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IFU / EKF Workshop - Beyond BRIC
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  • 1. Finance your international activities with IFU & EKF Beyond BRIC, Copenhagen December 8, 2010
  • 2. PAGE Financing in emerging markets poses testing challenges:
    • How will you manage credit risk to a rapidly expanding customer in Vietnam?
    • How can you protect yourself from corrupt regional financial officials in Nigeria?
    • How will you manage the risk of your Algerian infrastructure client reneging on the deal halfway through construction?
    • Where will you find financing for your planned production site in Ethiopia when your Danish bank looks at you in horror?
  • 3.
    • IFU: who we are and how we can collaborate
    • EKF: who we are and how we can collaborate
    • 3. What leads to success? Key lessons from emerging markets
    Today’s agenda PAGE
  • 4.
    • IFU is a self-governing fund established in 1967 and owned by the Danish government
    • Our purpose is to promote economic activity in developing
    • countries
    • We advise and invest with Danish companies in developing countries and emerging markets
    • We operate on commercial terms
    • Our Board mainly consists of members from Danish companies
    • Our instruments are equity investments and loan financing
    PAGE IFU - who we are
  • 5. Insert picture in right size Picture format = H 10.3 x W 22.2 cm IFU offices IFU’s footprint is oriented Beyond BRIC – 2/3 of our investments are made in non-BRIC emerging markets IFU eligible countries* PAGE * IFU can only invest in countries with a GDP per capita below USD 3,156
  • 6. What does IFU bring to the table? What do we require from you? PAGE
    • Network & expertise
    • 40 years of experience from developing countries and emerging markets
    • Regional offices in Kenya, South Africa, and Ghana in addition to China and India
    • Hands-on during preparation and implementation
    • Political “insurance”
    • Danish state “Quality mark”
    • Zero tolerance on corruption
    • Financing
    • Equity and loan financing
    • Financial risk sharing in project
    • A strong business case
    • Experience within the industry
    • Solid management experience
    • Organisational and strategic commitment
    • Financial strength
  • 7.
    • Risk sharing and long-term strategy
    • Share capital and/or loans
    • Investment period 6-8 years
    • Size of IFU’s investment:
      • Investments up to DKK 100m per project
      • Although no more than our Danish partner company
    • Agreed exit terms at the outset
    HEADER: Arial Regular 22/26 Max two lines. CAPS Text: Arial Regular 16/19 Click on ’Increase Indent’ for more bulletdesign To get previous design back, click on ’Decrease Indent’ Insert picture in right size Picture format = H 12.3 x W 10.4 cm IFU’s investment PAGE
  • 8.
    • Legal set-up/requirements
    • Financial structure
    • Where to establish
    • Negotiations with local partner, if any
    • Dealing with authorities
    • Member of project company board
    • Additional financing
    • Good governance and CSR policy
    HEADER: Arial Regular 22/26 Max two lines. CAPS Text: Arial Regular 16/19 Click on ’Increase Indent’ for more bulletdesign To get previous design back, click on ’Decrease Indent’ Insert picture in right size Picture format = H 12.3 x W 10.4 cm IFU as an advisor and partner PAGE
  • 9. Examples of Danish partners
  • 10.
    • IFU: who we are and how we can collaborate
    • EKF: who we are and how we can collaborate
    • 3. What leads to success? Key lessons from emerging markets
    Today’s agenda PAGE
  • 11. EKF ensures competitive financial terms for Danish business and industry in international markets EKF covers extraordinary financial risks related to business of economic interest to Denmark EKF operates on commercial terms and is guaranteed by the Danish state EKF’s Mission Statement PAGE
  • 12. Project finance Contract and Project delivery Guarantee Bond guarantees
    • Investment Guarantee
    • Equity
    • Loan
    • Export Credit Guarantees
    • Seller’s credit
    • Buyer’s credit
    Export loans Reinsurance Scheme EKF Climate L/C Guarantees Traditional New Working Capital Scheme EKF’s Products PAGE
  • 13. Project finance Contract and Project delivery Guarantee Bond guarantees
    • Investment Guarantee
    • Equity
    • Loan
    • Export Credit Guarantees
    • Seller’s credit
    • Buyer’s credit
    Export loans Reinsurance Scheme EKF Climate L/C Guarantees Traditional New Working Capital Scheme EKF’s Products PAGE
  • 14.
    • Two Danish companies, Cimbria Unigrain and Scanvægt, export equipment
    • The importer is Ukraine’s biggest chicken producer, Myronovsky
    • EKF garantees payments from Myronivsky to bank.
    Export loan Example – Export Credit Guarantee and Loan PAGE Guarantee Bank Contracts Cash payment Loan
  • 15. Project finance Contract and Project delivery Guarantee Bond guarantees
    • Investment Guarantee
    • Equity
    • Loan
    • Export Credit Guarantees
    • Seller’s credit
    • Buyer’s credit
    Export loans Reinsurance Scheme EKF Climate L/C Guarantees Traditional New Working Capital Scheme EKF’s Products PAGE
  • 16.
    • Kosan Crisplant signs contract for USD 30m with Algerian customer
    • Over a number of years, Kosan Crisplant must set up a range of gas filling stations
    • Kosan Crisplant worries that the customer will cancel the contract before all filling stations have been installed
    • EKF guarantees against losses due to unlawful contract cancellation
    Example – Contract guarantee PAGE
  • 17. Project finance Contract and Project delivery Guarantee Bond guarantees
    • Investment Guarantee
    • Equity
    • Loan
    • Export Credit Guarantees
    • Seller’s credit
    • Buyer’s credit
    Export loans Reinsurance Scheme EKF Climate L/C Guarantees Traditional New Working Capital Scheme EKF’s Products PAGE
  • 18.
    • X-Yachts produces luxury yachts
    • Exports about 90 % of turnover
    • Seasonal fluctuations puts working capital
    • under pressure
    • Bank is willing to expand credit line with
    • guarantee from EKF
    • >>> EKF provides guarantee to bank in periods with larger working capital needs
    Example – Working Capital Guarantee PAGE
  • 19.
    • A Danish company wishes to invest in factory in Vietnam
    • Another Danish company supplies equipment to the factory
    • IFU invests in company with DK Company 1
    • EKF garantees export credit from bank to DK Company 2
    Export loan IFU & EKF in same project? Supplier DK Company 2 Vietnamese project company Investor DK Company 1 PAGE Guarantee Bank Cash payment Loan
  • 20.
    • IFU: who we are and how we can collaborate
    • EKF: who we are and how we can collaborate
    • 3. What leads to success? Key lessons from emerging markets
    Today’s agenda PAGE
  • 21.
    • The customer is creditworthy
      • The customer can raise min. 15 pct. pre-payment
      • There is a bank willing to lend – perhaps with EKF guarantee
    • Environmental and other CSR aspects are acceptable
    When exporting… PAGE What leads to success? Key lessons When investing…
    • Projects require more financing than the business plan indicates
    • Projects take longer to establish than the business plan indicates
    • Country risks exist – the key is to identify them and anticipate them
    • The key to success: management, management, management
    • Be mindful of projects propped up by aid and subsidies
    • Collaborate with local partners – but think twice about sharing ownership