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NOT AN OFFICIAL UNCTAD RECORD. Strategic Risk Management. An alternative view for investing huge revenue windfall. African Oil Conference - Algiers, April 4th, 2006. Drawings: The Economist. Bests Asset Managers are different!. Yale endowment: an alternative view for investing reserves.

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NOT AN OFFICIAL UNCTAD RECORD

Strategic Risk Management

An alternative view for investing huge revenue windfall

African Oil Conference - Algiers, April 4th, 2006

Drawings: The Economist

bests asset managers are different
Bests Asset Managers are different!

Yale endowment: an alternative view for investing reserves

% Allocation de capitaux

% Capital Allowance

Annualized Yield

(2)

(10years-return

from 06/2005)

Present

2005 To

Institutional

Expected

Risk

2003

1999

Stand

30/06/05

Average (2)

Real return

Domestic Equity

14,0%

14,1%

14,9%

15,1%

32,0%

6,0%

20,0%

15,7%

(1)

Absolute Return (1)

25,0%

25,7%

25,1%

21,8%

17,6%

6,0%

10,0%

13,1%

Foreign Equity

14,0%

13,7%

14,6%

11,1%

17,4%

6,0%

20,0%

12,7%

17,0%

14,8%

39,5%

Private Equity

14,9%

23,0%

6,1%

11,4%

29,0%

Real Assets (3)

25,0%

25,0%

20,9%

17,9%

7,5%

6,0%

15,0%

17,7%

Fixed Income

5,0%

4,9%

7,4%

9,6%

19,5%

2,0%

10,0%

7,4%

Cash

0,0%

1,9%

2,1%

1,5%

3,5%

Total

100%

100%

100%

100%

100,0%

6,0%

11,1%

17,4%

Sources: Data consolidated from ”The Yale Endowment 2005 Report”

1) Alternative Asset Management

2) Average Value of University American Funds (06/30/2005). Past Yields do not herald future results

3) Include Real Estate/Oil & gas/Timberland

bests asset managers use active management
Bests Asset Managers use active management

Yale Diversifies Policy Asset Allocation : Target 1985 - 2005

Sources: Data consolidated from ”The Yale Endowment 2005 Report”

african oil companies have a social responsibility
African Oil Companies have a social responsibility
  • In real term, 2005 extra revenue nearly doubles 1974 and 1980 dollar surpluses
  • To face, oil price volatility and declining reserves, windfalls have to be invested in:
    • oil production and refining capacity,
    • the world's biggest companies,
    • private equity deals at home and abroad
capital flows are flooding but africa is missing
Nanjing Auto/Rover

Automobile

Hyop/Unicredito

Banking

TMNF/Real Seguros

Assurances

Oracle/I-Flex

Software

Telefonica/O2

Telecoms

Mittal/Krivorijstal

Acier

Casino/CBD

Distribution

CVRD/Canico

Mines

Tata/Millenium Steel

Acier

Mittal Steel/Arcelor

Acier

South/ North

CNPC/EnCana (Pétrole)

South/ South

North/ South

North/ North

Source: Thomson Financial-L’Expansion

Capital flows are flooding, but Africa is missing
africa does not appear as well in the information loop
Africa does not appear as well in the information loop

Internet World Map

Source: MichelCartier.com La carte internet du monde

what miss african oil companies to be part of the game
What miss African Oil Companies to be part of the game?
  • Safe and hospitable investment environment where profitable opportunities exist
  • Local financial market
  • Domestic Corporate finance and Fund management capability
  • Technology transfer via financial investments
  • Professional platform for M&A.
how to achieve it
How to achieve it?
  • Mix increase Oil production capacity with traditional financial investment, private equity at home and abroad
  • Take a long term view for managing revenues,
  • Enable the development of competencies poles in Energy, Telecoms, Software, Health care, Finance, Tourism, etc...
  • Be inspired by Kuwait and South Korea experiences in investing in less cyclical asset in complement to oil investments,
  • Create Partnerships controlled by Oil companies with independent financial professionals.
present and alternative
Present and alternative

Oil Company

1.Direct co-investments and partnership in Oil project and companies

Direct investment

2. Investment via several investment funds

Fund 1

Oil Company

Fund 2

Financial Advisor

...

Fund 10

3. Mix investment via Partnerships controlled by oil companies

Companies 1, 2,…10

Oil Company

Alternative funds

Controlled Partnerships

Real estate

kuwaiti korean experiences
Kuwaiti & Korean Experiences

Korea, an industrial approach

Kuwait, a financial approach

  • Kuwait Investment Office (KIO) manage reserves for future generations.
  • 10% of oil revenues,
  • Mix portfolio invested in all type of asset classes and geographical zones,
  • Long term horizon and own financial teams,
  • 100 people Kuwaiti and non Kuwaiti
  • ETRI (Electronics and Telecommunications Research Institute), create the conditions of a long term value creation for future generations
  • ETRI focus on Industrial Property on four axes :
    • Technology Transfer,
    • Patents,
    • Start up creation,
    • Consulting and infrastructure for business development.
  • Emergence of world leaders
kuwait a financial approach
KUWAIT, a financial approach
  • KIO wants to be a first class asset management company with a complementary mission for developing excellence in the Kuwaiti private sector :
      • Contribution to Kuwaiti human capital education and training
      • Active participation to investment growth in Kuwait
      • Transparency in operations and application strong governance
      • Development of a dynamic and motivated enterprise environment
      • Constant research of improvement in its investments process.
  • Controlled by the Board of the Kuwait Investment Authority, mother company, chaired by Minister of Finances, with as members :
      • Oil Minister
      • Central Bank Governor
      • Finance Secretary
      • Five other Kuwaiti experts on investments and finances of whom three are totally dedicated to this task
korea an industrial approach
Korea, an industrial approach
  • Electronics and Telecommunications Research Institute (ETRI) has been involved in more than 2.700 enterprise projects and more than 1.400 Technology transfers
  • ETRI spread over 264 companies mainly in Korea and abroad(Singapore …)
  • Today these companies represent more than 4.000 stable employees and annual revenues of WON 700 bln.
  • Some of these Companies are Worldleaders in domains like mobile phone, flat screens, or computers components.
  • With more than 3.500 international patents, ETRI is just behind American AT&T et IBM.
how to implement it
How to implement it?
  • Build an investment platform with a 5 to 8 years time horizon,
  • Hire an experienced professional team dedicated to complement actual investment with additional asset classes such as Private Equity, Alternative investment and Real estate, at home and abroad,
  • Immerge in-house talents to be part of the team with purpose to train them to the best practice of Corporate finance & Asset management,
  • Align the interest of team members with those of the structure to be sure to keep the bests,
  • Transfer technologies from investment abroad to local market,
  • Use the expertise of your platform team for your own M&A operations.
how it could be structured
How it could be structured?

Oil Company

Oil Co partnership

Investment Committee

Operational Partner

DO1

DO2

DO3

DO4

B/O*

M/O*

IT*

F/O*

CD1

CD1

CD2

J2

CD1

CD2

J1

Sec 1

A1

A1

Compt.

A2

A2

A3

A4

*F/O Market Operations; M/O Post Market Operations; B/O Operations Management;

IT Information Technologies; CD Department Managers; J Lawyer; A Deputy Manager; Sec Assistant;

Compt Accountant

Oil co personal

where is the value
Where is the Value?

General Partner

acquires

companies and alternative assets or real estate

Oil Company

Limited Partner

General Partner

99% Capital

Profit & return

Of capital

Carried interest1

  • General Partner
  • Sold-out Investments Portfolio:
  • IPO,
  • M&A
  • Recapitalizations
  • Transfers & Arbitrations for Alternative Assets and Real Estates
  • General Partner
  • adds value to investments through
  • Operational Experience,
  • Capital Markets experience,
  • Structuration Experience,
  • Board Involvement.

Cash

and/or

stocks

expected benefits from this type of structure
Expected benefits from this type of structure

Professional Team & Regulatory Environment

Technology Transfers

and Education

  • Access to a large pool of professional resources
  • Adapted Regulatory Environment
  • Portfolio Management Methods
  • Techniques of M&A, LBO, Structured Finance, Alternative Assets Management
  • Strategic Risk Management & Coverage
  • Governance Regulations imposed by Venture Capitalists (Rigor & Transparency)
  • Industrial Technologies from acquired companies

Financial Performance

  • Financial Output over 10%
  • High & Effective degree of influence & control over Investments
  • Legitimate access to non-public information before investment-decision
  • Strong alignment of Interests between Investors & Management

Long Term

Value Creation

Diversification

and Risks reduction

  • Access to unique opportunities in a vast & growing marketplace of privately held companies
  • Low correlation with other Asset classes
  • Private Equity and Alternative Assets Management as Risks mitigators
strategic risk management
Strategic Risk Management

For any Question :

Jean-François Casanova

52, rue de Ponthieu 75008 Paris

Tel :      +33 (0)1 45.62.16.64

Mobile:   +33 (0)6 15 38 64 08

E-mail : [email protected]

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