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I nternational F inance C orporation May 2013 Istanbul

I nternational F inance C orporation May 2013 Istanbul. Giovanni Daniele Manager, Manufacturing & Chemicals Europe, Middle East and North Africa. Table of Contents. IFC Overview Financing Needs in Emerging Markets and ECA: Risks & Opportunities

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I nternational F inance C orporation May 2013 Istanbul

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  1. InternationalFinanceCorporationMay 2013Istanbul Giovanni Daniele Manager, Manufacturing & Chemicals Europe, Middle East and North Africa

  2. Table of Contents • IFC Overview • Financing Needs in Emerging Markets and ECA: Risks & Opportunities • IFC in ECA: results to date and strategy going forward • IFC Value Proposition: how IFC can facilitate investment • IFC Project Cycle • IFC Teams and Contacts

  3. Who We Are, What We Do • IFC is the largest global development institution focused exclusively on the private sector – the global leader in private sector development finance • We invest, advise, mobilize capital, and manage assets – providing solutions for an inclusive and sustainable world • The World Bank Group consists of five closely related institutions: • IBRD: The International Bank for Reconstruction and Development, IDA: The International Development Association, IFC: International Finance Corporation, MIGA: The Multilateral Investment Guarantee Agency, ICSID: The International Center for the Settlement of Investment Disputes

  4. IFC’s Structure • Owned by 184 member countries • IFC is the main driver of private sector development in the World Bank Group • Collaborates with other members of the group, including the World Bank (IBRD and IDA, MIGA and the International Centre for Settlement of Investment Disputes) • Global: Headquartered in Washington, D.C.; Operating Center in Istanbul, Turkey • Local: More than 100 offices worldwide in 95 countries

  5. IFC’s Three Businesses IFC AssetManagementCompany Investment Services Advisory Services Loans Equity Trade finance Syndications Securitized finance Blended finance Wholly owned subsidiary of IFC Private equity fund manager Invests third-party capital alongside IFC Access to finance Sustainable Business Investment Climate Public-Private Partnerships $4.5 bnunder mgmt $56.5 bnportfolio $200 mnper year

  6. The Reach of IFC’s Projects (FY12) Despite the challenging economic context, IFC invested arecord $20.3 billion for the year Last year our clients provided: 2.5 millionjobs $200 billion in micro, small, and medium enterprise loans 12.2 million patients with health care treatment 34.3 million people with clean water 41.9 million people with power connections 900,000 million students with education

  7. Investments by Region, FY12 19% of IFC’s total business is in ECA Commitments for IFC’s Account: $15.4 Billion Global >1% Sub-Saharan Africa 18% Middle East and North Africa 14% East Asia and Pacific 16% Latin America and the Caribbean 24% South Asia 8% Europe and Central Asia 19%

  8. Growing Financial Needs for EM globally • Financing Needs: EM’s as a whole did not face financing needs in the 2005-08 period, but will be facing needs of around $600bn in 2013 – a 68% increase relative to 2012. Financing needs are projected at $1trillion for 2016. • Financing needs in non-IDA countries switched drastically from a surplus in 2005-08 to a deficit of $393bn in 2013 and a projected deficit of $824bn in 2016. • Capital Flows: Debt and equity flows to EM’s have already recovered to pre-crisis levels, and are projected to keep increasing towards $1.5 trillion by 2016, mainly driven by FDI flows, bond issuance and bank lending. • Reserve Accumulation is expected around $350bn per year in the 2013-16 period, well below its peak of over $1.3 trillion in 2007.

  9. ECA and LAC face the largest financing needs

  10. ECA Financing Needs: largest countries

  11. Investing in ECA: risk & opportunities going forward • Coming out of a very difficult period, a number of markets seem to have a more favorable outlook; growth in ECA at around 4 percent is higher than world average • Financing needs remain large (and growing) and this poses a key risk for the region • Given low portfolio flows, attracting FDI and bank flows is critical, so is the role of IPAs • Exposure to EU markets remains a concern • Need to focus on competitiveness and increase productivity • Opportunities for sector consolidation and regional expansion by industry leaders

  12. IFC in ECA • IFC has been contributing to the development of the private sector in ECA for over 45 years. • IFC’s five largest exposures are in Turkey, Russia, Ukraine, Romania and Serbia. Turkey is IFC’s fourth largest client in terms of committed portfolio. • We have offices in 21 countries in ECA • In the ECA region, since 2008 IFC invested $13.4 billion in 560 projects and mobilized $5.4 billion through other financial institutions.

  13. In 2010, IFC Launched IstanbulOperationCenter (IOC)IFC’s First Operations Center in Istanbul to Serve EMENA Region The IOC, with 195 staff, is at the center of a network of regional, sub-regional and smaller country offices, integrated with Washington DC and working to serve the needs of the EMENA region… … to deliver a program of over US$6.8 billion in total investment (own account and mobilization) in 171 projects and US$53 million in Advisory Services. (FY12 results)

  14. IFC Portfolio in ECA IFC Annual Commitments in ECA, $mn (as of February 28,2013) ECA Committed Portfolio, $mn( as of March 31,2013) 670

  15. IFC Sector Priorities in ECA • SMEs for jobs, economic diversification and higher equality • Agribusiness for food safety and • Infrastructure & Energy • Climate-smart investments • South-south investment • Health & Education • Supporting regional champions to foster regional integration and productivity growth

  16. How IFC can facilitate investment • Provide political risk mitigation • Long-term tenors • Global expertise combined with local knowledge • Ability to mobilize LT capital (including equity through AMC) • Advisory services • Equity • Honest broker role • Encouraging adoption of environmental best practices • Long-term relationship across emerging markets workldwide

  17. IFC’s Investment Guidelines • Committed and reputable sponsors with established track record in the industry • Ability to assume project completion risk • Sound market fundamentals: favorable supply/demand outlook also taking into consideration new capacity • Cost competitiveness • Absence of market distortions • Prudent capital structures • Adequate risk/return profiles • Sound corporate governance

  18. Commitment and Disbursement Early Review Due Diligence Disclosure Client needs determined Assessment of project’s impacts and development contributions Management committee approval Mandate letter Assessment of business opportunities and risks Analysis of environmental and social opportunities and risks Appraisal Credit committee approval Disclosure of environmental and social information Opportunity for public comment Negotiation and agreement of principal terms Board approval Signing of legal documents Disbursement IFC’s Project Cycle Negotiation Monitoring Annual review of project performance We agree on a specific timeline to meet client’s needs

  19. How We Finance Projects IFC Investment Project Type Up to 35% of project cost for IFC’s account Up to 25% of project cost for IFC’s account Up to 50% of project cost Greenfield, total costless than $50 million Greenfield, total costmore than $50 million Expansion or rehabilitation Umbrella for participants in IFC’s syndication program: IFC lender of record, immunity from taxation and provisioning requirements. IFC’s total financing (for its own account) must be less than 25% of total company capitalization

  20. Financial Products - From Equity to Debt Corporate and JV Typically 5-15% shareholding (not to exceed 20% of total equity) Long-term investor, typically 6-8 year holding period Not just financial investor, adding to shareholder value Usually no seat on board Infraventures (early equity investments) Equity Subordinated loans Income participating loans Convertibles Other hybrid instruments Mezzanine / Quasi Equity Senior Debt (corporate finance, project finance) Fixed/floating rates, US$, Euro and local currencies available Commercial rates, repayment tailored to project/company needs Long maturities: 8-20 years, appropriate grace periods Range of security packages suited to project/country Mobilization of funds from other lenders and investors, through cofinancings, syndications, underwritings and guarantees Senior Debt & Equivalents

  21. Mobilizing Financing - Syndication “B-Loan” Structure Loan Agreement IFC Borrower A + B Loans Participation Agreement B Loan A loan is for IFC’s own account B loan is for the account of participant commercial banks Only one loan agreement signed by the borrower and IFC IFC is the lender of record for the entire loan (A+B) Structure allows participants to benefit from IFC privileges and immunities Better pricing/tenors than otherwise available; preferred creditor access to foreign exchange IFC Loans exempt from withholding taxes Participants

  22. IFC Management Team in the Region Istanbul is the new Hub office for the Region Vice President of IFC DimitrisTsitsiragos (Istanbul) Director of Manufacturing, Agribusiness & Services Guy Elena (Istanbul) Director of Financial Markets AftabAhmed (Istanbul) Regional Director MouayedMakhlouf (Dubai) Director of Natural Resources and Infrastructure Gulrez Hoda (Istanbul) Regional Director Tomasz Telma (Moscow)

  23. Thank you...

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