ESPO Presentation May 2012


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ESPO Presentation May 2012

  1. 1. 2012 European Sea Ports Conference on PORT FINANCING AND INVESTMENS ‘tapping the global investment sector’ John P.M. Verschelden Connecting investors with port infrastructure marketsESPO-SOPOS, May 2012
  2. 2. InduStreams & Port Investor Port Investor is an activity of Hong Kong based InduStreams Limited The Mission  InduStreams’ mission is to create a more transparent, connected and informed infrastructure market place  Port Investor was launched as a specific sector pilot with focus on port infrastructure investing and the global port industry The Vision  UNLEASH the full potential of each port group and market  CONNECT all important port markets with investors and industry players  EMPOWER the market by creating new ways and models for investors and ports to come togetherESPO-SOPOS, May 2012
  3. 3. Magnitude and appetite  $100+ trillion in the funds management sector  big appetite for increased allocation to infrastructure investments  pension and insurance funds alone may quadruple their infrastructure holdings  no lack of cash in the funds sector  public debt in EU and budget deficits push private financingESPO-SOPOS, May 2012
  4. 4. Magnitude and appetite (2) More than $100 trillion just in the funds management sector alone (globally much more when industrials, operators, developers, governments etc. are included). There is big appetite for increased allocation to infrastructure investments not least given the volatile stock and bonds markets. Pension and insurance funds alone may be looking to quadruple their infrastructure holdings (and they combined control more than 50% of the global funds under management). There is no lack of funds and with the public debt situation in most EU countries and many others the need for private financing is maybe at the highest it has been for the last several decades.ESPO-SOPOS, May 2012
  5. 5. Investor diversity OPERATORS INVESTMENT FUNDS AND PRIVATE EQUITY Bulk Financial investor Container terminal Macquarie Infrastructure Group Oil and liquid terminal Brookfield Infrastructure Partners Container Bulk terminal JP Morgan Infrastructure Fund$10+ million Operator Free/logistic/property zones Citi Capital Advisors DEVELOPERS SOVEREIGN FUNDS Greenfield Brownfield Construction Abu Dhabi Investment Authority Marine infrastructure China Investment Corporation Developer Majority Economic zones Government of Singapore Investment Corporation Port industry/logistic zones Malaysia Mining Corporation Acquisition Oil & Liquid CARGO OWNERS PENSION AND INSURANCE FUNDS Container shipping Ping An (2nd biggest Chinese insurance fund) Logistic Zone $100+ million Oil shipping, Bulk shipping Ontario Teachers Pension Fund Mineral companies ATP (biggest Danish fund) Energy companies APG (biggest Dutch fund, 3rd biggest globally) Agriculture companies Seed investor Free Zone DEVELOPMENT BANKS AND INSTITUTIONS PARTNERS World Bank and IMF Minority $1+ billion South American, Asian, EU related development banks and funds Middle Eastern port groups IFU and other niche banks ESPO-SOPOS, May 2012
  6. 6. Investor diversity (2) The investor space and its many constituents is much wider and varied than most think. They vary greatly in their investment objectives, preferences, size etc. From big institutional investment funds with more than $100 billion to small operators and funds with less than $50 million to invest. The diversity in the target investment size, investment stage, investment horizon, target shareholding and investor role, proposition to project owners etc is vast. On the one extreme you have very short term focused funds often with high return requirements (15-20%) and on the other you have very long term focused e.g. pension funds with fairly low return requirements (5-10%), each seeking to invest in their own part of the value creation chain (refer later slide). The great diversity among investors, their preference and propositions to owners offers great potential to develop, fund and operate most projects with reasonable commercial foundation.ESPO-SOPOS, May 2012
  7. 7. The value creation chain Creating the product Scaling the Expand – from greenfield to investment – from low operation to high yield Seed Implement Grow Mature Transform Seeding the investment - from Creating the market - idea, opportunity or need to building the top line and Divest attractive proposition foundation for efficiencies Continued value creation…ESPO-SOPOS, May 2012
  8. 8. The value creation chain (2) The diversity in preference across the chain (not only in investment types) gives further opportunities to make new developments viable and free up capital. PE’s and operators typically have interest in the implementation/development and growth stage whereas institutional investors (including pension funds) have more interest in the mature stage. The seed stage is a significant challenge for most, often requiring several parties to come together or for someone to play the seed investor role which however is uncommon in the port sector. In most cases there are better owners out there allowing parties to either free up their capital for other developments or bring down debts or commitments. An example of a chain with changes in ownership could be a PE together with say a developer doing the seed investing, an operator doing the actual development and growth phases and a pension fund acquiring the asset once it reaches a more mature stage.ESPO-SOPOS, May 2012
  9. 9. World views Port Executive Investment BankerESPO-SOPOS, May 2012
  10. 10. World views (2) Perhaps the greatest challenge in tapping The Port Executive CV into the potential that lies in between the global investor community and the  30 years in transportation and port infrastructure sector is the chasm that related sectors  Deep and practical industry and exists between the people on each side. management experience  Massive industry executive network A good example would be the port (often however local) executive on the one side and an investment banker on the other. The Investment Banker CV Each come with completely different  MBA from top business school and backgrounds, look at value creation from fast paced investment banking career different perspectives and operate in  Deal and investment execution entirely different circles. experience across many sectors  Strong network within the financial Very fundamentally we need to bridge this “eco-system” chasm to create stronger engagement between the two sectors.ESPO-SOPOS, May 2012
  11. 11. Early engagementESPO-SOPOS, May 2012
  12. 12. Early engagement (2) Back in the day when the Ford T was a hit it was a very different economic reality. They designed and made one model for the entire market. Today of course none of us would buy a Ford T, we have very specific tastes when it comes to buying a car and none of the major car companies would dream of designing and making a new model without asking the consumer. Infrastructure is only viable if it has two happy users. The one of course is the physical user, the shipping line, the terminal operator, the logistics company etc. The other is the investor. And whereas the magnitude, appetite and diversity with investors is great, they are also becoming increasingly demanding on what they place their money in (infrastructure no longer has a “safe” label on it). Engaging the investor community early is free and can often contribute to further options and solutions than was originally conceived. Not doing so has had consequences – failed projects and years of delay. But doing it effectively is key.ESPO-SOPOS, May 2012
  13. 13. Collaborative modelsESPO-SOPOS, May 2012
  14. 14. Collaborative models (2) Technology (not least the internet) is allowing business collaboration to take place in a completely different way than was possible just a decade ago and are today widely recognized as the critical component in facing the challenges of tomorrow – whether that is environmental, personal health or something as basic as getting the right infrastructure in place. It is however not the technology itself that is important, that is just a lever. It is the massive communities out there with expert knowledge and networks to decision makers in hundreds of different fields and sectors that have the potential we need to un-tap, such as the port executive in Ghent and the investment banker in Hong Kong. The port challenge as we see it is that each port have an amazing depth of knowledge and local community but little engagement with the global investor community. There are hundreds of collaborative models out there (as basic as forming consortia across phases and investor types). Some are creating online platforms - we think much of the solution lies in the knowledge and capabilities of industry executives and experts. ESPO-SOPOS, May 2012
  15. 15. Messages from AsiaSome quotes recently picked up:“ We fear authorization and approval procedures are complicated and difficult for a Chinese company to invest in Europe. We are not sure how to proceed and hesitant to spend resources.”“ I’m not sure we are welcome. Are European projects not mainly for European investors, developers and operators?”“ We have a strong name in China but fear that in Europe our competencies and contributions as a company will not be valued in the same way as it is in China.”“ We would like to partner with a European port, but don’t know who to engage.”“ Going international, including investing in Europe, is part of our long term vision, however on we see very few real opportunities to invest.”ESPO-SOPOS, May 2012
  16. 16. And what is Europe’s reality today…? Long term limitations on public funding due to budget constraints and the need to bring down public debt Need to stimulate Europe’s economy with new initiatives and new investments for economic growth and reduction of unemployment A changed appetite and (often) ability with traditional parties like banks to fund port infrastructure projectsHow to break the deadlock?To create a more transparent, connected and informed portsinfrastructure market place (InduStreams’ vision) 16ESPO-SOPOS, May 2012
  18. 18. Pension fund example Objective Pension and insurance funds typically invest to secure long term stable returns (e.g. 5-10%). Typical investment size Typically look to invest $100-200 million as minimum per investment for their own share and therefore total investment size target often above $500 million. Role and shareholding target Often limited to that of a “financial” investor and thus typically looking only to take a minority position and for many are not allowed to have the main managing role. Investment stage and In general look for acquisition opportunities ore constellations whereby they mitigate holding period development and commercial risk and look to hold assets for long periods (30+ years). Emerging trends include pension funds seeking to take ownership along side entire port owners (land lords) as that further diversifies their risk across more assets. Proposition to asset/project Primarily bring lower cost of capital to the table (can live with lower returns) but also owners sometimes specific capabilities and global brand.ESPO-SOPOS, May 2012
  19. 19. Operator example Objectives Operators and some developers typically seek to grow their portfolio as primary objective and require medium to high returns (e.g 10-15%). Typical investment size Most investment sizes are relevant ranging all the way from $10-20 million to above $1 billion (although in latter case it might only be a few in the industry that would want to do that alone). Role and shareholding Most operators would like majority and management and an operational role often a must have. target Investment stage and Do green fields as well as acquisitions often without any specific holding strategy, but most tend holding period to just “hold on” once they secure an investment. Proposition to asset/project Operators typically bring significant know-how and skill and sometimes actual business to their owners projects.ESPO-SOPOS, May 2012
  20. 20. Private equity fund example Objectives Private equity and many PE type infrastructure funds invest on behalf of other funds (e.g. institutional funds such as pension fund) and look to achieve strong returns over a shorter period (e.g. 15-20%), but are typically also willing to take on greater risk. Typical investment size As with operators PE’s invest in small, medium as well as very large scale investments (substantial diversity). Role and shareholding Many PE’s are looking to take majority but for most however minority is also an option. Some of target the more sector specific ones would look to have a strong operational role as well whereas others would not have operational capability or interest. Investment stage and Most constellations and stages are relevant for PE’s, but acquisitions are gaining popularity. PE’s holding period and similar funds often look to hold the asset for 8-10 years. Proposition to asset/project Very mixed value proposition depending on the fund in question but do have the benefit of owners being very focused (once they raise a fund the money has to be spent over a short time period or the clients will withdraw the funds again) and thus tend to work effectively and with urgency.ESPO-SOPOS, May 2012
  21. 21. Sovereign wealth fund example Objectives Sovereign wealth funds and other government type funds have many different agendas but of course mostly to further the interests of the nation they have been mandated by. Consequently they also operate on a very wide return range (0-20%). . Typical investment size Work almost exclusively with larger scale investments, most in excess of $500 million and often more than $1 billion. Role and shareholding Almost exclusively look for a financial stake but may well want extensive influence. target Investment stage and Green fields and brown fields are both scope, however projects typically need to be among key holding period projects nationally or within the region. Proposition to asset/project Given the government leverage and wide return spectrum SWF’s can come with many different owners kinds of propositions and sometimes fit where no others are relevant.ESPO-SOPOS, May 2012
  22. 22. More profiles and info… …is available - feel free to contact us on contact@port-investor.comESPO-SOPOS, May 2012
  24. 24. History InduStreams was founded in 2011 with a mission to create a more transparent, connected and informed infrastructure market place. We launched Port Investor in July 2011, a specific sector pilot with focus on port investing and the global port industry.ESPO-SOPOS, May 2012
  25. 25. The vision UNLEASH The full potential of each port group and market. There is more than $1 trillion in unrealized investment potential. We want to enable an explosion in investment activity. CONNECT All important port markets with investors and industry players. Together, there are more than 5,000 globally. EMPOWER The market by creating new ways and models for investors and ports to come togetherESPO-SOPOS, May 2012
  26. 26. Status - InduStreams InduStreams ultimate scope Infrastructure spans the entire infrastructure sector and beyond. With Port Investor we have a strong base in the infrastructure sector and are already now branching into other transportation segments such as Port Other Energy & Social airports, social Etc. Infrastructure Transportation Renewables Infrastructure infrastructure and energy and renewables related.ESPO-SOPOS, May 2012
  27. 27. Status – Port Investor  200+ port groups and 1,000+ investors and executives in the community and increasing  China Port Investor and other regions are being launched  launched  Port Investor LinkedIn group launched (400+ members)  Representatives for Asia, Europe, Latin America and Africa in place alreadyESPO-SOPOS, May 2012
  28. 28. Global engagements For ports we primarily collaborate with three sides 1) port groups 2) 25+ ENGAGEMENTS WORDLWIDE project and asset owners and 3) investors Investors engage us to find investments that fit their specific requirements Project owners engage us to solicit investors or consortia of investors Port groups engage us to reach out to the wider investor community to fast track infrastructure developments and seek collaborative solutionsESPO-SOPOS, May 2012