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FINANCING OPPORTUNITIES IN THE ENERGY SECTOR IN IN ALGERIA. INTERNATIONAL FINANCE CORPORATION MAY 2006. IFC is the Largest Source of Loan and Equity Financing for the Private Sector in Emerging Economies. 178 Member Countries. AAA rating Over 80% of funds borrowed in international markets

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slide1

FINANCING OPPORTUNITIES IN THE ENERGY SECTOR IN

IN ALGERIA

INTERNATIONAL FINANCE CORPORATION

MAY 2006

slide2

IFC is the Largest Source of Loan and Equity Financing for the Private Sector in Emerging Economies

178 Member Countries

  • AAA rating
  • Over 80% of funds borrowed in international markets
  • Invests about US$5.0 bn every year for own accounts
  • Mobilize additional US$1.0bn p.a. in syndicated finance
  • US$19.3bn portfolio (in 120 countries)

Since 1956, approximately US$73 bn invested in

3,319 private sector companies in 140 developing countries

Today, IFC holds equity in about 800 Companies

slide3

Projects we Finance in the Energy and Resources Sector & Products We Offer

  • Oil, Gas and Energy
  • Appraisal and Development(no wildcat exploration)
  • Oil and Gas Pipelines
  • Oilfield Services
  • LNG
  • LPG
  • FPSOs
  • Logistics support infrastructure
  • Power projects
  • Chemical Projects
  • Refineries
  • Petrochemicals – crackers; PP/PE; VCM/PVC; PTA/PET; Methanol; et. al.
  • Infrastructure – storage; terminals
  • Inorganics – Hydrogen peroxide; chlor-alkali; carbon black; soda ash
  • Fertilizers – ammonia/urea; phosphoric acid; DAP

Products

  • Senior Debt
    • Project Finance
    • Corporate Loans
  • Income-Participating Debt
  • Convertibles
  • Revolving Credit
  • Equity
    • Corporate
    • UJVs
  • Partial Credit Guarantees
  • Acquisition Financing
  • Debt Refinancing
slide4

IFC’s ability to finance from own account & mobilize financing from additional sources

Project type

IFC's investment for its own account

Greenfield, total cost

less than $50 mm

Up to 35% of project cost

Greenfield, total cost

more than $50 mm

Up to 25% of project cost

Expansion or

rehabilitation

Up to 50% of project cost

  • IFC’s total financing must be less than 25% of total company capitalization, and IFC does not manage or have largest stake
  • IFC umbrella for B Loan participants: IFC lender of record, immunity from taxation and provisioning requirements
slide5

Loan Agreement

Borrower

IFC

A + B Loans

Participation

Agreement

B Loan

Participants

IFC Syndicates Full Debt Package Through the B Loan Program

  • A loan is for IFC’s own account
  • B Loan is for account of participant banks
  • 1 Loan Agreement signed by Borrower & IFC: IFC umbrella for B loan participants
  • IFC administers entire loan
  • IFC distributes payments pro rata among itself and participants
  • Participants accept commercial risks of project
  • Benefits of IFC “umbrella”
    • better pricing/tenors than otherwise available
    • preferred creditor access to foreign exchange
    • IFC loans exempt from withholding taxes and provisioning requirements
slide6

The IFC Value Proposition

  • Long-term financing – own and resource mobilization in tough markets
  • Risk sharing as equity partner
  • Tax benefit
  • Environment and social best practices
  • Linkages
    • Community development
    • Local suppliers
    • Micro-finance
  • In-house capabilities (technical, legal, insurance, environment/social)
  • De facto political risk mitigation
  • Corporate governance
slide8

IFC Portfolio in Algeria

Project Sector IFC Investment Amount Year

(US$ million)

Société Générale

Algérie Financial Markets 1.5 equity 1997

Algeria Trade Enhancement

Facility Financial Markets 20 debt 2000

Algerian Cement Co. General Manufcaturing 45 debt 2003 & 2004

Sider-Alfasid Annaba General Manufacturing 25 debt 2003

Algiers Investment

Partnership Financial Markets 0.2 equity 2000

Arab Banking Corp Financial Markets 1.9 equity 1998 & 2002

Arab Leasing Corp Financial Markets 0.7 equity 2002

slide9

IFC Current Activities in Algeria

Sector IFC Investment Amount

(US$ million)

General Manufacturing 12 equity

Financial Markets 19.5 equity

12.5 debt

Infrastructure 10 debt

Tourism 25 debt

Chemicals 24 equity

slide10

IFC Private Enterprise Partnership

  • IFC launched the Private Enterprise Partnership for the Middle East and North Africa (PEP MENA) in 2004
  • Technical assistance to help promote the development of the local financial markets, small & medium size enterprises, environmental awareness and development of public-private partnerships
  • Partnerships signed with
    • Confédération des Entrepreneurs Industriels de la Matidja, a (CEIMI) 500 member SME organization
    • Association nationale des Exportateurs Algériens (ANEXAL)
    • Club d’Action et de Réflexion autour de l’Entreprise (CARE), first Algerian think tank of young entrepreneurs
    • Conseil Consultatif National pour la PME
    • Others: Doing Business with Government, technical assistance for CPA (bank slated for privatization) and SME toolkit with ministry of SMEs
slide11

IFC Strategy in Algeria

  • Algeria has potential for a sizeable program
  • IFC sees its role as facilitating private sector investment
  • IFC is keen on:
    • Supporting the continual improvements in the investment climate
    • Assisting in the privatization process
    • Developing the financial sector, including SMEs
    • Encouraging private participation in infrastructure
    • Helping to strengthen the local private sector
slide12

IFC Algeria Office

  • Local presence since 2002 through NAED
  • Now expanded to cover Maghreb region
  • Abderahmane Fodil will be IFC’s Oil, Gas, Mining and Chemicals dedicated staff member based in Algiers starting September 2006

Abdelkader Allaoua

Associate Director

Middle East North Africa Department

19, rue Emile Marquis – Djenane

El Malik – Hydra 16035

Algiers, Algeria

Tel: (+213-21) 54 80 10

Fax: (+213-21) 54 95 82

E-mail: aallaoua@ifc.org

Rana Karadsheh

Senior Investment Officer

Oil, Gas, Mining & Chemicals Department

2121 Pennsylvania Ave. N.W.

Washington, DC, 20433 – U.S.A.

Phone: (+1-202) 473-5527

Fax: (+1-202) 974-4325, 974- 4324

E-mail: rkaradsheh@ifc.org

Abderhamane Fodil

Investment Officer

Oil, Gas, Mining & Chemicals Department

2121 Pennsylvania Ave. N.W.

Washington, DC, 20433 – U.S.A.

Phone: (+1-202) 458-9252

Fax: (+1-202) 974-4325, 974- 4324

E-mail: afodil@ifc.org

slide14

RED MED

  • Logistics Support Center
  • The Red Med Group (Red Med, Star Aviation, etc):
    • Local logistics company serving the hydrocarbon sector
    • Renowned for quality, reliability and integrity
    • Integrated services – base camp, mobile camps, air and ground transportation, truck/crane/car lease and others
    • Total project cost of US$32 million
  • IFC’s Involvement:
    • IFC’s first investment in a local company in Algeria
    • US$10 million quasi equity for facility upgrade and expansion
    • Advise on corporate governance
slide15

Fertial

  • Fertilizer Production
  • Fertial was privatized in 2005 to Grupo Villar Mir (GVM) of Spain
    • Domestic fertilizer company
    • Capacity of 990,000 tons of ammonia, 660,000 tons of nitric acid, 198,000 tons of urea and 740,000 tons of compound fertilizers
    • GVM committed to upgrade the plants to meet international operational and environmental standards
    • GVM committed to helping develop the domestic Algerian farming sector
    • Looking to develop a new ammonia plant with capacity of 1.1 million tons per annum
  • IFC’s Involvement
    • IFC’s largest investment in chemical sector in Algeria
    • US$24 million in equity
    • Will likely be financing the new ammonia plant
slide17

Petrochemicals

45%

Asia

56%

Chemicals

38%

Latin America & Caribbean

31%

Refineries

7%

Africa

3%

Fertilizers

10%

E. Europe

3%

Middle East & North Africa

7%

Chemicals Portfolio

US$1.1 Billion

Catalyzed over $15 billion in project investments

By Product

By Region

•US$522 million for IFC’s account

•US$645 million held by participants

slide18

Oil and Gas Portfolio

US$2.0 Billion

6 UJVs Equity Mezzanine Debt

slide19

IFC works with foreign investors and local companies on complex cross-border transactions

  • Azerbaijan / Georgia - Early Oil Project
  • Financing of a US$2 bn project ($0.5 bn pipeline element) for Amoco, Unocal, Exxon, Turkish Petroleum, and Lukoil
  • Precedent for multilateral financing of large deals in this region
  • Mitigation of political and cross-border risk
  • IFC investment: US$100 mm A loan, US$100 mm B loan

Azeri Chirag Gunashli Project

  • ACG field complex is being developed in phases by a consortium of 11 local and international

oil companies

  • IFC led the financing US$300 mm for ACG field development
    • Project currently producing 140,000 bbls/d
    • Production will ramp up to 1,000,000 bbls/d

BTC Pipeline

  • 1,750 km Baku Tblisi Ceyhan cross-border pipeline
  • Project cost is approximately US$3.8 billion
  • IFC provided $250 million and lead the financing for other

lenders including multilaterals, ECAs, commercial banks and political risk insurers

slide20

Landmark Transaction in Argentina

Argentina - Pan American Energy

  • US$250 million unsecured financing for PAE (Pan American Energy), second largest oil & gas producer in Argentina
  • PAE recognized as a good corporate citizen
  • Financing included US$135 million syndicated loan – 7 year loan longest syndicated for an argentine borrower since crisis
  • Transaction completed in less than 4 months (mandate to commitment)
  • LAC IFC Plus facility subsequently signed MOU with client launching technical assistance project.
slide21

IFC provides flexible financing to growing Independents

  • Bangladesh / India – Cairn Energy
  • Development of oil and gas assets in Bangladesh and India
  • IFC plans to provide a US$150 mm revolving corporate facility as part of a larger syndicated debt issue
  • IFC participation sought by Cairn for greater comfort on political risk and help structure a more focused Environment, Health & Safety Management Plan and its Corporate Social Responsibility Policy.
  • IFC providing support on SME development and community issues
slide22

IFC provides flexible financing to growing Independents

  • Egypt/Bulgaria– Melrose Resources
  • IFC provided a US$25 million revolving corporate facility
  • Funds used for capital expenditures and restructuring group debt
  • Development of gas production from the El Mansoura and Qantara concessions in Egypt and the Galata concession in Bulgaria

Soco International

  • SOCO keen to partner with IFC given exposure in emerging markets
  • $45 million reserve-based revolver to SOCO International
  • Funding to go towards Capex in Yemen & Vietnam
slide23

IFC works with clients on greenfield Projects

  • Thailand Vinythi
  • Fully integrated PVC plant with a capacity of 195,000 tonnes per annum (tpa) at a total cost of US$416 m
  • IFC assisted through the Thai crisis by providing restructuring advice and facilitating capital increase
  • Helped set environmental standards for the pre-treatment of effluents before they are released into common treatment facilities operated by local authorities
  • IFC investment: US$115 m (A Loan US$28m, B Loan US$70 m and C Loan US$17m)

Venezuela Profalca

  • Construction of a propane/propylene splitter to produce up to 140,000 tpa of polymer grade propylene at a cost of US$102m
  • IFC investment: US$47m (A loan US$24m; B Loan US$23m)
slide24

Expansion & Modernization Projects

  • China – Maanshan Carbon Black
  • Modernization and expansion of a plant with a total cost of US$30 million
  • Project improves environmental performance and transforms state-owned enterprises
  • IFC helped establish a resettlement and compensation mechanism for retrenched workers; also helped obtain speedy approvals from local and central authorities
  • IFC investment: US$11m (A Loan US$9 m, equity US$2 m)
  • Philippines – Philipinas Shell Petroleum
  • Replacement with modern 110,000 bpd refinery with thermal cracking unit at total cost of US$667m
  • Worked with Shell and the government in establishing precedent setting environmental regulations for the refining industry in the Philippines
  • IFC investment: US$120m (A Loan US$35 m, B Loan US$85 m)
slide25

IFC invests its own money when access

to capital is difficult

  • Kenya – Magadi Soda Ash
  • Financed a US$24m modernization program to (i) increase capacity & efficiency of soda ash production facilities, (ii) upgrade & manage a railway line, and (iii) improve port facilities and environmental standards
  • IFC provided A Loan of US$9m
  • China – Suzhou Huasu Plastics Co, Ltd.
  • 100,000 tpa PVC resin plant, & 24,000 tpa PVC film calendaring facility
  • Provided otherwise scarce long-term limited recourse financing
  • IFC took a US$2.5m equity stake and provided US$44m in A and B Loans
slide26

IFC has developed long-term partnerships with its clients

  • Egypt – Alexandria Carbon Black (ACB)
  • IFC worked with the client since 1992 when the client had difficulty attracting financing
  • IFC provided subsequent investments in 1997, 1998 and 2003 for expansions
  • ACB is now setting standards for efficiency, environmental performance and productivity. ACB is one of the largest exporters to Europe of carbon black
  • IFC investment: 1992 (A Loan US$7 m, equity US$1.5m); 1997 (A Loan US$5m, equity US$1.5m); 1998 (A Loan US$7.5m); 2003 (A Loan US$5m)

Pakistan – Engro Chemicals Pakistan Limited

  • IFC assisted employees in 1991 with an employee buyout of Esso’s shares in an ammonia/urea complex
  • IFC provided financing with subsequent expansions, as well as subsidiary companies in PVC and a chemical storage terminal.
  • IFC Investment in ECPL: 1991 (A Loan US$36 m, B Loan US$5 m, Equity US$5.5 m); 1995 (A Loan US$10 m, B Loan US$8 m)
  • IFC investment: Engro Vopak 1996 (A Loan US$12 m, B Loan US$5 m); Engro Asahi 1997 (A Loan 14.25 m)

Both clients have expressed interest in Algeria

slide27

IFC has helped clients strategically position themselves in the petrochemical markets

  • Brazil – Suzano Petroquimica
  • Suzano acquired 50% stake in Polibrasil for US$277 million, allowing Suzano to take 100% control of Polibrasil. Suzano is now the largest PP producer in Latin America
  • IFC provided funding for: (i) refinancing the bridge loan for the acquisition; (ii) the debottlenecking of Polibrasil’s operations; (iii) corporate restructuring of Suzano; and (iv) some debt refinancing
  • The acquisition allowed Suzano to become a fully integrated chemical company
  • IFC investment: A Loan US$50 m; C Loan US$10m; B Loan US$150 m

Turkey – OPET Petrolcülük A.S

  • Project involved construction of a greenfield terminal and tank storage facility, expansion of the company’s retail network, and acquisition of a small terminal
  • Opet had been suffering from a weak competitive position and with the boosting of its storage capacity and expansion of its retail network, OPET positioned itself to meet the challenges of an increasingly liberalized fuel market
  • IFC investment: A Loan US$25 m; B Loan US$40m
slide28

Summary of IFC’s experience in the chemicals sector

  • Petrochemicals:
  • NPC, Thailand: gas cracker
  • Copesul, Brazil: naptha cracker
  • Copene, Brazil: naptha cracker
  • Samsung, Korea: petrochem/aromatics complex restructuring
  • HMC Polymers, Thailand: PP
  • Petroken, Argentina: PP
  • Politeno, Brazil: PE
  • Ipiranga I & II, Brazil: PE, PP
  • Indelpro, Mexico
  • Profalca, Venezuela: PP
  • Grupo Zuliano, Venezuela: petrochem complex
  • Suzhou, China: PVC
  • Vinythai, Thailand: PVC
  • Engro PVC, Pakistan: PVC
  • Tuntex, Thailand: PTA
  • Rhodiaco, Brazil: PTA
  • Rhodia-ster, Brazil: PTA/PET
  • Oxiteno, Brazil: EO/MEG
  • Girsa, Mexico: EO/MEG
  • Pralca, Venezuela: MEG
  • Gidesa, México: EG, PS
  • Trikem, Brazil: PS
  • Innova, Brazil: styrene/PS
  • Daaboul, Syria: LAB
  • Jose Methanol, Venezuela: methanol
  • Darong, China: specialty chemicals
  • Kuaz, Russia: caprolactam
  • Refineries:
  • PSPC (Shell), Philippines
  • Star Petroleum (Caltex), Thailand
  • Refisas (Pecom), Argentina
  • Petrotel-Lukoil, Romania
  • Fertilizers
  • ICS, Senegal: phosphoric acid
  • Indo Jordan, Jordan: phosphoric acid
  • Engro Chemicals, Pakistan: ammonia
  • Trigen II, Trinidad & Tobago: ammonia
  • Fosfertil, Brazil: SSP, TSP, MSP, DAP
  • GNFC, India: ammonia, urea
  • Deepak Nitrate, India: ammonia, Urea, DAP
  • PQB, Bolivia: ammonium nitrate
  • Toaz, Russia: ammonia
  • Inorganic Chemicals
  • Alexandria Carbon Black, Egypt: Carbon black
  • Continental Carbon (CCIL), India: Carbon Black
  • Maanshan I & II, China: Carbon black
  • Rain Calcining, India: calcined carbon
  • Peroxythai, Thailand: hydrogen peroxide
  • Chengdu, China: potassium hydroxide & PVC
  • Prodesal, Colombia: caustic soda, chlorine
  • Magadi Soda, Kenya: soda ash
  • Others/Infrastructure:
  • Engro Vopak, Pakistan: Chemical terminal
  • Messer, Trinidad & Tobago: industrial gases
  • Opet Petrolculuk, Turkey: fuel distribution
  • Antai, China: metallurgical coke
  • Ecogreen I & II, Indonesia: oleochemicals
  • Darong, China: specialty chemicals
  • UPL, India: pesticides, herbicides
  • Gapco, Kenya: storage terminal
  • Zhong Chen, China: storage terminal
  • Galnaftogaz, Ukraine: petroleum retailer
slide29

In summary…IFC’s value add

  • Long term partner
  • Equity and Debt
  • Environmental, social and other expertise
  • Risk mitigation
  • “Honest broker” role
  • Support both local and international companies