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INTERNATIONAL FINANCE CORPORATION Helping Russian Chemical and Petrochemical Companies Succeed Prepared for the Conference “Business Strategy of Russian Chemical and Petrochemical Companies”. Moscow, September 2002 http://www.ifc.org/ogc. International Finance Corporation.
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INTERNATIONAL FINANCE CORPORATION Helping Russian Chemical and Petrochemical Companies Succeed Prepared for the Conference “Business Strategy of Russian Chemical and Petrochemical Companies” Moscow, September 2002 http://www.ifc.org/ogc
InternationalFinanceCorporation Chemical Sector Activities Working with IFC
IFC is the private sector arm of the World Bank Group • 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 benefit • to host country • - Additionality: private sector not displaced
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) IFC is the largest source of loan and equity financing for the private sector in emerging economies US$14.3 bn portfolio (own account) Since 1956, approximately US$55 bn invested in 2,840 companies in 140 developing countries
IFC combines the resources of a development bank with the flexibility of a merchant bank, reassuring investors and Governments • Long Term Financing • Corporate / Project Loans • Equity / Quasi-equity • Innovative Instruments Industry knowledge & contacts • Capital Mobilization • B loan syndications - exempt from withholding tax & provisioning requirements • Export Credit Agency co-financing • Partial Credit Guarantees IFC’s Products Sensitivity to Government priorities Commercial and technical skills in emerging markets • Advisory Services • Country, industry, financial and technical
Market approach coupled with political risk mitigation adds value to sponsors • Fixed/floating rates, US$, 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 Flexible Loans Credit Enhancement • Partial guarantee on local / foreign currency bonds or bank loans • Credit enhancement mechanisms for asset securitization • “Neutral broker” between foreign and local owners • Technical /commercial knowledge as partner • Long-term partnership without controlling interest Equity Participation Capital Mobilization • B Loan Program – International bank syndications • Co-financing with Export Credit Agencies and other multilaterals
InternationalFinanceCorporation Chemical Sector Activities Working with IFC
IFC supports upstream & downstream projects in developing countries 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.)
FY 01 Oil, Gas and Chemicals Portfolio : US$ 2.6 billion US$ 1.2 billion for IFC’s account / US$ 1.4 billion held by participants
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 Chemicals Sector Experience to Date • Fertilizers • Ammonia/urea • Phosphoric acid • DAP • Soda ash
Investments Cabot C.S. – Carbon Black, Czech Republic Dunastyr – Styrene, Hungary Gaspol – LPG Distribution, Poland Strategic Overview Oltchim - Romania Chemicals Sector Experience in Eastern Europe
Retrofit/Modernization: Refineries, Chemicals, Petrochemicals, Fertilizers The need to retrofit/modernize existing operations can result from the 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.
IFC designs financing plans of greenfield projects to meet sponsor needs Pakistan - 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 - 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)
IFC funds not only greenfield but also expansion and modernization projects India – 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 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)
IFC facilitates financing in difficult environments China - 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 million China – 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)
IFC supports chemical infrastructure and distribution China – 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)
IFC provides financial and technical advisory services Bangladesh – 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
International Finance Corporation Chemical Sector Activities Working with IFC
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
Beyond its own investment limits, IFC can help mobilize financing from commercial banks, export credit agencies and bilaterals/ multilaterals Project type IFC's investment for its own account Greenfield, total cost Up to 35% of project cost less than $50 mn Greenfield, total cost Up to 25% of project cost more than $50 mn Expansion or Up to 50% of project cost rehabilitation · 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. ·
IFC team works closely with theclient/sponsor to finalize the investment Internal to IFC As Seen By Client Initial Discussions Initial Review & Authorization to Appraise Mandate Letter Appraisal Financing Negotiations Management Approval Information Memo and Syndication Legal Documentation Disbursement Board Approval Supervision
How can we help?Please contact us for further information: Alzbeta Klein Senior Investment Officer, IFC Moscow tel: 7-095-755-8818 E-Mail: aklein@ifc.org Address: 7/5 Bolshaya Dmitrovka Str Moscow, 103009 Russia Telefax: 7-095-755-8296 www.ifc.org/ogc