INTERNATIONAL FINANCE CORPORATION Helping Russian Chemical and Petrochemical Companies Succeed
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Transcript of INTERNATIONAL FINANCE CORPORATION Helping Russian Chemical and Petrochemical Companies Succeed
INTERNATIONAL FINANCE CORPORATIONINTERNATIONAL FINANCE CORPORATION
Helping Russian Chemical Helping Russian Chemical and Petrochemical Companies Succeedand Petrochemical Companies Succeed
Prepared for the Conference Prepared for the Conference ““BusinessBusiness Strategy of Russian Chemical and Petrochemical Companies” Strategy of Russian Chemical and Petrochemical Companies”
Moscow, September 2002Moscow, September 2002http://www.ifc.org/ogchttp://www.ifc.org/ogc
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WorkingwithIFC
WorkingwithIFC
InternationalFinance
Corporation
InternationalFinance
Corporation
Chemical Sector Activities
Chemical Sector Activities
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• Promotes economic development by encouraging foreign and domestic private investment in emerging markets
• Supports private sector ventures that are financially viable, benefit the host country economy, promote high environmental standards, and provide strong demonstration effect
• Provides long-term financing, capital mobilization and advisory services
• Three guiding principles for supporting an investment: - Catalytic: minority role, investment limit, mobilization of
capital - Business partnership: same risks as other investors, no
government guarantees, satisfactory returns as well as benefitto host country
- Additionality: private sector not displaced
IFC is the private sector arm of the World Bank Group
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IFC is the largest source of loan and equity financing for the private sector in emerging economies
• 174 member countries
• AAA rated member of World Bank
• FY02 commitments: US$3.6 bn in 204 projects, including US$518 million in syndicated “B” loans
(June 2002)
US$14.3 bn portfolio (own account)
Since 1956, approximately US$55 bn invested in 2,840 companies in 140 developing countries
Europe18%
Sub-Saharan Africa
8%
South & South-East Asia
27%
Central Asia, Middle East &
North Africa11%
Latin America36%
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Advisory Services•Country, industry, financial and technical
Advisory Services•Country, industry, financial and technical
IFC’s Products
Industry knowledge & contacts
Sensitivity toGovernment priorities
Commercial andtechnical skills inemerging markets
Capital Mobilization•B loan syndications - exempt from withholding tax & provisioning requirements
•Export Credit Agency co-financing
•Partial Credit Guarantees
Capital Mobilization•B loan syndications - exempt from withholding tax & provisioning requirements
•Export Credit Agency co-financing
•Partial Credit Guarantees
Long Term Financing•Corporate / Project Loans
•Equity / Quasi-equity
•Innovative Instruments
Long Term Financing•Corporate / Project Loans
•Equity / Quasi-equity
•Innovative Instruments
IFC combines the resources of a development bank with the flexibility of a merchant bank,
reassuring investors and Governments
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Credit Enhancement
Flexible Loans
Capital Mobilization
Equity Participation
•Fixed/floating rates, US$, Euro and some local currencies available
•Commercial rates, repayment tailored to project needs
•Long maturities: 7-12 years, appropriate grace periods
•Range of security packages suited to project/country
•B Loan Program – International bank syndications
•Co-financing with Export Credit Agencies and other multilaterals
•“Neutral broker” between foreign and local owners
•Technical /commercial knowledge as partner
•Long-term partnership without controlling interest
•Partial guarantee on local / foreign currency bonds or bank loans
•Credit enhancement mechanisms for asset securitization
Market approach coupled with political risk mitigation adds value to sponsors
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WorkingwithIFC
WorkingwithIFC
InternationalFinance
Corporation
InternationalFinance
Corporation
Chemical Sector Activities
Chemical Sector Activities
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IFC supports upstream & downstream projects in developing countries
Oil, Gas and Chemicals Investment Commitments
0
50
100
150
200
250
300
350
1998 1999 2000 2001 2002E 2003F 2004F
US$
Mill
ion
Upstream:• Onshore/Offshore• Appraisal & development
(no pure exploration)• LPG / LNG • Oil field services • Oil and gas pipelines
Downstream:• Oil refining• Petrochemicals• Fertilizers• Other chemicals• Biotechnology• Infrastructure (terminals, etc.)
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FY 01 Oil, Gas and Chemicals Portfolio : US$ 2.6 billion
By Region
Africa14%
Latin America
34%
Asia42%
MENA2%
Europe & C.Asia
8%
US$ 1.2 billion for IFC’s account / US$ 1.4 billion held by participants
By Sector
Oil & Gas43%
Refineries6%
Petrochemicals42%
Fertilizer3%
Chemicals6%
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Chemicals Sector Experience to Date
Petrochemicals
• Refineries
• Naphtha crackers
• PP/PE
• VCM/PVC
• PTA/PET
• Ethylene derivatives
• Methanol
Inorganics
• Hydrogen peroxide
• Chlor-alkali
• Carbon black
• Other inorganics
Infrastructure
• Storage facilities
• Marine terminals
• LPG distribution
Fertilizers
• Ammonia/urea
• Phosphoric acid
• DAP
• Soda ash
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Chemicals Sector Experience in Eastern Europe
Investments
• Cabot C.S. – Carbon Black, Czech Republic
• Dunastyr – Styrene, Hungary
• Gaspol – LPG Distribution, Poland
Strategic Overview
• Oltchim - Romania
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Retrofit/Modernization: Refineries, Chemicals, Petrochemicals, Fertilizers
The need to retrofit/modernize existing operations can result from the The need to retrofit/modernize existing operations can result from the
following factors:following factors: • Limited local availability of hydrocarbon feedstocks
• Pressure on prices as tariff protection/price supports are reduced
• Plants based on outdated technologies at a competitive disadvantage compared to modern facilities
• Non-compliance with current or proposed standards of environment, waste treatment, and handling of hazardous materials
• Rising energy costs
• Inefficient material handling systems which cause loss of material, environmental problems and health hazards.
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IFC designs financing plans of greenfield projects to meet sponsor needs
Pakistan - Engro AsahiPakistan - Engro Asahi• Construction of a greenfield 100,000 tpy PVC manufacturing plant at a
cost of US$83 million• JV between Engro Chemical Pakistan, Asahi Glass Co. and Mitsubishi
Corporation • IFC committed US$14.25 mm A Loan
Thailand - VinythaiThailand - Vinythai• Fully integrated PVC plant with a capacity of 195,000 tpa at a total cost
of US$416 million• IFC assisted the company through the Thai crisis by providing
restructuring advice and facilitating a capital increase• Total IFC financing was US$115 million (A Loan US$28 million, B
Loan US$70 million and C Loan US$17 million)
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IFC funds not only greenfield but also expansion and modernization projects
India – Continentals Carbon India LimitedIndia – Continentals Carbon India Limited• Modernization/expansion of carbon black plant at total cost of US$34 mm• The project will retrofit and clean up an existing carbon black plant and
bring production to globally accepted environmental, technical and quality standards
• IFC investment of US$20.5mm (A Loan US$9mm, B Loan US$11.5mm)
Philippines – Philipinas Shell Petroleum CorporationPhilippines – Philipinas Shell Petroleum Corporation• Replacement of old refinery with modern 110,000 bpd refinery with
thermal cracking unit at total cost of US$667 mm
• IFC investment of A Loan US$35 mm and B Loan US$85 mm)
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IFC facilitates financing in difficult environments
China - Chengdu ChemicalChina - Chengdu Chemical• Modernization and expansion of a 30,000 tpa potassium hydroxide
facility at a cost of US$30 million• IFC enabled a 100% local company to access international financial
markets• IFC provided loans and equity of US$19 millionChina – DarongChina – Darong• Expansion of calcium cyanamide production from 50,000 tpa to
150,000 tpa at a total cost of US$30 mm• Environmental upgrade of existing calcium carbide furnaces to reduce
air emissions and recover waste heat • IFC investment of US$18 mm (A Loan US$10 mm, B Loan US$8mm)
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IFC supports chemical infrastructure and distribution
China – Zhong Chen LPG FacilityChina – Zhong Chen LPG Facility
• Construction of 50,000 ton liquefied petroleum gas (LPG) storage and harbor facility at a total cost of US$99 mm
• IFC finalizing investment of US$57 mm (A Loan US$25 mm, B Loan US$32 mm)
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IFC provides financial and technical advisory services
Bangladesh – KAFCO Fertilizer ComplexBangladesh – KAFCO Fertilizer Complex
• Helped negotiate offtake and feedstock supply agreements needed to ensure financial viability of the company
• Developed capex program needed to mitigate technical issues
• Helped the company secure US$250 mm of ECA restructured debt and US$30 mm of equity infusion
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WorkingwithIFC
WorkingwithIFC
International Finance
Corporation
International Finance
Corporation
Chemical Sector Activities
Chemical Sector Activities
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Companies or entrepreneurs setting up facilities in emerging markets can approach IFC
• Foreign or domestic sponsors can request IFC financing – New venture or expansion; private sector majority ownership required
– Project must be developmentally sound as well as commercially viable
• Sponsor commitment is required– Equity participation; pre-completion support/guarantees
• Submit preliminary business plan or feasibility study– Brief project description, including technical feasibility / market study
– Information on sponsors and operator
– Environmental studies
– Information on investment requirements, financing plan and cash flow projections
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Beyond its own investment limits, IFC can help mobilize financing from commercial banks, export
credit agencies and bilaterals/ multilaterals
Project typeProject type
Greenfield, total costless than $50 mn
Greenfield, total costmore than $50 mn
Expansion orrehabilitation
IFC's investment for its own accountIFC's investment for its own account
Up to 35% of project cost
Up to 25% of project cost
Up to 50% of project cost
IFC's total financing must be less than 25% of total company capitalization, and IFC does not manage or have largest stake..
IFC umbrella for B Loan participants: IFC lender of record, immunity from taxation and provisioning requirements.
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IFC team works closely with theclient/sponsor to finalize the investment
Internal to IFC
Supervision
As Seen By Client
Management Approval
Board Approval
Initial Discussions
Mandate LetterAppraisal
Financing Negotiations
Information Memo and SyndicationLegal Documentation
Disbursement
Initial Review & Authorization to Appraise
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How can we help?Please contact us for further information:
Alzbeta KleinAlzbeta Klein
Senior Investment Officer, IFC MoscowSenior Investment Officer, IFC Moscow
tel: 7-095-755-8818tel: 7-095-755-8818
E-Mail: [email protected]: [email protected]
Address: 7/5 Bolshaya Dmitrovka StrAddress: 7/5 Bolshaya Dmitrovka Str
Moscow, 103009 RussiaMoscow, 103009 Russia
Telefax: 7-095-755-8296Telefax: 7-095-755-8296www.ifc.org/ogcwww.ifc.org/ogc