IFU s financing of UN s SDGs and the new SDG fund. Bjerringbro - 29 August 2018

Transcription

1 IFU s financing of UN s SDGs and the new SDG fund Bjerringbro - 29 August 2018

2 IFU IN BRIEF Independent government-owned fund, operating on commercial terms Promotes economic and social progress in developing countries 143 Provides risk capital and advice for projects having a Danish interest investment countries Established in Total contracted investments of more than bn DKK 184 invested in share capital and loans bn DKK PAGE 2

3 IFU S INVESTMENT MODEL Examples of Danish interest IFU Danish interest Danish investor Danish company supplying goods, technology, know-how, management or services Share capital/ loan Project company Danish company sourcing products from the project company Use of state-of-the-art Danish technology in the project Share capital Loan Local investor Local bank PAGE 3

4 General direct outcomes Sector-specific direct outcomes Jobs, taxes, female employment, youth employment, etc. Input and output IFU CONTRIBUTES TO THE 17 SUSTAINABLE DEVELOPMENT GOALS Limited CO2 emissions, number of assisted small farmers, etc. Indirect contributions Technology level, staff training, ESG assessment, etc. PAGE 4

5 SDG EQUITY FUND Private investors Danish State 40% 60% DANISH EQUITY FUND Portfolio investments Total fund size - first close DKK 4.1 billion PAGE 5

6 SDG EQUITY FUND Regional focus 30% - 40% Africa 30% - 40% Asia 10% - 20% Europe and MENA 10% - 20% LatinAmerica Sector focus 30% - 40% renewable energy 20% - 30% agribusiness 20% - 30% infrastructure, water and sanitation 10% - 20% industry and service 0% - 10% financial sector PAGE 6

7 IFU S AFRICA ACTIVITIES Number of active investments IFU has undertaken 250 investments in Africa in 37 African countries IFU currently has 68 investments across 16 countries DKK 1.9 billion currently invested in Africa New investments of DKK 353 m in 2017 > Significant sectors: Heavy Industries: Cement, Fertilizer plants Manufacturing: Breweries, industrial goods Hospitality Hotels Agribusiness: Commercial farms, processing Infrastructure: Port infrastructure, power plants Renewables: Wind, solar PAGE 7

8 SEVEN GOOD REASONS TO INVEST IN AFRICA Population growth 1 bn. 2 bn. in The world's largest workforce in 2040 (1.1 bn.) A growing middle class 300m 500m in First mover advantages Low competition High economic growth 4 5 % on average ( ) 3 4 Access to raw materials, semi-finished products 5 Increasing urbanization 50 % live in cities by 2035 PAGE 8

9 SUB-SAHARAN AFRICA TEAM Copenhagen: Lagos: ACCRA LAGOS NAIROBI Catherine I. Cax Henrik Henriksen Vice President, Regional Director, Sub-Saharan Africa West Africa Nairobi: Henrik Frøsig Regional Director, East Africa Accra: Seye Bassir Investment Director Pretoria: PRETORIA Samuel Githinji Wathondu Investment Director Njeri Mungai Ngaruiya Investment Director Nana Yaw Kwakye Investment Director Johnny Ohgrøn Hansen Regional Director, Southern Africa Marcson Baker Assistant Investment Manager PAGE 9

10 IFU CRITERIA FOR PROJECT ENGAGEMENT Reputable company or project partner with a positive track record Ability of partner(s) to own and assume a reasonable level of project finance risk Strong and experienced management and/or technical partner(s) Project particulars backed/prepared by trustworthy agents (Big 6 external audit, grade A consultants feasibility/business plans etc.) Deal size ranging USD 5 million USD 25 million. IFU ownership stake of 15% 40% Clear exit defined upfront Willingness and ability to comply with international sustainability and corporate governance best practice principles Potential for Danish commercial involvement a positive factor PAGE 10

11 IFU S SME FACILITY Preparation phase Improve business plans/feasibility studies Eliminate/reduce risks/uncertainties Definition of must-win battles Check of important assumptions/ conditions Max. support DKK 750,000 (50 % of cost) Implementation phase Recruitment of professionals and management support Implementation of training plans, know-how transfer Introduction of procedures for monitoring, reporting, board work Implementation of sustainability initiatives Max. support DKK 750,000 (50 % of cost) An SME has: Less than 250 employees and A turnover less than EUR 50m or a balance less than EUR 43m PAGE 11

12 Case study from Tanzania KEY FACTS Project type Country Status IFU participation Total investment Egg production Tanzania In operation DKK 3 m DKK 9.2 m BUSINESS CONCEPT Large-scale egg production in Tanzania. The project has 30,000 hens in modern production facilities Targets low-to-medium income consumer segment having a demand for protein Contribution to SDGs Support the goal to substantially reduce the proportion of youth not in employment, education and training. Youth employment in project at 50 %. Challenges Building a capable operational management team. Legal issues concerning land rights locally in Tanzania. Support the goal to protect labor rights. Support the goal to increase incomes of small-scale food producers, particularly women. Female employment at 40 % in project. IFU s Value Proposition Practical guidance on setting up business Local footprint: IFU s East-African team actively assisted the management team for 3 months during the early execution Grant assistance provided to strengthen the business plan and early execution Political insurance. The Trade Council at the DK embassy in Kenya and IFU assisted with securing land rights in Tanzania PAGE 12

13 Case study from Kenya KEY FACTS Project type Country Status IFU participation Total investment Production facility Kenya In production USD 4m USD 20m BUSINESS CONCEPT Local production of high energy food for malnourished people Value creation locally rather than imported finished product Contribution to SDGs Support the goal to reduce the global maternal mortality to less than 70 per 100,000 live birth Support the goal to end all form of malnutrition, Support the goal to end hunger and ensure access for infants to safe and nutritious food. Challenges Handling complexity of multiple suppliers and production technologies. Recruiting and building skilled operational teams. Sufficient financing to handle greenfield risk and working capital needs IFU s Value Proposition Provide hard currency at competitive rate Assess to other financing partners: Brought in the IFC through a syndicated loan Gave the local partner promoter international political legitimacy vis-à-vis international offtake partners, e.g. UNICEF supply Long-term patient partner: Willingness to look at expansion in multiple countries PAGE 13

14 Case study from Mali KEY FACTS Project type Country Status IFU participation Total investment HFO power plant Mali Under construction DKK 70 m DKK 915 m BUSINESS CONCEPT 81.5 MW HFO power plant in Kayes in South Western Mali. The plant will produce 12% of Mali s electricity capacity and will play a critical role in supporting economic development. Contribution to SDGs Support the goal to facilitate infrastructure through enhanced financial, technological and technical support to African countries. Support the goal to promote public procurement practices in accordance with national priorities and policies.. Challenges Complex financing structure with four equity shareholders and five regional lenders, incl. Islamic lending First IPP in Mali, unchartered territory extensive development period IFU s Value Proposition Ability to bring in co-investors: IFU s role as a DFI provided reassurance to a regional development finance entity which was bought in late on to close a funding gap DFI participation: IFU s participation supported the political goodwill provided by the Malian government Risk capital: IFU s investment allowed the Danish EPC contractor to reduce its own financial risk PAGE 14

15 Questions? Please contact Henrik Henriksen, Regional Director West Africa telephone , Tel: PAGE 15