Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

ALTUM Investor presentation

1,131 views

Published on

ALTUM Investor presentation

Published in: Business
  • Be the first to comment

ALTUM Investor presentation

  1. 1. ALTUM INVESTOR PRESENTATION October 2017
  2. 2. DISCLAIMER This presentation and any materials distributed or made available in connection herewith (collectively, the “presentation”) have been prepared solely for your use and benefit for information purposes only and are the sole responsibility of Akciju sabiedrība "Attīstības finanšu institūcija Altum" (the “Company”), and have not been verified, approved or endorsed by any lead manager, bookrunner, underwriter or adviser retained by the Company. This presentation and any question and answer session that follows the oral presentation do not contain all of the information that is material to an investor. By attending meeting where this presentation is made or by accessing, downloading, reading or otherwise making available to yourself any content of the presentation, in whole or in part, you agree to be bound by the following limitations and accept the terms and conditions as set out below. No information contained in the presentation may be copied, photocopied, duplicated, reproduced, passed on, redistributed, published, exhibited or the contents otherwise divulged, released or disseminated, directly or indirectly, in whole or in part, in any form by any means and for any purpose. The presentation does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. If any such offer or invitation is made, it will be done pursuant to separate and distinct documentation in the form of a prospectus and any decision to purchase or subscribe for any securities pursuant to such offer or invitation should be made solely on the basis of such prospectus and not this presentation. Any person considering the purchase of any securities of the Company must inform himself or herself independently before taking any investment decision. By accessing this presentation the recipient will be deemed to represent that they possess, either individually or through their advisers, sufficient investment expertise to understand the risks involved in any purchase or sale of any financial instrument or any other information contained herein. This presentation should not be construed as legal, tax, investment or other advice and any recipient is strongly advised to seek their own independent advice in respect of any related investment, financial, legal, tax, accounting or regulatory considerations. The presentation has been provided to you solely for your information and background and is subject to amendment. Further, the information in this presentation has been compiled based on information from a number of sources and reflects prevailing conditions as of its date, which are subject to change. The information in this presentation is subject to verification, completion and change without notice and the Company is not under any obligation to update or keep current the information contained herein. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company and AB SEB bankas or any of their respective members, directors, officers, advisers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on such information or opinions will be at your sole risk. Neither the Company nor AB SEB bankas nor any of their respective members, directors, officers, advisers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation includes "forward-looking statements," which include all statements other than statements of historical facts, and involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Accordingly, any reliance you place on such forward-looking statements will be at your sole risk. These forward-looking statements speak only as at the date as of which they are made. Past performance of the Company cannot be relied on as a guide to future performance. No statement in this presentation is intended to be a profit forecast. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. THIS PRESENTATION IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. This presentation and the information contained herein are not an offer of securities for sale in the United States. No securities have been or will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States and securities may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws and may only be sold outside of the United States in reliance on Regulation S under the Securities Act and otherwise in compliance with all applicable laws and regulations in each country or jurisdiction in which any such offer, sale or delivery of securities is made. The Company does not intend to register or to conduct a public offering of any securities in the United States. This presentation and its contents may not be viewed by persons within the United States (within the meaning of Regulation S under the Securities Act).
  3. 3. CONTENT: I. Business Overview II. Portfolio Overview and Funding III. Green Bonds Appendixes Source: Pixabay.com
  4. 4. KEY CREDIT STRENGHTS  Ownership by The Republic of Latvia rated A3/A-/A- by Moody’s, S&P and Fitch respectively and clearly expressed support  Long-term issuer credit rating Baa1 assigned by Moody’s  Solid equity position (49.4% of total assets*)  Strong liquidity and secured long term funding  Track record of improving operational efficiency  Prudent corporate governance and professional management team  Corporate and Social Responsibility agenda  Modern risk management system *Total capital and reserves/Total assets at 30/06/2017
  5. 5. I. BUSINESS OVERVIEW Source: Pixabay.com
  6. 6. GENERAL INFORMATION  100% state-owned financial institution  Provides access to finance in the areas prioritized by the government  Implements the state policy in the national economy Ministry of Economics 30% Ministry of Agriculture 30% Shareholders of Development Finance Institution ALTUM Ministry of Finance 40%
  7. 7. HISTORY AND LEGAL BACKGROUND Latvian Guarantee Agency Rural Development Fund Altum JSC Development Finance Institution Altum  Established by the decision of the Cabinet of Ministers  Special Law on the Single Development Institution  European Commission`s decision
  8. 8. Source: Pixabay.com We help Latvia grow MISSION To be a partner and financial expert in economic development VISION Team Excellence Responsibility VALUES
  9. 9. BUSINESS MODEL  Long-term profitability  Extra credit risk covered by public funding – Risk coverage reserve and Portfolio loss reserve  Guarantees issued by ALTUM have 200 MEUR back-up guarantee from the Latvian state  No dividend payments by law Total assets 432.3* MEUR Number of outstanding contracts 13,005* Loans 209.4* MEUR Guarantees 165.9* MEUR VC 57.0* M * 1H 2017 MID TERM TENDENCIES LOANS VENTURE CAPITAL GUARANTEES
  10. 10. BUSINESS OVERVIEW: CLIENT SEGMENTS  Portfolio increased by 9.1 MEUR in 1H 2017.  The fastest growing segment – Individuals  Major segments by volume – SMEs & Midcaps and Agriculture  In 1H 2017 total volumes are 61 MEUR (56% - guarantees, 42% - loans and 2% -venture capital investments)  During 1H 2017 volume of guarantees had steep growth compared with 1H 2016 (by 62%)  Financial intermediaries segment decreased due to the end of venture capital fund investment period * Gross value 48.6 57.1 66.2 95.7 102.9 106.3 200.4 200.8 200.0 44.9 62.4 59.9 0 100 200 300 400 500 2015 2016 1H 2017 MEUR Portfolio* Financial intermediarie s SMEs and Midcaps 16.2 19.9 10.9 33.4 35.3 16.3 52.3 60.4 32.6 19.2 21.4 1.2 0 20 40 60 80 100 120 140 160 2015 2016 1H 2017 MEUR Volumes
  11. 11. The Development Finance Institution Law and other legislative acts CORPORATE GOVERNANCE SHAREHOLDERS’MEETING COUNCIL CABINET OF MINISTERS MANAGEMENT BOARD (5 board members) Internal audit unit *Audit committee *as of late autumn 2017
  12. 12. DECISION MAKING BODIES Jēkabs Krieviņš Member of the Board State support programs and the Latvian Land Fund Reinis Bērziņš Chairman of the Board Finances and administration Inese Zīle Member of the Board Business growth, marketing and customer service, Juris Vaskāns Member of the Board Venture capital financial instruments and Stressed assets workout Members of all committees are appointed by the Management Board Credit committee (12 members) Stressed Assets management committee (13 members) Risk and Liquidity management committee (6 members) Information Systems (IT) management committee (6 members) BOARD Aleksandrs Bimbirulis Member of the Board Risk Management and Credit processes
  13. 13. FOCUS AREAS leading to efficiency New products Funding Core business Improve customer service Operational efficiency  New products – assignment guarantees and portfolio guarantees, Land Fund  Regional coverage of branches restructured in 2016  Internal processes streamlined and more efficient  Strategic shift in funding sources to decrease administrative burden for the staff  Limitation of non-core business activities - Sales of investment properties in 2017- 2018 - the privatization process servicing terminated in 2016  Installation of new IT infrastructure in 2018 will lead to a substantial decrease of IT costs NEW PRODUCTS & EFFICIENCY
  14. 14. II. PORTFOLIO OVERVIEW AND FUNDING, 1H 2017 Source: Pixabay.com
  15. 15.  The deals volume and number per employee is increasing year by year  Costs are expected to decline gradually In the coming years  IT and communications-related costs will be substantially lower after IT infrastructure upgrade IMPROVING OPERATIONAL EFFICIENCY 390 423 406 432 3.2% 3.0% 1.42% 1.13% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 0 100 200 300 400 500 2015 2016 1H 2016 1H 2017 MEUR Portfolio Year overheads vs portfolio Half year overheads vs portfolio
  16. 16. WELL DIVERSIFIED PORTFOLIOS  Portfolios are diversified across economic sectors  Thus the institution is well positioned to withstand macro- level risk events  The composition of both portfolios reflects Latvian government’s strategic priorities in implementing its growth strategy Agriculture 45% Individuals 8% Through financial intermediaries… Manufacturing 21% Trade 7% Accommodation and food service 3% Electricity, gas and steam supply 3% Other 12% SME and midcaps 47% Loan portfolio by industry Agriculture 7% Individuals 30% Manufacturing 27% Construction 15% Trade 11% Other 10% SME and Midcaps 64% Guarantee portfolio by industry
  17. 17. LONG TERM FUNDING IS WELL ANCHORED  Funding term structure corresponds to the portfolio term structure  The aim is to reduce the dependence on Structural Funds by replacing it with loans from international financial institutions and proceeds from bond issuance 8.9 35.2 0.7 7.9 96.5 49.1 6.5 0 50 100 Loans from International Financial Institutions EU structural funds and State budget Loans from State Treasury and Rural Support Service Other liabilites < 1 year 1-5 years >5 years MEU
  18. 18. EXCEPTIONALLY STRONG LIQUIDITY POSITION  High liquidity ratio – maintained over 350%*  Diversified exposure  Current buffer – in accordance with the programme rules and agreements with the State Treasury, Altum has unused credit lines from the State Treasury to finance the support programmes (~25 MEUR) Liquidity portfolio MEUR * Liquidity ratio: Due from other credit institutions and Treasury with maturity up to 1 month + Investment securities (available for sale)/ Liabilities with the contractual maturity dates up to 6 months + Financial commitments with the contractual maturity dates up to 6 months Bonds issued by the Republic of Latvia, 62.5 Cash at State Treasury, 47.2 Cash at Banks (Aa1- Aa3); 27.3 Cash at Banks (A1-A3); 10.3 Cash at Banks (Ba1-Ba3); 4.8
  19. 19. VENTURE CAPITAL: PROFESSIONAL SELECTION AND RISK BALANCE Business idea Business start-up Early growth Expansion growth Stable growth Risk HighLow Portfolio 57M EUR, 192 projects, 9 funds  Fund managers are selected through the public procurement process  Investment decisions are made by professional fund managers  Ticket size: up to 10% of the fund volume Medium Expansion Capital Fund (4) 40 MEUR, 79 projects Venture Capital Funds (4) 12 MEUR, 22 projects Seed Capital Funds (1) 5 MEUR, 91 projects Acceleration Funds (0) 0 MEUR, 0 projects (planned new instrument)
  20. 20. KEY FINANCIAL FIGURES (1) Key Financial data (Group) 2015 2016 1H 2017 Total assets, TEUR 406,918 443,126 438,889 Tangible Common Equity(TCE)/Tangible Managed Assets (TMA) 37.3% 35.2% 35.5% Equity, TEUR 199,610 210,094 216,596 Risk Coverage, total: TEUR 41,021 67,705 63,162 - Risk Coverage Reserve 40,662 64,833 60,788 - Risk Coverage Reserve used for provisions -1,276 -4,323 -4,821 - Portfolio Loss reserve within Reserves (specific reserve capital) 1,635 7,195 7,195 Liquidity Ratio 180 days 351.9% 449.3% 567.9% Key Financial data (Group) 2015 2016 1H 2016 1H 2017 Net income from interest, fees and commissions, TEUR 16,419 11,024 6,658 6,639 Profit (period), TEUR 4,924 2,170 832 5,414 Cost to income Ratio 55.8% 88.4% 82.7% 43.1% Employees 282 242 252 228
  21. 21. Financial instruments (gross value) 2015 2016 1H 2016 1H 2017 Outstanding (TEUR) (by financial instrument) Loans 218,562 217,429 221,330 209,364 Guarantees 131,120 147,175 134,291 165,941 Venture capital 39,929 58,541 50,765 56,974 Total 389,611 423,145 406,386 432,279 Number of contracts 8,901 11,449 10,058 13,005 Volumes granted (TEUR) (by financial instrument) Loans 52,329 59,465 33,693 25,366 Guarantees 50,065 56,109 21,244 34,422 Venture capital 18,798 21,356 6,309 1,219 Total 121,192 136,929 61,246 61,007 Number of contracts 2,819 4,461 2,240 2,314 Leverage for raised private funding 104% 162% 158% 181% KEY FINANCIAL FIGURES (2)
  22. 22. III. GREEN BONDS Source: Pixabay.com
  23. 23. NATIONAL OBJECTIVES ALTUM Green Bond will play an IMPORTANT ROLE in the national strategy implementation KEY ENVIRONMENTAL OBJECTIVES OF LATVIA to be reached by 2030  Target of a 50% share of energy from renewable sources in gross final energy consumption  Reduction of imported energy and energy resources by 50% NATIONAL DOCUMENTS  Latvian energy long-term strategy 2030  Guidelines for Energy Sector Development 2016- 2020
  24. 24. ALTUM’s GREEN BOND FRAMEWORK Eligible Green project categories:  Renewable energy  Energy efficiency  Green buildings  Sustainable transportation Project Evaluation and Selection process:  Loan and Guarantee Department  Energy Efficiency Programme Department Management of Proceeds:  Earmarked special account Reporting: Annual Investor Letter  financed projects / expected impact  project examples with impact reporting  new projects vs refinancing  summary GB development Green Bond
  25. 25. USE OF PROCEEDS – ELIGIBLE PROJECTS RENEWABLE ENERGY  Wind  Solar  Bio energy (max 20%) ENERGY EFFICIENCY  District heating based on renewables  Energy recovery projects  Non-fossil technologies/ manufacturing*  Non-fossil energy consumption reduction*  Minor renovations of commercial or residential buildings* GREEN BUILDINGS Max 20% of proceeds  Energy use of nearly zero or at least 25% lower than required by national regulations  Major renovations leading to reduced energy use per year of at least 35 %SUSTAINABLE TRANSPORTATION  Solutions / systems based on non- fossil fuel and supporting infrastructure Explicitly excluded: nuclear and fossil-fuel energy generation projects* Efficiency at least 25%
  26. 26. Project example: ESCO ESCO Lightning Retail Office Warehouse Plant ESCO Technology efficiency HVAC Equipment for industrial processes ESCO Solar panels Industrial park Office Energy efficiency Investments Loan Residential 50+% 25+% Equipment for Electricity T&DRepayment of investments from energy efficiency Loan Loan ESCO – energy service company providing energy solutions that lead to lower bills and alternative energy sources
  27. 27. EVALUATION AND SELECTION PROCESS Green project Creditworthiness appraisal methodology for business loans Green Bond Framework Related legislation Loan and Guarantee Department Energy Efficiency Programme Department CONSENSUS ALTUM employees have broad capacity and competence in energy efficiency related areas. For specific cases extra competence will be insourced from The State Environmental Service; Department of Environmental Science (University of Latvia) etc.
  28. 28. MANAGEMENT OF PROCEEDS  Financing of new Eligible projects  Refinancing of existing Eligible projects  Positive balances can be invested as short term liquidity reserves  Projects are removed from the portfolio if they cease to meet the Eligibility criteria Proceeds from the Green Bond issue Earmarked Green Bond account at financial institution
  29. 29. List of financed projects (brief description and expected impact) Summary of ALTUM’s Green Bond development Selection of project examples with impact reporting Share allocated to new projects and to completed projects respectively TRANSPARENCY AND IMPACT REPORTING Annual Investor Letter The Investor Letter and the opinion of the audit will be published on ALTUM’s web page The internal tracking method and the allocation of the Green Bond funds will be verified by ALTUM’s Internal Audit Department or an external third party appointed by ALTUM with the relevant expertise and experience Information on energy consumption (or production of renewable energy) before and after project implementation will be collected
  30. 30. SECOND OPINION OF THE GREEN BOND FRAMEWORK (1) Environmental expert second opinion on the Green Bond Framework is provided by the Center for International Climate and Environmental Research – Oslo (Cicero), a Norwegian independent institute for interdisciplinary climate research. Cicero’s Shades of Green: Conclusions:  Framework provides a clear and sound framework for climate-friendly investments  Management of proceeds and reporting are of high standards  Based on the overall assessment of the assets and project types that will be financed by the ALTUM’s Green Bond and governance and transparency considerations Medium green: on the way to a long-term solution Dark green: implementing a long-term solution Light Green: short-term benefits, but not a long-term solution Brown: opposite to a long-term solution
  31. 31. SECOND OPINION OF THE GREEN BOND FRAMEWORK (2) Renewable energy Energy efficiency Green buildings Sustainable transportation °C °C °C °C Dark green Medium/dark green Medium green Dark green Comprehensive list of project Exclusion of fossil fuel projects Good structure for approval of projects Management of proceeds Transparency and reporting No obvious weaknesses STRENGHTS WEAKNESSES
  32. 32. www.altum.lv

×