international finance corporation helping russian chemical and petrochemical companies succeed

INTERNATIONAL FINANCE CORPORATIONINTERNATIONAL FINANCE CORPORATION

Helping Russian Chemical Helping Russian Chemical and Petrochemical Companies Succeedand Petrochemical Companies Succeed

Prepared for the Conference Prepared for the Conference ““BusinessBusiness Strategy of Russian Chemical and Petrochemical Companies” Strategy of Russian Chemical and Petrochemical Companies”

Moscow, September 2002Moscow, September 2002http://www.ifc.org/ogchttp://www.ifc.org/ogc

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WorkingwithIFC

WorkingwithIFC

InternationalFinance

Corporation


Corporation

Chemical Sector Activities


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• Promotes economic development by encouraging foreign and domestic private investment in emerging markets

• Supports private sector ventures that are financially viable, benefit the host country economy, promote high environmental standards, and provide strong demonstration effect

• Provides long-term financing, capital mobilization and advisory services

• Three guiding principles for supporting an investment: - Catalytic: minority role, investment limit, mobilization of

capital - Business partnership: same risks as other investors, no

government guarantees, satisfactory returns as well as benefitto host country

- Additionality: private sector not displaced

IFC is the private sector arm of the World Bank Group

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IFC is the largest source of loan and equity financing for the private sector in emerging economies

• 174 member countries

• AAA rated member of World Bank

• FY02 commitments: US$3.6 bn in 204 projects, including US$518 million in syndicated “B” loans

(June 2002)

US$14.3 bn portfolio (own account)

Since 1956, approximately US$55 bn invested in 2,840 companies in 140 developing countries

Europe18%

Sub-Saharan Africa

8%

South & South-East Asia

27%

Central Asia, Middle East &

North Africa11%

Latin America36%

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Advisory Services•Country, industry, financial and technical

Advisory Services•Country, industry, financial and technical

IFC’s Products

Industry knowledge & contacts

Sensitivity toGovernment priorities

Commercial andtechnical skills inemerging markets

Capital Mobilization•B loan syndications - exempt from withholding tax & provisioning requirements

•Export Credit Agency co-financing

•Partial Credit Guarantees

Capital Mobilization•B loan syndications - exempt from withholding tax & provisioning requirements

•Export Credit Agency co-financing

•Partial Credit Guarantees

Long Term Financing•Corporate / Project Loans

•Equity / Quasi-equity

•Innovative Instruments

Long Term Financing•Corporate / Project Loans

•Equity / Quasi-equity

•Innovative Instruments

IFC combines the resources of a development bank with the flexibility of a merchant bank,

reassuring investors and Governments

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Credit Enhancement

Flexible Loans

Capital Mobilization

Equity Participation

•Fixed/floating rates, US$, Euro and some local currencies available

•Commercial rates, repayment tailored to project needs

•Long maturities: 7-12 years, appropriate grace periods

•Range of security packages suited to project/country

•B Loan Program – International bank syndications

•Co-financing with Export Credit Agencies and other multilaterals

•“Neutral broker” between foreign and local owners

•Technical /commercial knowledge as partner

•Long-term partnership without controlling interest

•Partial guarantee on local / foreign currency bonds or bank loans

•Credit enhancement mechanisms for asset securitization

Market approach coupled with political risk mitigation adds value to sponsors

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WorkingwithIFC

WorkingwithIFC


Corporation


Corporation



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IFC supports upstream & downstream projects in developing countries

Oil, Gas and Chemicals Investment Commitments

0

50

100

150

200

250

300

350

1998 1999 2000 2001 2002E 2003F 2004F

US$

Mill

ion

Upstream:• Onshore/Offshore• Appraisal & development

(no pure exploration)• LPG / LNG • Oil field services • Oil and gas pipelines

Downstream:• Oil refining• Petrochemicals• Fertilizers• Other chemicals• Biotechnology• Infrastructure (terminals, etc.)

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FY 01 Oil, Gas and Chemicals Portfolio : US$ 2.6 billion

By Region

Africa14%

Latin America

34%

Asia42%

MENA2%

Europe & C.Asia

8%

US$ 1.2 billion for IFC’s account / US$ 1.4 billion held by participants

By Sector

Oil & Gas43%

Refineries6%

Petrochemicals42%

Fertilizer3%

Chemicals6%

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Chemicals Sector Experience to Date

Petrochemicals

• Refineries

• Naphtha crackers

• PP/PE

• VCM/PVC

• PTA/PET

• Ethylene derivatives

• Methanol

Inorganics

• Hydrogen peroxide

• Chlor-alkali

• Carbon black

• Other inorganics

Infrastructure

• Storage facilities

• Marine terminals

• LPG distribution

Fertilizers

• Ammonia/urea

• Phosphoric acid

• DAP

• Soda ash

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Chemicals Sector Experience in Eastern Europe

Investments

• Cabot C.S. – Carbon Black, Czech Republic

• Dunastyr – Styrene, Hungary

• Gaspol – LPG Distribution, Poland

Strategic Overview

• Oltchim - Romania

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Retrofit/Modernization: Refineries, Chemicals, Petrochemicals, Fertilizers

The need to retrofit/modernize existing operations can result from the The need to retrofit/modernize existing operations can result from the

following factors:following factors: • Limited local availability of hydrocarbon feedstocks

• Pressure on prices as tariff protection/price supports are reduced

• Plants based on outdated technologies at a competitive disadvantage compared to modern facilities

• Non-compliance with current or proposed standards of environment, waste treatment, and handling of hazardous materials

• Rising energy costs

• Inefficient material handling systems which cause loss of material, environmental problems and health hazards.

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IFC designs financing plans of greenfield projects to meet sponsor needs

Pakistan - Engro AsahiPakistan - Engro Asahi• Construction of a greenfield 100,000 tpy PVC manufacturing plant at a

cost of US$83 million• JV between Engro Chemical Pakistan, Asahi Glass Co. and Mitsubishi

Corporation • IFC committed US$14.25 mm A Loan

Thailand - VinythaiThailand - Vinythai• Fully integrated PVC plant with a capacity of 195,000 tpa at a total cost

of US$416 million• IFC assisted the company through the Thai crisis by providing

restructuring advice and facilitating a capital increase• Total IFC financing was US$115 million (A Loan US$28 million, B

Loan US$70 million and C Loan US$17 million)

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IFC funds not only greenfield but also expansion and modernization projects

India – Continentals Carbon India LimitedIndia – Continentals Carbon India Limited• Modernization/expansion of carbon black plant at total cost of US$34 mm• The project will retrofit and clean up an existing carbon black plant and

bring production to globally accepted environmental, technical and quality standards

• IFC investment of US$20.5mm (A Loan US$9mm, B Loan US$11.5mm)

Philippines – Philipinas Shell Petroleum CorporationPhilippines – Philipinas Shell Petroleum Corporation• Replacement of old refinery with modern 110,000 bpd refinery with

thermal cracking unit at total cost of US$667 mm

• IFC investment of A Loan US$35 mm and B Loan US$85 mm)

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IFC facilitates financing in difficult environments

China - Chengdu ChemicalChina - Chengdu Chemical• Modernization and expansion of a 30,000 tpa potassium hydroxide

facility at a cost of US$30 million• IFC enabled a 100% local company to access international financial

markets• IFC provided loans and equity of US$19 millionChina – DarongChina – Darong• Expansion of calcium cyanamide production from 50,000 tpa to

150,000 tpa at a total cost of US$30 mm• Environmental upgrade of existing calcium carbide furnaces to reduce

air emissions and recover waste heat • IFC investment of US$18 mm (A Loan US$10 mm, B Loan US$8mm)

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IFC supports chemical infrastructure and distribution

China – Zhong Chen LPG FacilityChina – Zhong Chen LPG Facility

• Construction of 50,000 ton liquefied petroleum gas (LPG) storage and harbor facility at a total cost of US$99 mm

• IFC finalizing investment of US$57 mm (A Loan US$25 mm, B Loan US$32 mm)

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IFC provides financial and technical advisory services

Bangladesh – KAFCO Fertilizer ComplexBangladesh – KAFCO Fertilizer Complex

• Helped negotiate offtake and feedstock supply agreements needed to ensure financial viability of the company

• Developed capex program needed to mitigate technical issues

• Helped the company secure US$250 mm of ECA restructured debt and US$30 mm of equity infusion

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WorkingwithIFC

WorkingwithIFC

International Finance

Corporation

International Finance

Corporation



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Companies or entrepreneurs setting up facilities in emerging markets can approach IFC

• Foreign or domestic sponsors can request IFC financing – New venture or expansion; private sector majority ownership required

– Project must be developmentally sound as well as commercially viable

• Sponsor commitment is required– Equity participation; pre-completion support/guarantees

• Submit preliminary business plan or feasibility study– Brief project description, including technical feasibility / market study

– Information on sponsors and operator

– Environmental studies

– Information on investment requirements, financing plan and cash flow projections

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Beyond its own investment limits, IFC can help mobilize financing from commercial banks, export

credit agencies and bilaterals/ multilaterals

Project typeProject type

Greenfield, total costless than $50 mn

Greenfield, total costmore than $50 mn

Expansion orrehabilitation

IFC's investment for its own accountIFC's investment for its own account

Up to 35% 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.

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IFC team works closely with theclient/sponsor to finalize the investment

Internal to IFC

Supervision

As Seen By Client

Management Approval

Board Approval

Initial Discussions

Mandate LetterAppraisal

Financing Negotiations

Information Memo and SyndicationLegal Documentation

Disbursement

Initial Review & Authorization to Appraise

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How can we help?Please contact us for further information:

Alzbeta KleinAlzbeta Klein

Senior Investment Officer, IFC MoscowSenior Investment Officer, IFC Moscow

tel: 7-095-755-8818tel: 7-095-755-8818

E-Mail: [email protected]: [email protected]

Address: 7/5 Bolshaya Dmitrovka StrAddress: 7/5 Bolshaya Dmitrovka Str

Moscow, 103009 RussiaMoscow, 103009 Russia

Telefax: 7-095-755-8296Telefax: 7-095-755-8296www.ifc.org/ogcwww.ifc.org/ogc

international finance corporation helping russian chemical and petrochemical companies succeed

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