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IFC in Russia:   Strategy and Financing Instruments  Association of European Banks Moscow May 25, 2005
Outline <ul><li>Evolution of IFC’s Strategy in Russia </li></ul><ul><li>Financing Instruments </li></ul><ul><li>Focus on L...
IFC Investment Strategy in Russia <ul><li>1990s: Focus on TA </li></ul><ul><ul><ul><li>-   privatization and capital marke...
IFC Portfolio in Russia by Year   For IFC account
Sectoral Focus <ul><li>Financial Markets </li></ul><ul><li>- independent banks </li></ul><ul><li>- new products (housing f...
IFC Portfolio in Russia by sector   (as of June 30, 2004) Total for IFC account US$ 1,123
IFC’s Largest Country Exposures (Portfolio for IFC’s account, as of May 2005)
IFC’s Products and Services <ul><li>Corporate loans </li></ul><ul><li>Financial intermediaries </li></ul><ul><li>Syndicate...
Key Investment Guidelines <ul><li>Private sector </li></ul><ul><li>Financially, economically, environmentally, and sociall...
Loans and Intermediary Services <ul><li>Fixed or floating market-rate pricing </li></ul><ul><li>Features </li></ul><ul><ul...
IFC Financial Products:  Equity and Quasi-Equity <ul><li>Equity investment based on anticipated  </li></ul><ul><li>return ...
Focus on Local Currency Financing <ul><li>Objectives:  </li></ul><ul><li>Hedge exchange rate risks </li></ul><ul><li>Help ...
Russian Mortgage Market <ul><li>Mortgage market tiny </li></ul><ul><ul><li>Total outstanding mortgage debt: less than $1 b...
Mortgage Investments/GDP
Russian Mortgage Market US$ MN 0 100 200 300 400 500 600 2001 2002 2003 2004
Russian Mortgage Market Structure <ul><li>Commercial: </li></ul><ul><ul><li>US$: Moscow/St. Pete ($400-$600 mln) </li></ul...
Securitization: the Great White Hope <ul><li>Legal problems: </li></ul><ul><ul><li>No SPVs, no tax-neutrality </li></ul></...
Housing Finance: Recent Investments <ul><li>Georgia: </li></ul><ul><ul><li>Bank of Georgia </li></ul></ul><ul><li>Russia: ...
<ul><li>Russia: </li></ul><ul><ul><li>Fannie Mae training </li></ul></ul><ul><ul><li>MBS Law assistance </li></ul></ul><ul...
IFC Approach to Housing Finance <ul><li>FIRST PRIMARY, THEN SECONDARY </li></ul><ul><li>Proven standards (from worldwide e...
<ul><li>Primary mortgage market development project: </li></ul><ul><ul><li>Combining TA and funding </li></ul></ul><ul><ul...
<ul><ul><li>Combining TA, GEF guarantee, and funding </li></ul></ul><ul><li>Energy intensity of the Russian economy  </li>...
<ul><li>Overcome the liquidity barrier for EE projects in select financial institutions (FIs) </li></ul><ul><li>Encourage ...
<ul><li>Replacement of purchased heat by in-house generation (Metalworking)  </li></ul><ul><ul><li>Decrease annual heating...
Program Focus: Project Criteria <ul><li>Ownership:  private sector projects </li></ul><ul><li>Size:  > $50,000, < $1 milli...
<ul><li>THANK YOU! </li></ul>
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  • Targeted credit lines to solve the liquidity problem Heavy TA focus for FIs, project developers and end-users Small Guarantee Facility Initial focus on industry Regional pilot program in areas where economic conditions most promising for EE
  • Transcript of "AEB_presentation_May_25_2005_v2.ppt"

    1. 1. IFC in Russia: Strategy and Financing Instruments Association of European Banks Moscow May 25, 2005
    2. 2. Outline <ul><li>Evolution of IFC’s Strategy in Russia </li></ul><ul><li>Financing Instruments </li></ul><ul><li>Focus on Local Currency Finance </li></ul><ul><li>Focus on Housing Finance </li></ul>
    3. 3. IFC Investment Strategy in Russia <ul><li>1990s: Focus on TA </li></ul><ul><ul><ul><li>- privatization and capital markets </li></ul></ul></ul><ul><ul><ul><li>- small amount of investment </li></ul></ul></ul><ul><li>After 1998 : Focus on foreign partners: </li></ul><ul><ul><ul><ul><ul><li>- DeltaCredit Bank </li></ul></ul></ul></ul></ul><ul><li>From 2001: Shift to local sponsors </li></ul><ul><ul><li>- Russian Standard Bank </li></ul></ul><ul><ul><li>- NBD Bank, Centre-Invest, ICB St Pete </li></ul></ul><ul><ul><li>Continued support for foreign companies expanding into Russia </li></ul></ul><ul><ul><ul><ul><ul><li>- Raiffeisen Bank </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>- SocGen (BSGV) </li></ul></ul></ul></ul></ul><ul><li>Mortgage TA project </li></ul><ul><li>Sustainable Energy Finance Project </li></ul>
    4. 4. IFC Portfolio in Russia by Year For IFC account
    5. 5. Sectoral Focus <ul><li>Financial Markets </li></ul><ul><li>- independent banks </li></ul><ul><li>- new products (housing finance, leasing, consumer finance, microfinance) </li></ul><ul><li>“ Real Sectors” </li></ul><ul><li>- retail, manufacturing, regional hotels </li></ul><ul><li>- transport/logistics, agribusiness,mining </li></ul>
    6. 6. IFC Portfolio in Russia by sector (as of June 30, 2004) Total for IFC account US$ 1,123
    7. 7. IFC’s Largest Country Exposures (Portfolio for IFC’s account, as of May 2005)
    8. 8. IFC’s Products and Services <ul><li>Corporate loans </li></ul><ul><li>Financial intermediaries </li></ul><ul><li>Syndicated loans </li></ul><ul><li>Project financing </li></ul><ul><li>Equity and quasi-equity </li></ul><ul><li>Guarantees </li></ul><ul><li>Advisory services </li></ul>
    9. 9. Key Investment Guidelines <ul><li>Private sector </li></ul><ul><li>Financially, economically, environmentally, and socially sound </li></ul><ul><li>25 percent maximum IFC share of project cost </li></ul><ul><li>Investment size: </li></ul><ul><ul><li>$1 million to $100 million in standard projects </li></ul></ul><ul><ul><li>An increasing focus on support for small and medium enterprises, mainly through lending to local financial institutions </li></ul></ul>
    10. 10. Loans and Intermediary Services <ul><li>Fixed or floating market-rate pricing </li></ul><ul><li>Features </li></ul><ul><ul><li>Tailored to cash flow </li></ul></ul><ul><ul><li>Loan maturities of 7 to 12 yeas </li></ul></ul><ul><ul><li>Appropriate grace period </li></ul></ul><ul><li>Lending to projects through banks and leasing companies </li></ul>
    11. 11. IFC Financial Products: Equity and Quasi-Equity <ul><li>Equity investment based on anticipated </li></ul><ul><li>return </li></ul><ul><li>Never the largest shareholder </li></ul><ul><li>Passive investor </li></ul><ul><li>Often considered “local” shareholder </li></ul><ul><li>Long-term investor </li></ul><ul><li>Quasi-equity: convertibles, warrants, preferred shares, subordinated loans </li></ul>
    12. 12. Focus on Local Currency Financing <ul><li>Objectives: </li></ul><ul><li>Hedge exchange rate risks </li></ul><ul><li>Help develop local capital markets </li></ul><ul><li>Products </li></ul><ul><li>Structured finance: </li></ul><ul><ul><li>partial credit guarantees </li></ul></ul><ul><ul><li>securitization </li></ul></ul><ul><li>Ruble-linked loans </li></ul>Russian Standard Bank Center-Invest Bank
    13. 13. Russian Mortgage Market <ul><li>Mortgage market tiny </li></ul><ul><ul><li>Total outstanding mortgage debt: less than $1 billion – 0.1% of GDP </li></ul></ul><ul><li>Demand for housing finance high </li></ul><ul><li>Weaknesses in legal framework improving </li></ul>
    14. 14. Mortgage Investments/GDP
    15. 15. Russian Mortgage Market US$ MN 0 100 200 300 400 500 600 2001 2002 2003 2004
    16. 16. Russian Mortgage Market Structure <ul><li>Commercial: </li></ul><ul><ul><li>US$: Moscow/St. Pete ($400-$600 mln) </li></ul></ul><ul><ul><li>US$ 10%-15%, 5-15 years, true mortgage </li></ul></ul><ul><li>Quasi-Commercial </li></ul><ul><ul><li>Sberbank, Fed. Mortgage Agency </li></ul></ul><ul><ul><li>RR, 13-15%, 5-27 years </li></ul></ul>
    17. 17. Securitization: the Great White Hope <ul><li>Legal problems: </li></ul><ul><ul><li>No SPVs, no tax-neutrality </li></ul></ul><ul><ul><li>Other aspects untested </li></ul></ul><ul><li>Market problems </li></ul><ul><ul><li>No data </li></ul></ul><ul><ul><li>No market </li></ul></ul><ul><ul><li>No long-term funding </li></ul></ul><ul><li>IFC focus: </li></ul><ul><ul><li>Now: Primary market </li></ul></ul><ul><ul><li>Future: Securitization structure </li></ul></ul>
    18. 18. Housing Finance: Recent Investments <ul><li>Georgia: </li></ul><ul><ul><li>Bank of Georgia </li></ul></ul><ul><li>Russia: </li></ul><ul><ul><li>RZB Russia </li></ul></ul><ul><ul><li>Delta Credit Bank (2) </li></ul></ul><ul><ul><li>Societe Generale </li></ul></ul><ul><li>The Baltics </li></ul><ul><ul><li>BalAEF (2) </li></ul></ul>
    19. 19. <ul><li>Russia: </li></ul><ul><ul><li>Fannie Mae training </li></ul></ul><ul><ul><li>MBS Law assistance </li></ul></ul><ul><ul><li>Securitization working group </li></ul></ul><ul><li>Ukraine: </li></ul><ul><ul><li>MBS Law assistance </li></ul></ul>Housing Finance: Recent TA
    20. 20. IFC Approach to Housing Finance <ul><li>FIRST PRIMARY, THEN SECONDARY </li></ul><ul><li>Proven standards (from worldwide experience) </li></ul><ul><li>Focus on mortgage origination </li></ul><ul><li>Move to Ruble finance (as soon as possible) </li></ul><ul><li>Long-term: develop secondary market </li></ul><ul><ul><li>Eventually, securitization </li></ul></ul><ul><ul><li>IFC has done first securitizations in several markets worldwide </li></ul></ul>
    21. 21. <ul><li>Primary mortgage market development project: </li></ul><ul><ul><li>Combining TA and funding </li></ul></ul><ul><ul><li>Targeting domestic banks (regional) </li></ul></ul><ul><ul><li>Launched in April 2005 </li></ul></ul>Housing Finance: Next Steps
    22. 22. <ul><ul><li>Combining TA, GEF guarantee, and funding </li></ul></ul><ul><li>Energy intensity of the Russian economy </li></ul><ul><li>End user inefficiency </li></ul><ul><li>Rising energy tariffs </li></ul><ul><li>Large EE potential in Russia </li></ul><ul><li>Increasingly large potential for financial savings </li></ul><ul><li>New business opportunities </li></ul>Focus on Energy Efficiency Finance
    23. 23. <ul><li>Overcome the liquidity barrier for EE projects in select financial institutions (FIs) </li></ul><ul><li>Encourage funding of EE projects </li></ul><ul><li>Improve expertise in EE project development at company level and processing by FIs </li></ul><ul><li>Build relationships between FIs, energy service companies, vendors </li></ul>Program aims at stimulating private sector EE investment in Russia through: CREDIT LINES PORTFOLIO GUARANTEE TECHNICAL ASSISTANCE
    24. 24. <ul><li>Replacement of purchased heat by in-house generation (Metalworking) </li></ul><ul><ul><li>Decrease annual heating expenses by 82%. </li></ul></ul><ul><ul><li>Investment: $546,000. Simple payback 4.4 yrs. </li></ul></ul><ul><li>Installation of a steam boiler and steam turbine for electricity generation (Food processing) </li></ul><ul><ul><li>Generate in-house cheap electricity </li></ul></ul><ul><ul><li>Investment: $1,250,000. Simple payback 1.6 yrs. </li></ul></ul><ul><li>Installation of co-generation steam turbines (Pulp and paper industry) </li></ul><ul><ul><li>Decrease expenses for heat and electricity consumption </li></ul></ul><ul><ul><li>Investment: $2,860,000. Simple payback 1.6 yrs. </li></ul></ul><ul><li>Installation of co-generating module for in-house electricity and heat production (Wood working industry) </li></ul><ul><ul><li>Decrease of expenses for electricity consumption </li></ul></ul><ul><ul><li>Investment: $2,700,000. Simple payback 2.7 yrs. </li></ul></ul>Energy Efficiency Projects: Examples
    25. 25. Program Focus: Project Criteria <ul><li>Ownership: private sector projects </li></ul><ul><li>Size: > $50,000, < $1 million </li></ul><ul><li>Payback period: < five years </li></ul><ul><li>Technical: investment must be in a proven technology </li></ul>
    26. 26. <ul><li>THANK YOU! </li></ul>
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