ifc: financing solutions for the power sector financing solutions for the power sector platts...

IFC: financing solutions for the Power Sector

PLATTS Caribbean Energy Conference 2013

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Introduction to IFC

IFC Overall Caribbean Region

Provides equity, quasi-equity, debt, risk mgt and advice in member countries

Benefits from 103 offices worldwide and industry expertise

Only focuses in emerging markets

4 Offices: T&T, Jamaica, DR, Haiti 14 Countries of Operation:

• Antigua & Barbuda

• Bahamas* • Barbados* • Belize • Dominica • Dom Rep • Grenada

• Guyana • Haiti • Jamaica • St Kitts &

Nevis • St Lucia • Suriname • T&T

Largest global multilateral for private sector in developing economies

IFC FY12 Highlights •S&P, Moody’s AAA

•Portfolio $45.2 billion

•Committed $15.4 billion

•Syndicated $3.5 billion

•# of client cies 1,825

•# of countries 103

IFC Equity Initiatives • Equity mobilization: IFC Asset Management Company, Global

Infrastructure Fund

IFC invests in generation, transmission and distribution as well as equipment supply chain

200+ power investments in 57 countries since 1967

Power represents one of IFC’s largest exposures: $4.8bn committed portfolio or 10% of IFC’s total as of June 2012. Close to $1.4bn commitments (including mobilization) in 38 transactions in FY12

Many 1sts: wind farms in LAC and SE Europe, solar farm in SE Asia, merchant wind farm, etc

Power Sector

3

IFC is a lead financier in the power sector $7

.8 b

n or

27,

852

MW

$4

.7 b

n or

14,

048

MW

Cumulative commitments since 1967

Outstanding portfolio

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Robust and growing renewable business: IFC RE investments increased 3x since 2007; now 70% of new power business

Increasing technology diversification: hydro and wind historically. Also, more recently, geothermal, solar, and biomass

Investments in financial intermediaries and funds allow us to support smaller companies/projects

In-house technical expertise allows us to appraise faster investments in new and emerging technologies / prototypes

Local, regional and global players as IFC Partners over the years

Half our business is with global clients – We have forged long-term partnerships with key clients – Recent trend of partnering with renewable energy

companies expanding into emerging markets

We support local clients to become global clients – Local power companies investing in their own country or

expanding into other emerging markets – Local industrials expanding into the power sector – Our local clients are becoming a larger share of our

business as market reform increases opportunities for private investment in the power sector

We work with emerging renewable energy companies – We have supported newly started local renewable energy

firms, as they begin to build their first projects

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6

IFC’s Approach to Financing Solutions

Up to 20 yrs, typically 8-14 yrs Loans in all major currencies and several

local currencies Variable or fixed interest rates Senior or subordinated

Up to 20% of company equity + AMC (49%) Minority, passive shareholder with

standard minority owners rights Right to Board representation

IFC requires client companies to be in the effective control of the private sector IFC takes project risks, including commercial and political risks No international competitive bidding of goods & services required but transparent procurement IFC does not accept government guarantees of IFC financings IFC provides corporate or project financing. Use of proceeds of IFC financing include: capital

expenditure, acquisition, reasonable development fees, interest during construction, etc.

IFC Value Added

LT Partnership. Tailor-made solutions. Mobilization capacity. Global sector expertise. Local authorities knowledge. Brand enhancement. In-house technical expertise (engineering, insurance,

environmental/social)

IFC Debt Financing IFC Equity Financing

Key Features of IFC’s Financing

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IFC Funding Capacity for its Own Account:

Leveraging the World Bank Group’s Special Privileges and Immunities: As lender of record, IFC can share its immunity from taxation

More generally: IFC can syndicate (on best efforts basis) 100% of the debt financing based on a preapproved financial plan

Greenfield & total cost<$50m

Greenfield & total cost >$50m

Expansion or rehabilitation (corporate finance)

All projects

Up to 35% of project cost



Up to 25% of client’s capitalization

+

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IFC can deliver a complete financing package to clients

Complemented by IFC’s Mobilization Capacity:

What we do…

Types of Political (Country) Risk Coverages 1. Inconvertibility and Transfer Restriction …protects against Inability to convert local currency into foreign exchange within the host country Transfer/excessive delays in acquiring Forex Currency depreciation is not covered

2. Expropriation …protects against Nationalization and confiscation Interference with ownership, control and material rights Inability to exercise collateral Discriminatory license cancellation Creeping /Partial expropriation (expropriation of funds) 3. War and Civil Disturbance …protects against Damage/disappearance of tangible assets (including revolution, insurrection, coups d'état, sabotage, and terrorism) Business interruption Acts must have a primary intent of achieving a political objective

4. Breach of Contract …protects against Breach or repudiation of a contract between the investor/project company and the host country authorities Non-enforcement of an arbitration/judicial award, or no recourse to judicial/arbitral forum, or decision by forum not rendered in reasonable time May cover sub-sovereign obligations and obligations from SOEs

5. Non-Honoring of Sovereign Financial Obligations For unconditional financial payment obligations No arbitration required

What MIGA does… Non commercial risk insurance for investors and lenders

Dispute resolution services for guaranteed investments

Research and knowledge services (World investment and Political Risk Report, PRI-Center)

Support the multi-donor Investment Climate Advisory Services of the World Bank Group

• MIGA at a Glance

•Guarantee holder can choose any combinations of these coverages…

Supportive country environment and legal framework

Well-structured and clear regulatory / contractual framework, providing for :

– adequate mechanism of tariff adjustment and/or strong LT PPA from creditworthy utility/off-taker

– Government’s commitment (lenders’ rights and security, termination provisions, financial equilibrium)

Committed and experienced investor/operator/developer

– Sufficient equity at risk

– Transparent procurement

– Good integrity

Robust financial structure

Good business case (promising market / competitiveness of power generation project in merit order/ Secured input supply - hydrology, intermittent supply risk of some RE) and realistic market expectations

Construction cost control

What does IFC look for in Power Investments?

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IFC’s Track Record

IFC’s Caribbean Investments

43%

47%

1% 5% 4% IFC FY11 Commitments by Sector

Financial Markets Infrastructure

Oil, Gas & Mining Manufacturing

Information Technology

Since FY09, IFC has committed $516 million and mobilized $209 million in the Caribbean

$73 $38

$133

$345

4 7

15

17

024681012141618

$0$50

$100$150$200$250$300$350$400

FY08 FY09 FY10 FY11(YTD)

Volu

me

$

IFC Commitments in the Caribbean Volume $

Project #

The Caribbean Energy Sector is an IFC focus

• Basic Energy, DR: $20m A loan in 2007 • Linea Clave, DR: $5m C loan in 2010 • Jamaica Energy, Jamaica: $20m A loan, $45m B loan and $8m C loan in 2005 • West Kingston Power, Jamaica: $13m A loan, $33m B loan and $9m C loan in

2010 • JPSCo, Jamaica: $45m A loan in 2003 and $30m A loan in 2010 • E-Power, Haiti: $16.24m A loan and $11.21M B loans in 2009 and subsequently

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IFC Caribbean Priorities:

crisis response

increased competitiveness

regional integration

climate change

IFC has strong track record in power equity investments

South East Europe

•South Eastern Energy Capital

Indonesia

•MEDCO Energy

$25,000,000

Equity investment on IFC’s own account out of $112 million equity

package.

March 2012

MedcoEnergi is an integrated oil & gas

exploration company with operations in

Indonesia as well as the United States, the

Middle East, and North Africa. Listed on the

Jakarta Stock Exchange.

189 MW

Gas power projects in Indonesia)

India

•Aura Mira Energy

$8,000,000

Equity investment on IFC’s own account.

September 2010

Renewable Energy (“RE”) focused

company, currently developing 100+MW projects in Biomass,

small hydro and wind.

17.5MW

(two current biomass projects)

MENA Region

•Creative Energy Resources

$50,000,000


July 2009

Investment holding company that will acquire, develop,

build, own and operate power sector

projects (i.e., generation,

transmission and distribution)

1,178 MW

(mainly combined cycle projects)

Brazil

•ENDESA Brazil

$50,000,000

Equity investment / convertible loan on IFC’s own account.

July 2006

Holding of companies that work with

distribution, generation,

transmission and commercialization of

energy. Present in four states of Brazil services

around 5.1 million clients.

3,105 MW

(multiple technologies)

Brazil

•CPFL Energia

$40,000,000

Equity investment / convertible loan on IFC’s own account.

February 2004

Holding company that controls three

distribution companies and has majority

ownership in several generation projects. CPFL is the largest

power company controlled by local

investors.

2,379 MW

(multiple technologies)

$88,700,000


February 2008

Joint venture promoted by

ContourGlobal of the U.S. and the Public Power Corporation

,Greece’s state-owned power company,

focused on generation, transmission and

distribution.

2,379 MW

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Selected IFC investments in renewable energy in LAC

Guatemala

El Canada

$27,000,000

Loan project financing and Mobilization

Hydro, 43 MW

Mandated Lead Arranger

December 2002

Colombia

Caruqia and Guanaquitas

$15,500,000

Senior & subordinated

project financing

Hydro, 20 MW

Lender

October 2008

Chile

La Higuera

$160,000,000


project financing x

Hydro, 155 MW


May 2007

Chile

Norvind

$61,500,000

Senior project financing

Wind, 50 MW


February 2009

Mexico

Eurus

$375,000,000


project financing x

Wind, 250 MW


June 2010

Mexico

Eléctrica del Valle

$138,000,000


project financing xx

Wind, 67.5 MW


August 2010

Nicaragua

San Jacinto

$160,000,000



Geoth., 72 MW


November 2010

Peru

Cheves

$250,000,000


Hydro, 168 MW


December 2010

Panama

Pando y Monte Lirio

$183,000,000



Hydro, 85 MW


June 2010

Chile

La Confluencia

$208,000,000


Hydro, 158 MW


October 2007

Dom. Republic

Basic Energy

$42,650,000

Loan financing and guarantee

Wind & other

Lender

June 2005 / June 2007

IFC has financed around 4,000 MW of hydro capacity globally and more than 1,350 MW in LAC

Chile

Hidromaule

$19,700,000


project financing

Hydro, 20 MW


June 2007

Jamaica

JPS Co

$30,000,000


Wind, 3 MW / Hydro 6 MW

Lender

November 2010

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KEY CONTACTS FOR INFRASTRUCTURE

Gabriel Goldschmidt Senior Manager, Infrastructure, Latin America & Caribbean

[email protected] Tel: 1 (202) 473 7732

Miguel Toledo Principal Investment Officer, Infrastructure, Latin America & Caribbean


Catherine Gourdin Senior Investment Officer – Infrastructure, Caribbean


Judith Green Senior Investment Officer – Jamaica Country Office


Omar Zacarías Investment Analyst – Infrastructure, Caribbean


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mailto:[email protected]





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Annexes

Major Investor in Thermal Generation

Long track-record in all thermal sub-sectors

Most recent investments include Cameroon, Chile, Colombia, Haiti, India, Jamaica, Pakistan, Turkey, Togo

To date, IFC

Financed more than 70 thermal projects totaling 21,000 MW of capacity

Is more selective in its thermal investments:

Increased focus on natural gas

Climate friendly measures, e.x. energy efficiency, gas flaring reduction

Diesel and heavy fuel oil where limited generation alternatives exist

Project finance and/or corporate holding company finance, equity and/or debt

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IFC’s Long Standing Experience in Hydro

IFC has financed key private sector hydro projects in Chile, Guatemala, Nepal, India, Philippines, Uganda, Turkey and Pakistan, among others

IFC has made over 40 hydro investments totaling more than 4,500 MW of capacity

IFC supports hydro projects by:

Providing long maturities to match asset life

Taking on full or partial merchant risk

Assisting with managing E&S issues

Taking construction risk

Creating innovative bundling for small hydros

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IFC is a Leading Investor in Emerging Markets Wind

IFC has made 15 wind investments in more than 1,200 MW of capacity

Key transactions in Chile, Mexico, Bulgaria, Turkey, Romania, China, Sri Lanka, and India

Experience with both equity and debt financing

Can mobilize donor financing where appropriate

IFC leverages its strong expertise to appraise/support wind projects

Relationships with top technical consultants

Experience with a wide range of turbine manufacturers/models

Innovative structuring to optimize leverage, e.x. flexible subordinated tranches that can “absorb” wind variability

Understanding of regulatory support mechanisms

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IFC Investment in Solar Generation

IFC has made 9 solar generation investments in Thailand, Philippines, India and China

Projects in new markets/regulatory regimes


Can mobilize donor financing where appropriate

IFC invests in technology and scale to reduce cost of solar energy:

Financing utility-scale solar plants in emerging markets

Investing in best-in-class start up developers

Developing relationships with suppliers

Following emerging solar technologies to be ready for first opportunity

Investing in solar power development private equity funds

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IFC supports this difficult but promising sector through:

Innovative structuring allowing for stage disbursement to full resource completion

In-house technical expertise allowing for greater comfort with resource-related issues

Understanding of sector-specific challenges related to resource risk and long project cycle

IFC has made geothermal investments in Guatemala, Nicaragua, and Philippines

Experience with corporate finance, as well as project finance of both integrated (steam+plant) and plant-only projects


IFC Invests in Geothermal Companies and Projects

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IFC Experience in Distribution and Transmission

IFC has made over 35 distribution and transmission investments

Recently invested in distribution companies in Albania, Brazil, Jordan, Macedonia, Turkey and Uganda

Investments in transmission in Argentina, Bolivia, Chile, India and Peru

IFC works with clients to tailor investment to capital needs and regulatory environment

IFC has been able to deliver several “first of a kind” transactions:

Providing financing to for capital expenditure programs for distribution companies, including recently privatized companies – e.g. Sedas (Turkey), Umeme (Uganda) and rural electrification concessions – e.g. Comasel (Senegal)

Supporting financing of greenfield private transmission assets – e.g. Powerlink (India) and privatized transmission assets (e.g. TDE, Bolivia)

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IFC Caribbean Example: West Kingston Power Partners (Jamaica)

- 66MW power generation tender awarded pre-crisis on a BOO basis by the

independent regulator to Jamaica Energy Partners (JEP), an IFC IPP client - Project developed as greenfield land-based HFO diesel IPP

- Objective: Provide severely needed upgrade to Jamaica’s aging generation capacity

Issues

• Project financed greenfield (construction risk) with no recourse to owners

• Vulnerable macroeconomic environment in the crisis, making $77m syndication challenging

• No long-term commercial bank financing alternative available

Mitigants

• Sector well regulated (price cap method and fuel cost passed through)

• Project undertaken by JEP, an experienced IPP

• $1.3bn IMF Stand-by-Agreement in early 2010 facilitated syndication

Risk

Ass

essm

ent

IFC provided $22m for its own account and mobilized $77m from other financial institutions: Bank of Nova Scotia Jamaica, First Caribbean International Bank, CAF, CIFI, Finnvera, as well as CJAP Partners: FMO and DEG

Successful mobilization

Plant is 75% more efficient than the old existing generation plants it displaces. It reduces the sector’s overall fuel imports, saving annually: 0.18m tons of CO2 emissions and net costs of $35m

Power Efficiency

Plant can be run, at a marginal investment cost, on natural gas, once supply becomes available in Jamaica M

erits

of t

he P

roje

ct

Back

grou

nd

Provides 60 full time jobs near impoverished downtown Kingston neighborhood

Diversifying Power Sources

Employment

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ifc: financing solutions for the power sector financing solutions for the power sector platts...

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