IFU’s financing of UN’s SDGs and the new SDG fund

Bjerringbro - 29 August 2018

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IFU IN BRIEF

27-08-2018

Independent government-owned fund, operating on commercial terms

1967

investment countries

invested in share capital and loans

Provides risk capital and advicefor projects having a Danish interest 143

Total contracted investments of more than

20 bn DKK bn DKKEstablished in

Promotes economic and social progress in developing countries

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IFU’S INVESTMENT MODEL

Project company

Local investor

Share capital

Examples of Danish interest

• Danish investor

• Danish company supplying goods, technology, know-how, management or services

• Danish company sourcing products from the project company

• Use of state-of-the-art Danish technology in the project

Local bank

Loan

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Danish interestIFU

Share capital/loan

Sector-specific direct outcomes

Indirect contributions

General direct outcomes

Input and output

IFU CONTRIBUTES TO

THE 17 SUSTAINABLE

DEVELOPMENT GOALS

Jobs, taxes, female employment, youth employment, etc.

Limited CO2 emissions, number of assisted small farmers, etc.

Technology level, staff training, ESG assessment, etc.

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SDG EQUITY FUND

DANISH

EQUITY FUND

Total fund size - first close

DKK 4.1 billion

40% 60%

Private investors

Portfolioinvestments

Danish State

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SDG EQUITY FUND

30% - 40% renewable energy

20% - 30% agribusiness

20% - 30% infrastructure, water and sanitation

10% - 20% industry and service

0% - 10% financial sector

Regional focus Sector focus

30% - 40% Africa

30% - 40% Asia

10% - 20% Europe and MENA

10% - 20% LatinAmerica

IFU’S AFRICA ACTIVITIES

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> 7 5-73-421

• 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:

Number of active investments

Heavy Industries:Manufacturing:HospitalityAgribusiness:Infrastructure:Renewables:

Cement, Fertilizer plantsBreweries, industrial goodsHotelsCommercial farms, processingPort infrastructure, power plantsWind, solar

Countries

Size CountryNumber of projectAmount invest (DKKm)

7Kenya10286.90

12Ghana6150.40

30Benin1117.60

1Nigeria389.90

5South Africa689.30

39Liberia180.50

23Senegal167.40

17Cameroon232.90

6Tanzania632.20

13Mozambique226.80

16Angola123.00

2Ethiopia217.60

22Zambia214.40

9Uganda25.50

46Gambia15.00

24Zimbabwe11.20

14Cote D'Lvoire11.10

8Algeria00.00

43Botswana00.00

19Burkina Faso00.00

32Burundi00.00

54Cape Verde00.00

36Central African Republic00.00

25Chad00.00

52Comoros00.00

4Democratic Republic of the Congo00.00

50Djibouti00.00

3Egypt00.00

45Equatorial Guinea00.00

37Eritrea00.00

41Gabon00.00

26Guinea00.00

47Guinea-Bissau00.00

44Lesotho00.00

34Libya00.00

15Madagascar00.00

21Malawi00.00

20Mali00.00

40Mauritania00.00

48Mauritius00.00

55Mayotte (France)00.00

11Morocco00.00

42Namibia00.00

18Niger00.00

38Republic of the Congo00.00

51Reunion (France)00.00

28Rwanda00.00

58Saint Helena, Ascension and Tristan da Cunha (UK)00.00

56Sao Tome and Principe00.00

57Seychelles00.00

35Sierra Leone00.00

31Somalia00.00

29South Sudan00.00

10Sudan00.00

49Swaziland00.00

33Togo00.00

27Tunisia00.00

53Western Sahara00.00

Total activeTotal amount invested

481041.70

Design

200 <DKKm <> 7

100-200 DKKm 5-7

50-100DKKm 3-4

10-50DKKm 2

10 >DKKm 1

0DKKm 0

Misc

SEVEN GOOD REASONS TO INVEST IN AFRICA

The world's largest workforcein 2040 (1.1 bn.)

Population growth 1 bn. 2 bn. in 2030

A growing middle class300m 500m in 2030

High economic growth4 – 5 % on average

(2015 – 2020)Access to raw materials, semi-finished products

Increasing urbanization50 % live in cities by 2035

First mover advantagesLow competition

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SUB-SAHARAN AFRICA TEAM

27-08-2018

Henrik FrøsigRegional Director,

East Africa

Samuel Githinji WathonduInvestment

Director

Nairobi:

Copenhagen:

Nana YawKwakye

InvestmentDirector

Accra:

Henrik HenriksenRegional Director,

West Africa

Johnny Ohgrøn Hansen

Regional Director,Southern Africa

Pretoria:NAIROBI

ACCRA

PRETORIA

LAGOS

Lagos:

Seye BassirInvestment

Director

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Catherine I. CaxVice President,

Sub-Saharan Africa

Marcson Baker

Assistant Investment Manager

Njeri Mungai Ngaruiya

InvestmentDirector

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

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IFU’S SME FACILITY

Preparation phase Implementation phase

An SME has:• Less than 250 employees and• A turnover less than EUR 50m or a balance less than EUR 43m

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• 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)

• 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)

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Case study from TanzaniaKEY FACTSProject type Egg production Country TanzaniaStatus In operation IFU participation DKK 3 mTotal investment 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

Challenges• Building a capable operational management team.• Legal issues concerning land rights locally in Tanzania.

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

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 %.

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.

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Case study from KenyaKEY FACTSProject type Production facilityCountry KenyaStatus In productionIFU participation USD 4mTotal investment USD 20m

BUSINESS CONCEPT• Local production of high energy food for malnourished

people

• Value creation locally rather than imported finished product

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 off-take partners, e.g. UNICEF supply

• Long-term patient partner: Willingness to look at expansion in multiple countries

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.

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Case study from MaliKEY FACTSProject type HFO power plant Country Mali Status Under constructionIFU participation DKK 70 mTotal investment 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.

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

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.

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Questions?

Please contact

Henrik Henriksen, Regional Director West Africa

HHE@IFU.DK, telephone +45 3363 7579, +45 2173 3693

www.ifu.dk

Tel: +45 33 63 75 00

mailto:HHE@IFU.DKhttp://www.ifu.dk/

Slide Number 1IFU IN BRIEFIFU’S INVESTMENT MODELIFU CONTRIBUTES TO THE 17 SUSTAINABLE DEVELOPMENT GOALSSlide Number 5Slide Number 6IFU’S AFRICA ACTIVITIESSEVEN GOOD REASONS TO INVEST IN AFRICASUB-SAHARAN AFRICA TEAM IFU CRITERIA FOR PROJECT ENGAGEMENTIFU’S SME FACILITYSlide Number 12Slide Number 13Slide Number 14Slide Number 15