IFC

1
IFC

• Presentation to CARICOM Regional Agriculture
  Investment Forum
• June 6-7, 2008

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Index

• IFC An Overview
• IFC and Agribusiness
• Transaction Examples
• Working with IFC

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IFC An Overview
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IFC is a Member of the World Bank Group
MIGA Multilateral Investment and Guarantee Agency
IBRD International Bank for Reconstruction and
Development
IDA International Development Association
IFC International Finance Corporation
Est. 1945
Est. 1960
Est. 1956
Est. 1988
Role
To promote institutional, legal and regulatory
reform Governments of poorest countries with per
capita income of less than 1,025 - Technical
assistance - Interest Free Loans - Policy Advice
To promote private sector development Private
companies in member countries -
Equity/Quasi-Equity - Long-term Loans - Risk
Management - Advisory Services
To reduce political investment risk Foreign
investors in member countries - Political Risk
Insurance
To promote institutional, legal and regulatory
reform Governments of member countries with per
capita income between 1,025 and 6,055. -
Technical assistance - Loans - Policy Advice
Clients
Products
Shared Mission To Promote Economic Development
and Reduce Poverty
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IFC 73 billion Invested in Emerging Markets
since 1956

• Largest multilateral source of financing for the
  emerging markets private sector
• 179 member countries
• AAA rated by SP and Moodys
• Promoter of environmental, social, and corporate
  governance standards
• Resources and know-how of a global development
  bank and flexibility of a merchant bank
• Holds equity in over 800 companies worldwide

IFC FY07 Highlights
Portfolio 25.4 billion Committed 10
billion Syndicated 1.8 billion of
companies 1,400 of countries 69
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IFCs Products and Services
Senior Debt
Structured Finance
Mezzanine Finance
Private Equity

• Partial credit guarantees
• Securitization
• Bond underwriting
• Credit Enhancement

• Convertible debt
• Subordinated debt
• Other Tier II instruments

• On-lending
• Liquidity management
• Acquisition financing
• Warehousing facilities
• Syndicated loans

• Common shares
• Preferred shares

Global Trade Finance Program
Advisory Services
Sustainable Finance

• 1 billion program
• Guarantees to issuing banks
• 46 issuing banks in 24 countries
• 92 confirming banks in 62 countries
• 579 million of issued guarantees in first 12
  months

• Corporate governance
• Risk management
• Small and medium business banking
• Housing finance
• Energy efficiency finance

• Carbon finance
• Renewable energy
• Supply chain financing
• Corporate governance

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IFC and Agribusiness
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Tortilla Crisis January 2007
International corn prices rose 25, blamed
largely on demand for corn for ethanol in North
America
Jan 31, 2007 Over 120,000 people marched in
protest in Mexico City
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Extract of 10-Point Plan for the Food Crisis

• () there needs to be more investment in
  agribusiness so that we can tap the private
  sectors ability to work across the value chain
• developing sustainable lands and water
• supply chains
• cutting wastage
• infrastructure and logistics
• helping developing country producers meet food
  safety standards
• connecting retailers with farmers in developing
  countries and
• supporting agricultural trade finance ()
• Robert Zoellick, President of World Bank Group
• Financial Times Article dated 29 May 2008

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Agribusiness Supporting the entire value chain
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Agribusiness Committed Portfolio
1.7 Billion Committed Portfolio As Of December
31, 2007
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Global Expertise Selected Clients
Turkey
Ukraine
Russia
Ecuador
Nicaragua
Egypt
China
India
Peru
Ghana
Indonesia
Uruguay
Mozambique
South Africa
Brazil
Argentina
Clients benefit from access to global
expertiseand IFC network of clients
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Agribusiness Investment Approach

• Corporate Project Finance
• Provide long term financing equity and loans
  that is not otherwise available
• Create long term partnerships with emerging
  industry leaders
• Promote IFCs brand through best practice for
  corporate governance, sustainability, Environment
  Social standards, etc.
• Implement further reach programs to support
  individual farmers, distribution companies, etc.
• Provide Technical Assistance as added value in
  IFCs financing package

• Wholesaling through Traders
• and Financial Institutions (FIs)
• Majority of farms/SMEs are too small for IFC
  reach but are essential to the sector
• Field advantage of local intermediaries
• (regulations, business customs, client/
  supplier reputations)
• Channel financial and technical assistance to end
  users via intermediary
• Develop and promote sustainability best practices
  through the intermediary
• Instruments Long Term finance, partial credit
  guarantees, risk sharing, etc.

• Technical Assistance (TA) and Advisory Services
• Project specific for farmers, SME development,
  supply chain linkages, infrastructure
• Market development of local supply to meet
  quality and quantity requirements
• Corporate governance and business transparency
  advisory services

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IFC Financing in Agribusiness
Activities

• Greenfield project finance
• Debt restructuring
• Syndicated loans
• Trade finance/working capital lines
• Partial credit guarantees
• Acquisition financing
• Convertible loans

• Expansion of production/ processing facilities
• Port/warehouse infrastructure (logistics)
• Rehabilitation of assets
• Farmer (pre-harvest) financing programs
• Supply Chain or Distribution integration
• Quality management/Safety certification
• New market entry/partner

Greenfield Projects to Corporate Expansions
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Financial Products - From Equity to Debt
Equity

• Corporate/JV ? Typically 5-15 shareholding ?
  Possibly seat on board
• Long-term investor, typically 6-8 year holding
  period
• Not just financial investor, adding to
  shareholder value

Mezzanine/Quasi Equity

• Subordinated loans
• Income participating loans
• Convertibles
• Other hybrid instruments

• Subordinated loans ? Income participating
  loans
• Convertibles ? Other hybrid instruments

Senior Debt Equivalents

• Senior Debt Project Finance or Corporate Finance
  (Reserve base lending, term loans, Partial
  credit guarantees for bonds)
• Fixed/floating rates, US, Euro and some local
  currencies as available
• Commercial rates, repayment tailored to
  project/company needs
• Long maturities up to 15 years, appropriate
  grace periods
• Range of security packages suited to
  project/country
• Mobilization of funds from other lenders and
  investors - through IFCs B loan Syndication
  Program

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IFC Value Added in Agribusiness
Environmental Social Risk Management
Long-term Competitive Financing
Sustainability Toolkit
Global Sector Expertise
Regional Knowledge
Country Risk Mitigation

• Equity
• Fixed/Floating Rates, Local Currencies
• Up to 15 year Loan Maturity
• Flexible Amortization Profile
• Catalyst for other Investors and Lenders
• Equity Participation
• Capital Mobilization

• 40 Years of Sector Expertise
• Industry Specialist Advice and Benchmarks
• Greenfield
• Expansion/Modernization
• Corporate Strategy
• Access to International Investors

• Government Relations
• Neutral broker Role
• Reduced Risk of Expropriation, Breach of
  Contract, Convertibility
• World Bank Synergies
• Withholding Tax Benefit

• Advice on Environmental and Social Best Practices
• Energy and Water Use Management / Cleaner
  Technologies
• Equator Principles Modeled after IFC Standards
• Local Consultation and Disclosure

• Local Supplier Development
• Environmental/ Social Advice
• Corporate Governance
• Local Economic Development
• HIV/AIDS Prevention
• Community Development Funding

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Transaction Examples
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Sample of sugar projects approved by IFC
Countries with Existing Sugar Projects
Countries with Past Sugar Projects
Dec. 2007 CAGs sugar sector investments was
US233 million (about 17 of CAG protfolio
exposure)
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Recent Sugar Projects in Latin America Caribbean

• Nicaragua
• Nicaragua Sugar 25m (2007)

• Guatemala
• Pantaleón
• 20m (2007) (Monte Rosa)

Caribbean Sea

• Peru
• Laredo
• 15m (1999)
• 18m (2003)

• Brazil
• Vale do Paraná
• 35 m (2007)
• Usiña São João
• 40 m (2008)
• Cosan
• 60 m (2005)

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Examples of IFCs Investments in the Sugar
Sector Vale do Paraná - Brazil
Vale do Paraná is a joint venture between IFC
Clients Manuelita S.A. (Colombia), Pantaleón
Sugar Holdings (Guatemala) and sugar operator
Unialco S.A. (Brazil)
Company

• In 2007, IFC provided a US35 million financing
  package to
• support the companys investment and refinancing
  plans
• A Loan US28 million
• Convertible C Loan US7 million

IFCs Investment

• Provided long-term funding
• Supported the companys efforts to further
  strengthen its environmental and social practices
• Support IFC clients in regional expansion
  (South-South investments)

IFCs Value Addition
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ECOM-Nestlé Coffee Value Chain
Contribution
TA
Financing TA
8,000 farmers
COFFEE
PREFERRED MKT ACCESS
FINANCING
Intl Buyer
Trader
Primary Value Suppliers
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IFCs Role in the Project

• Global/Local Player role
• Replicability and Scaling of Business Model
• Project Management
• Honest Broker role
• Transparency and Independent
• Commercial Leverage
• No conflict of Interest
• Prestige / Branding Value Proposition role
• Passed Social/Environmental Due Diligence
• Differentiation and Competitive Advantage

• Value Added by IFC
• Higher value to small producers inclusion
• Fair Market conditions for SMEs
• All links in the chain benefit

SUSTAINABLE DEVELOPMENT
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GAIN Challenge Fund

• Fund Objective Provide financial and tech.
  support to IFC clients to develop new products,
  distribution channels and marketing approaches
  for fortified complementary foods and food
  supplements for infants (6-24 months)
• Funding Challenge Fund covers 50 of project
  costs with company contributing 50.
• Example SHOKTI- sweet yogurt, fortified with
  Vitamin A, zinc, iron, iodine. Traditional
  product in modern packaging, positioned as snack

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Working With Us
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IFCs investment strategy

• IFCs investment strategy is based on 3
  fundamental principles
• Commercially viable investments
• Market based
• Must produce returns
• Value added beyond capital
• Opportunity to help clients achieve higher
  standards of management and social responsibility
• Food chain development
• Strong development impact
• Food chain development
• Support projects that will expand Agribusiness in
  a socially and environmentally responsible way
• Sponsor has material funds at risk

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IFCs Investment Restrictions

• IFC investment must be
• lt 50 of project cost in the case of an existing
  enterprise (i.e. expansion project)
• lt 25 for greenfield projects (35 for certain
  smaller projects)
• lt 20 of company capital in case of equity
  investment
• Minimum investment size

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IFCs Project Cycle
Monitoring
We Agree on a Specific Timeline to Meet Clients
Needs
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IFC TeamContact Information
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Annex 1 Caribbean Transactions
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Significant Industry Expertise and Knowledge of
Caribbean Region
Financial Markets
Financial Markets
General Manufacturing
Financial Markets
Financial Markets
Trinidad and Tobago
Guyana
Dominical Republic
Dominican Republic
I - US50 million Sr. II - US20 million Sr.
US1 million equity
US1 million Equity
US20 million Sr.
Trinidad and Tobago
Jamaica
Trinidad and Tobago
Dominican Republic
Banco BHD
US30 million Sr.
US50 million mezzanine
US10 million Sr. US10 million Mezzaine
US20 million Sr.
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Health and Education
General Manufacturing
General Manufacturing
General Manufacturing
Services General Manufacturing
Dominican Republic
Regional
Grenada
US1 million Sr. US1 million mezzanine US2.5
million arr.
US11 million Sr. US11 million arr.
US25 million Sr. US10 million mezzannie US70
million arr.
Trinidad and Tobago
US5 million Sr.
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Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Dominican Republic
US30 million Sr.
Jamaica
Dominican Republic
US45 million mezzanine
US10 million Sr. US13 million guarantee
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Agribusiness
Oil, Gas and Mining
Information and Communication
Information and Communication
OECS
Haiti
Dominical Republic
US14 million Sr. US1 million mezzanine
US15 million Sr.
US12 million Sr. US3 million mezzanine
Dominican Republic
US35 million Sr. US15 million mezzanine US50
million arr.
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Annex 2 IFCs Approach to Biofuels
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Economics of Biofuels

• Economic viability depends on
• Price/cost of feedstock
• Feedstock Production efficiency/technology
• Feedstock conversion efficiency
• Transportation costs
• Price of competing fuel at the delivery point
• Environmental Benefits and possibility of
  monetization (carbon credits)

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IFCs Approach to Biofuels

• Investment decision depends on
• What is the feedstock (agricultural-related
  risks)
• Where is it produced and what/where is the market
• Proven Process/varieties/yields
• Sponsors experience and track record in
• agricultural issues
• producing in the Projects location
• What is the Projects economic impact
• Single location projects are riskier
• What are the environmental benefits
• Financial feasibility test in the absence of
  subsidies/preferential treatment/mandate
• Sponsors financial strength and support is key
  in greenfield projects

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IFCs Biofuels Investment Approach

• Consistency with IFCs Strategy for renewable
  energy and climate change
• Project must be consistent with IFC Environmental
  and Social Performance Standards
• Preference for sugar cane based ethanol where
  costs are globally competitive
• Preference for Biodiesel Projects produced from
  low value added feedstocks (waste oil, animal
  fats)
• Continue to investigate jatropha-based biodiesel
  (and others that do not compete directly with
  food production)

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IFC commitments
240 m
92.5 m
N/A
102 m
Biodiesel - Other
Ethanol Other
Ethanol Sugar
Biodiesel Palm Oil

• Central America
• - Nicaragua Sugar (2007)
• - Pantaleon (2007)
• - Monte Rosa (2007)
• Brazil
• Usiña Sao João (2008)
• Vale do Paraná (2007)
• Cosan (2005)
• India
• Balrampur (2003, 2007)
• Bajaj Hindustan (2007)
• DSCL (2005)
• Peru
• - Laredo (1999, 2006)
• - Paramonga (1997)

Wilmar (Indonesia) Trade finance (2004, 2006)
Delta-Wilmar (Ukraine) CPO refining (2007) GOPD
C (Ghana) Oil palm plantations (2007)
Soybean oil Vicentin (Argentina) (2003, 2005)
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Represents approximate exposure of ENTIRE sector
not particular to biofuels