returns on investment should not be guaranteed.investment should not be guaranteed.

Speculation or gambling (Speculation or gambling (maisirmaisir) is prohibited.) is prohibited.

Transaction should be free from uncertainty, risk and Transaction should be free from uncertainty, risk and

speculation. speculation.

The existence of uncertainty (The existence of uncertainty (gharargharar) in a ) in a

contract is prohibited.contract is prohibited.

Absolute certainty of contract is required.Absolute certainty of contract is required.

, etc., etc.

2121



However,However,

�� concept of taking commercial risks of a concept of taking commercial risks of a project directly is same as the project directly is same as the conventional concept of Project Finance.conventional concept of Project Finance.

Therefore,Therefore,

Route is different but Goal is same?Route is different but Goal is same?

the joining of Islamic Finance principles the joining of Islamic Finance principles with conventional finance principles, is with conventional finance principles, is achievable?achievable?

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JBIC has not provided loan, based on JBIC has not provided loan, based on Islamic Law (i.e.: in accordance with Islamic Law (i.e.: in accordance with ShariShari’’ahah principles).principles).

In Recent transaction, In Recent transaction, inclidingincliding JBIC, JBIC, conventional lenders shared security conventional lenders shared security interests with Islamic lenders. interests with Islamic lenders.

explore the possibility in Asian Energy explore the possibility in Asian Energy Project.Project.

2323

ContCont’’d d -- JBICJBIC’’s view on PF within s view on PF within

the framework of Islamic Lawthe framework of Islamic Law

JBIC set up an Islam Task Force in 2005.JBIC set up an Islam Task Force in 2005.

JBIC set up JBIC set up ““ShariShari’’ah Advisory Groupah Advisory Group”” in 2006. in 2006. The purpose is The purpose is

(1) to conduct researches on Islamic Finance, (1) to conduct researches on Islamic Finance,

(2) (2) to disseminate related knowledge of Islamic to disseminate related knowledge of Islamic financing with Japanese private banks,financing with Japanese private banks,

(3)(3) to study possibility of potential finance by to study possibility of potential finance by way of Islamic Finance, andway of Islamic Finance, and

(4)(4) to send messages to Islam countries.to send messages to Islam countries.

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Cooperation with Asian ECACooperation with Asian ECA

The Asian EXIM Banks ForumThe Asian EXIM Banks Forum: since 1996, a forum : since 1996, a forum for discussion on collaborative efforts and for discussion on collaborative efforts and strategies regarding a broad range of issues.strategies regarding a broad range of issues.

The Tokyo ConsensusThe Tokyo Consensus: 9 Asian ECA signed on Nov. : 9 Asian ECA signed on Nov. 1010thth,2006.,2006.　　　　　　(1) the consolidation of regional energy security,(1) the consolidation of regional energy security,　　　　　　　　　　　　　　　　　　　　　　　　(2) the promotion of small(2) the promotion of small--and and mediummedium--sized sized enterprises(SMEsenterprises(SMEs) and ) and 　　　　supporting supporting industries,industries,　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　(3) partnerships among members to promote (3) partnerships among members to promote trade and investment with thirdtrade and investment with third--party countries,party countries,　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　(4)(4)　　collaboration and outreach in human resource collaboration and outreach in human resource development.development.

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AppendixAppendix

2626

Mission of JBICMission of JBIC

MISSION OF JBIC:MISSION OF JBIC:

““JBIC has a statutory mandate to undertake JBIC has a statutory mandate to undertake lending and other operations for the promotion lending and other operations for the promotion of Japanese exports, imports and economic of Japanese exports, imports and economic activities overseas, for:activities overseas, for:

(a)(a) the stability of international financial order; the stability of international financial order;

(b)(b) economic and social development; andeconomic and social development; and

(c)(c) economic stability in developing economies, economic stability in developing economies,

thereby contributing to the sound development thereby contributing to the sound development of the Japanese economy, as well as the of the Japanese economy, as well as the international economy.international economy.””

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JBICJBIC--Capital,BudgetCapital,BudgetCapital:Capital:

-- International Financial Operations: 985.5 billion International Financial Operations: 985.5 billion

Yen (=USD8,496Mil.)Yen (=USD8,496Mil.)

-- Overseas Economic Cooperation Operations: Overseas Economic Cooperation Operations:

7,065.6 billion Yen (=USD60,910Mil.) 7,065.6 billion Yen (=USD60,910Mil.)

Budget (FY 2006):Budget (FY 2006):

-- International Financial Operations: 1,060 billion International Financial Operations: 1,060 billion

Yen (=USD9,138Mil.)Yen (=USD9,138Mil.)

-- Overseas Economic Cooperation Operations: Overseas Economic Cooperation Operations:

770 billion Yen770 billion Yen (=USD6,638Mil.)(=USD6,638Mil.)

Staff: Staff: 869869Note: Figures in US$ are calculated at Yen 116/US$.

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JBICJBIC--Operation ResultsOperation Results

47447455556216217272Profit Profit

98,51798,51711,4211,42

8868,10368,1037,9007,900

OutstandingOutstanding

(at FY2005(at FY2005--

end)end)

4,9144,91457057011,56011,5601,3411,341Commitment Commitment

(Loan, Equity, (Loan, Equity,

Guarantee)Guarantee)

US$ MillioUS$ Millio

nn\\ BillionBillion

US$ MillioUS$ Millio

nn\\ Billion Billion

ODAODAIFOsIFOs

Operation Results for the Fiscal Year 2005　　　　

Note: Figures in US$ are calculated at Yen 116/US$.

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JBICJBIC--Recent Project Finance Recent Project Finance

RecordRecord

Industry-wise Project Portfolio (committed)Industry-wise Project Portfolio (committed)Industry-wise Project Portfolio (committed)Industry-wise Project Portfolio (committed)

52%

15%

13%

9%

11%

Power

Mining

Manufacturing

Transportation/ Telecommunication/Water,etcOil&Gas

Region-wise Project Portfolio (committed)Region-wise Project Portfolio (committed)Region-wise Project Portfolio (committed)Region-wise Project Portfolio (committed)

37%

34%

4%

15%

4%4%

2%

Asia

Americas

Africa

Middle-East

Europe

CIS/Russia

Oceania

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DisclaimerDisclaimer

This presentation has been prepared by the Project This presentation has been prepared by the Project Finance Department of JBIC and is being shared with you Finance Department of JBIC and is being shared with you solely for solely for

Information purposes. Information purposes.

JBIC does not make any representation or warranty as to JBIC does not make any representation or warranty as to the accuracy or completeness of this information.the accuracy or completeness of this information.

These presentation materials may not be reproduced or These presentation materials may not be reproduced or disclosed to any person or entity in whole or in part, or disclosed to any person or entity in whole or in part, or used for any other purposes (except for this discussion used for any other purposes (except for this discussion today), without the prior written consent of JBIC.today), without the prior written consent of JBIC.

11850 Munetaka Horiguchi

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