ADB Operations Promoting Bilateral Mechanisms in Asia and the - - PowerPoint PPT Presentation

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ADB Operations Promoting Bilateral Mechanisms in Asia and the - - PowerPoint PPT Presentation

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ADB Operations Promoting Bilateral Mechanisms in Asia and the Pacific A Workshop on the Joint Crediting Mechanism Jakarta, 21 May 2015 0 The Asian Development Bank ADB was established by agreement of its member countries to foster economic

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ADB Operations

Jakarta, 21 May 2015

Promoting Bilateral Mechanisms in Asia and the Pacific

A Workshop on the Joint Crediting Mechanism

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The Asian Development Bank

ADB was established by agreement of its member countries to foster economic growth and co-

  • peration in the Asia and Pacific region, and to contribute to economic development of its

developing member countries in the region, collectively and individually.

  • Established in 1966
  • Long-term ratings:

− S&P: AAA − Moody’s: Aaa − Fitch Ratings: AAA

  • HQ in the Philippines
  • 24 field offices in Asia
  • 5 representative offices in

Australia, Germany, Japan, the Philippines, and the USA

  • Over 2,800 employees

Quick Facts

ADB HQ ADB Field Offices

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ADB’s LONG TERM STRATEGY

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Since 2008, ADB’s operations have been guided by a comprehensive, long-term strategy

Framing ADB’s Long-Term Strategy: Strategy 2020

Core Objectives  Inclusive Economic Growth  Environmentally Sustainable Growth  Regional Integration

Key Drivers

  • Private Sector Development

and Operations

  • Good Governance and

Capacity Development

  • Gender Equity
  • Knowledge Solutions
  • Partnerships

Core Areas of Operation

  • Infrastructure
  • Environment (including climate change)
  • Regional Cooperation and Integration
  • Financial Sector Development
  • Education

80% of annual

  • perations

targeted by 2020

3

  • Private Sector Development

and Private Sector Operations

  • Good Governance and

Capacity Development

  • Gender Equity
  • Knowledge Solutions
  • Partnerships

50% of annual

  • perations

targeted by 2020

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SLIDE 5

Strategy for Private Sector Development

A multi-pronged approach to private sector development:

Support governments to create enabling environments for business Generate

  • pportunities

in ADB-financed Public Sector projects Catalyze private investments Fight Poverty in Asia

ADB’s Private Sector Thrusts

ADB’s sovereign operations Private Sector Operations Department

  • ADB believes that a vibrant private sector

− is essential to long-term economic growth, − advances employment , productivity and

new technologies,

− through payment of taxes, enables

governments to invest in public goods and services, including basic social services

  • ADB supports private sector development

through complementary assistance to both

− governments, through its sovereign

  • perations departments

− the private sector, through the Private

Sector Operations Department

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The Private Sector Operations Department (PSOD) is ADB’s only department responsible for assistance to private sector projects.

  • formulate and implement ADB strategies for

direct assistance to the private sector

  • provide financial assistance to private

companies and government-owned firms on a non-sovereign basis

  • mobilize funds for private sector activities,

including loan syndications, partial risk guarantees, and partial credit guarantees

  • invest in private equity funds for small and

medium-sized enterprises (SMEs), microfinance, infrastructure, and clean energy and water

  • monitor ADB’s private sector portfolio and

manage risk Our Mandate Capital Markets & Financial Sector

− Banks − Nonbank Financial Institutions − Private Equity Funds

Infrastructure

− Energy (incl. Power) − Transport − Telecommunications − Water − Urban Infrastructure

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PRIVATE SECTOR OPERATIONS

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How We Operate

ADB’s private sector interventions are selected to maximize development impact.

  • are aligned with ADB’s country strategy
  • have wider sectoral / economic impacts
  • have strong poverty reduction elements
  • promote good governance
  • crowd others in (“catalytic”) private sector

investors

  • deepen financial and capital markets
  • bring private sector rigor and management skills

into public sector services

  • are bankable

PSOD selects projects which

  • pioneer innovative, replicable solutions

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Our Value Proposition

Private sector partners benefit from ADB’s unique set of advantages.

  • Local companies
  • Multinationals
  • Banks
  • Investment funds
  • State-owned

enterprises We provide

  • ur clients…
  • Loans
  • Equity investments
  • Guarantees
  • Cofinancing
  • Technical assistance

…a comprehensive product suite

  • An Asian institution – ADB has long relationships with

most DMCs1, and an established presence in key sectors

  • “One-stop shop” – loans, guarantees, equity
  • Closer to clients– ADB’s decision-making is in the region
  • Risk mitigation – through structuring and enhancing

credibility of borrowers/projects

  • Technical expertise – synergy with ADB’s sovereign
  • perations
  • Experience in generally difficult market conditions

…and a distinctive set of advantages

Notes: (1) DMCs = Developing Member Countries

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Overview of Private Sector Operations Department (PSOD)  PSOD undertakes private-sector, commercially-oriented investments across a wide range of industry sectors throughout developing Asia  We have a diverse financing toolkit to catalyze transactions that generate attractive financial returns and high developmental impact, including:

  • Debt
  • Equity
  • Guarantees

 We invest across a variety of different modalities, including:

  • Project Finance
  • Corporate Finance
  • Private Equity Funds
  • Funding Programs (e.g., Trade Finance, Microfinance, Supply Chain Finance, etc.)

 Our team includes approximately 160 professionals across 7 locations:

  • Manila (HQ)
  • Jakarta
  • Bangkok
  • Hanoi
  • Concessional Capital
  • Technical Assistance
  • New Delhi
  • Beijing
  • Almaty

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SLIDE 10

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STRICTLY CONFIDENTIAL

ADB’s PSOD has a lengthy history of investing in its core sectors across emerging Asia

China Pakistan India Sri Lanka Mongolia

n

Khan Bank

n

XacBank and TenGer

Thailand Azerbaijan Indonesia

n

Adjaristsqali Hydropower

n

TBC Bank Georgia

n

ACME-EDF Solar Power

n

Axis and Yes Bank

n

Dahej LNG Expansion Phase III

n

Delhi Electricity Distribution

n

Dewan Housing Finance Corp.

n

Horticulture Cold Chain

n

India Agribusiness Fund II

n

NSL Renewable Power

n

Ocean Sparkle Ltd.

n

ReNew Power

n

Hippocampus Rural Education

n

Off-grid Pay-As-You-Go Solar

n

Solar and Wind Power

n

East Jakarta Water Supply

n

Indonesia Investment Finance Corporation

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Rantau Dedap Geothermal Power

n

Sarulla Geothermal Power Generation

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Hatton National Bank

n

Nations Trust Bank Plc

n Access Bank Azerbaijan n DemirBank n Garadagh Cement Energy n

Clean Bus Leasing in the PRC

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Greenhouse Agricultural Development

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Natural Gas for Land and River Transportation

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Rural Smart Wastewater Treatment

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Urban and Rural Integration Water Distribution

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Wastewater Treatment & Reuse Financial Markets

n Banking n Private Equity

Infrastructure

n Renewables/Efficiency n Other Energy n Transport/Water/ICT n Other Sectors

Bangladesh

n

Bibiyana II Gas Power

n

PRAN Agribusiness

Tajikistan

n

Mactan-Cebu International Airport Terminal

n

Philippine Investment Alliance for Infrastructure Fund

Philippines Myanmar

n

Connectivity Infrastructure Development

n

Yangon Urban Renewal and District Cooling

Laos Regional

n

Asia Environmental Partners Fund II

n

Olympus Capital Asia Fund

n

OrbiMed Asia Partners II, L.P.

n

Spice Value Chain

Selected PSOD transactions approved between 2012 and 2014

Armenia

n

Sevan–Hrazdan Cascade Hydropower

Cambodia Kazakhstan

n

Akmola Electricity Distribution

n

RG Brands Agribusiness

Georgia

n

New Bong Escape Hydropower

n

Patrind Hydropower

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Rural Financial Inclusion and Dairy Growth Facility

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Zorlu Wind Power

n

Access Bank

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Nam Ngiep Hydropower

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Akay Flavours & Aromatics

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Loan to ACLEDA Bank Plc

n Central Thailand Solar Power n NED Solar Power n Provincial Solar Power n Subyai Wind Power

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PSOD Sector Focus

Environmental protection

Developing sources of renewable energy and encouraging energy efficiency

Sustainable agribusiness

Promoting environmentally friendly food production, processing, and distribution

Health

Supporting private providers

  • f high-quality and affordable

health care

Infrastructure

Catalyzing economic growth and social equity via energy, waste, water, transport, and telecommunications facilities

Finance & capital markets

Providing better access to higher-quality financial services across Asia’s developing markets

Education

Building human capital through the expansion of basic and higher education services 10

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PSOD provides a range of financing solutions to meet its clients’ needs

  • Direct loans: market-based pricing in major international and/or local currencies
  • B-loans: ADB acts as Lender of Record and administers the loan, but it is funded by 3rd-party

financing

  • Unfunded risk participations: fronting arrangement with IFIs and/or commercial banks / insurers
  • Direct investments in enterprises and financial institutions through common shares,

preferred stock, and/or convertibles

  • Investments in private equity funds as a general partner (GP) or limited partner (LP)
  • Political Risk Guarantee (PRG): protection against political risks, including foreign exchange

restrictions, expropriation, political violence and contract dispute

  • Partial Credit Guarantee (PCG): protection against credit risks, including non-payment by the

borrower of the principal and interest due

  • Attractively priced and structured capital via 3rd-party concessional sources for targeted

industries / geographies Debt Equity Guarantees Concessional Capital 11

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Technical Assistance

  • Technical assistance funding for project preparation, capacity development, R&D, etc.
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$2,683.3 37.1% $2,298.0 31.7% $2,076.5 28.7% $183.6 2.5%

Infrastructure Finance Environment-Related Agribusiness

PSOD’s Sector Focus

Note: (1) Includes loans, equity investments and guarantees. As at 31 December 2014

 Infrastructure

  • Conventional Energy
  • Transportation
  • Water Supply / Treatment
  • Telecommunications

 Finance

  • Banks, Insurance Companies
  • Trade Finance, Supply Chain Finance
  • Private Equity

 Environment-Related

  • Clean Energy
  • Energy Efficiency
  • Clean Technology

 Agribusiness Key Industry Sectors PSOD’s Current Portfolio(1), by Industry Sector $ million

$7.2 billion

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STRICTLY CONFIDENTIAL

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PSOD’s Portfolio, by Geography

PSOD’s Portfolio(1), by Geography

Note: (1) Outstanding balances and undisbursed/unissued commitment for loans, equity investments and guarantees. As at 31 December 2014

$ million

$1,325.1 20.0% $1,020.4 15.4% $1,219.0 18.4% $1,432.4 21.6% $1,625.4 24.5% Southeast Asia South Asia Central and West Asia East Asia Regional

$7.2 billion

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STRICTLY CONFIDENTIAL

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$897.0 47% $462.0 24% $370.0 19% $103.0 5% $86.5 5%

South Asia Southeast Asia East Asia Central and West Asia Regional

$768.0 40% $530.0 28% $522.0 27% $98.5 5% Finance Infrastructure Climate-related Agribusiness and Education

PSOD 2014 Operations at a Glance

14 PSOD Approvals(1), by Industry Sector PSOD Approvals(1), by Geography

$1.9 billion $1.9 billion

Note: (1) Approvals refer to Board Approval of ADB’s Ordinary Capital Resources

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STRICTLY CONFIDENTIAL $ million $ million

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32.9M

tons CO2/year reduction in greenhouse gas emissions

Sustainable Growth

7.2M

microfinance accounts opened / borrowers reached

Financial Inclusion

4.9M

households connected to electricity

Access to Energy

2.1M

teachers trained with quality

  • f competency standards

Social Impact

ADB consistently delivers projects with high development outputs

A Decade of Development Impact Results (2004–2013) Each of ADB’s projects across its sovereign and private sector portfolio is measured on its ability to address key development challenges that constrain sustainable growth in Asia A snapshot of PSOD results (2013)(1)

70K+

households connected to new or improved piped water supply

$4.0B+

in trade supported via trade finance

4.7GW

  • f installed

energy capacity

2,520

direct local jobs created (not including indirect jobs)

Note: (1) These results reflect the impacts that were recorded in project completion reports that were submitted in 2013 and not the totality of PSOD operations in that same year.

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PSOD Organizational Structure

Develops, structures, and executes infrastructure financings in:

  • Central & West Asia
  • South Asia

Infrastructure Finance Division 1 Develops, structures, and executes infrastructure financings in:

  • East Asia
  • Southeast Asia
  • The Pacific

Infrastructure Finance Division 2 Develops, structures, and executes financial intermediary financings for:

  • Banks
  • Non-bank financial

institutions

  • Insurance
  • Trade & Supply Chain

Finance

  • Microfinance

Financial Institutions Division Develops, structures, and executes:

  • Private equity fund

investments

  • Co-investments
  • Other special

investment initiatives Investment Funds & Special Initiatives Division Industry / Sector Teams Develops, structures, and executes agribusiness- related financings Agribusiness Investment Team Cross- Department Teams Transactions Support Division Provides transaction support to new and existing transactions, including Cofinancing, Development Effectiveness, Environmental / Social Safeguards, and Integrity standards Portfolio Management Division Manages deals & connected relationships once transactions are funded; reports on and manages PSOD’s overall portfolio and capital position 16

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Safeguard Requirements

ADB adds value to private sector transactions by applying rigorous standards to mitigate adverse environmental and social impacts.

  • Ensure the environmental soundness and

sustainability of projects

  • Support the integration of environmental

considerations into project decision-making Environmental Impact

  • Avoid involuntary resettlement wherever possible
  • Minimize involuntary resettlement by exploring

project & design alternatives

  • Enhance, or at least restore, the livelihoods of all

displaced persons in real terms relative to pre- project levels Involuntary Resettlement

  • Ensure that the design and implementation of

projects foster full respect for Indigenous Peoples’ identity, dignity, human rights, livelihood systems, and cultural uniqueness Indigenous People

  • Integrated 3-in-1 approach

(Environment, Involuntary Resettlement, Indigenous Peoples)

  • Consistent with WB and IFC approaches
  • Requirements tailored appropriately to

different financing modalities

  • Strengthened monitoring and

supervision

  • Country Safeguard Systems (CSS)
  • Emphasis on capacity development in

developing member countries

Key Policy Features

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ADB Value Addition

Investment Limits

STRICTLY CONFIDENTIAL

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Debt instruments to support both project finance and corporate finance*

  • For project finance, ADB direct loan cannot not exceed the lower of 25% of project costs and $250 million.
  • For corporate finance, ADB’s direct loan cannot not exceed the lower of 25% of total assets and $250 million.
  • For smaller projects, with project costs/ total assets below $250 million, ADB’s exposure can be higher (i.e. up

to 50% of project cost/ total assets for projects with costs/assets of less than $50 million) Debt instruments to support funding gaps for financial institutions

  • ADB’s direct loan cannot not exceed the lower of 50% of tangible net worth and $250 million.

Equity instruments to support projects or growth stage companies with proven business model

  • ADB direct investment cannot exceed the lower of 25% the net worth of the investee (including ADB’s

investment) and $75 million.

*Total exposure limits are increased when debt instruments are combined with guarantee products.

Long term, competitive finance to support infrastructure and financial institutions

  • Tailored financial solutions to meet client needs (e.g. repayment

schedule, local currency facilities, concessional finance, grant assistance for capacity development)

  • Support to achieve the highest environmental, social and

governance standards

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Case Studies

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STRICTLY CONFIDENTIAL

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Sarulla 320MW Geothermal Power(1)

Case Studies: Infrastructure

Rantau Dedap 240MW Geothermal Power (Phase 1)

$: US dollars; JBIC: Japan Bank for International Cooperation (1) Project Name: Sarulla Geothermal Power Development Project (2) Mezzanine Finance (3) Canadian Climate Fund for Private Sector in Asia

Description:

  • Geothermal Independent Power Producer (IPP) with
  • approx. 320 MW of installed capacity in N. Sumatra and 30-

year power offtake with state-owned utility PLN.

  • Sponsors: Itochu Corporation, Kyushu Electric Power

Company, Ormat International, Medco Power Indonesia. Total project cost of $1.6 billion; Total ADB assistance:

  • $250 million ADB direct loan; $80 million loan via ADB-

managed Clean Technology Fund(2); $20 million loan via ADB-managed Canadian Climate Fund.(2)(3)

  • 20 year tenor with 4 year grace period.

Key features:

  • Accelerating development of the Indonesia geothermal

sector via the financing, implementation, and commissioning of the first geothermal IPP in Indonesia in

  • ver 10 years.
  • Avoiding the emission of 1.3 million tons of greenhouse

gases (CO2 equivalent) per annum. Description:

  • Given the high barriers to entry and capped returns facing

geothermal projects, the relative absence of risk sharing solutions during the resource discovery phase has limited geothermal power expansion across the globe.

  • Approx. 240 MW geothermal IPP development in S.

Sumatra requiring early stage financing to support drilling exploration program.

  • Sponsors: Supreme Energy, GDF Suez and Marubeni

Corporation. Total ADB assistance:

  • $50 million loan via ADB-managed Clean Technology Fund.
  • Maximum 4 year loan with bullet repayment.

Key features:

  • Bridging financing gap – It is the first significant non-

recourse loan in which risks are shared with the private sector during the resource discovery phase of a geothermal project, setting new milestone for the Indonesian geothermal sector and the regional power market.

  • Catalyzes more private investment in geothermal energy by

demonstrating resource viability in Indonesia.

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STRICTLY CONFIDENTIAL

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Case Studies: ADB private sector investments pre-2010

Tangguh LNG (2007) PALYJA – West Jakarta Water Supply (2007) 21

Description:

  • BP Berau Ltd is the operator of Tangguh LNG, a major

greenfield development to extract and liquefy natural gas from gas fields in the Berau and Bintuni bay areas of Irian for shipping to export markets.

  • The project includes an offshore gas production facility,
  • nshore liquified natural gas (LNG) facility, and gas

transmission pipelines. The 2-train LNG facility produces 7.6 million tons per annum (Mtpa).

  • Sponsor: British Petroleum (BP).

ADB’s assistance:

  • $350 million direct loan with a 12 year tenor, including

grace period. Key features:

  • Generate financial benefits to central and local

governments.

  • Supply and promote usage of natural gas to countries

looking to reduce reliance on oil and diesel.

  • Largest private sector financing in Indonesia in 2007,

demonstrating resumption of private sector confidence in Indonesia and its reform initiatives in the energy sector. Description:

  • PT Pam Lyonnaise Jaya (PALYJA) is the the West Jakarta

water concessionaire owned by Suez Environnement and Astratel.

  • The water operator supplies water for 400,000 end users in

West Jakarta under a 25-year concession agreement with PAM Jaya, the municipal water utility owned by DKI. ADB’s assistance:

  • 455 million rupiah local currency loan (funded through

cross currency swap, 2 years grace and 5 year repayment) to support the third 5-year capital expenditure program. Key features:

  • ADB remains actively involved in the Jakarta water sector,

providing technical assistance for regulatory framework reform and last-mile connections to low income household. 21

STRICTLY CONFIDENTIAL

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PT Indonesia Infrastructure Facility (IIF)

Case Studies: Financial Sector

Bank Mandiri

Description:

  • ADB, in collaboration with other international financial

institutions and the Government of Indonesia (GOI), established IIF in 2010 as a private, non-bank financial institution set up to mobilize long-term financing for creditworthy infrastructure projects in Indonesia.

  • Shareholders: ADB, GOI through PT Sarana Multi

Infrastruktur (Persero) (SMI), DEG, IFC, SMBC. Total ADB assistance:

  • Equity Investment: Up to $40 million (in IDR equivalent) for

a stake of up to 19.9%.

  • Loan: A $100 million loan from ADB’s public sector to GOI

for on-lending to SMI, a wholly government-owned entity. Key features:

  • IIF’s product and services offerings include: (i) fund-based

products including senior loans, refinancing, mezzanine financing, subordinated finance, and share investments; (ii) non-fund based products such as guarantees and stand-by finance; and (iii) fee-based services such as syndication and advisory. Description:

  • ADB extended a loan facility to Bank Mandiri to: (i) support

strengthening its financial position following the onset of the global financial crisis; (ii) assist in addressing its asset- liability mismatch; (iii) help meet long-term capital expenditure funding needs; (iv) support the GOI’s strategy

  • f encouraging private sector participation in infrastructure

development; and (v) catalyze commercial lenders and demonstrate the viability of long-term offshore funding. Total ADB assistance:

  • Senior secured ADB-led syndicated loan to Bank Mandiri

consisting of two facilities: (i) a $75 million direct loan from ADB with a maturity of 7 years, and (ii) up to $225 million financed by participating commercial banks under mutually agreed upon terms under ADB’s B-loan facility, with ADB as the lender of record. Key features:

  • ADB support to vulnerable financial markets in the

aftermath of the global financial crisis in 2008 was successfully demonstrated through the project by helping Bank Mandiri raise urgently needed long-term funding when global liquidity conditions had become fragile. In addition, the B loan was successful in helping Bank Mandiri augment its long-term foreign currency lending capabilities and foreign currency asset-liability matching.

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STRICTLY CONFIDENTIAL

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Case Studies: Agribusiness

PAK: Rural Financial Inclusion & Dairy Growth IND & CAM: Spice Value Chain Project 23

Description:

  • Investment pool for over 400 farmers: (i) dairy company

selects reliable farmers among its milk suppliers, (ii) dairy company accredits animal suppliers to ensure good quality, and (iii) local bank performs credit analysis and issues loans. ADB’s assistance:

  • Donor guarantees 20% first loss: Mitigates climatic, farm

management, side selling and repayment behavior risks.

  • Dairy company guarantees 10% second loss: Mitigates

adverse selection risk and supports its timely monitoring and debt service (on behalf of the farmer).

  • ADB and Local Bank cover 70% third loss; ADB guarantees

50% of third loss; Local bank provides full local currency funding and retains 50% of third loss. Key features:

  • Structure provides affordable pricing to farmers (about 15-

20% below MFI rates).

  • Participants will learn from the pilot and can adjust

structure and pricing based on experience. Description:

  • Agricultural development is a key to eradicating poverty

and creating conditions for sustainable/equitable growth

  • Akay Flavours & Aromatics (Akay) invests across spice value

chain, from climate-resilient and inclusive farming models to processing of high-value spice products

  • Akay links smallholder farmers to global markets through

its contract farming model in India and Cambodia. ADB’s assistance:

  • $16.5 million direct financing (equity and debt)
  • $5 million mobilized from the Pilot Program for Climate

Resilience (PPCR) under the Climate Investment Funds

  • Technical assistance from Dalberg and Credit Suisse

mobilized under ADB’s inclusive business program Key features:

  • The project will benefit at least 5,000 low-income contract

farmers

  • ADB’s first private sector climate adaptation project
  • Socioeconomic survey on contract farmers

under RSDD’s inclusive business technical assistance. 23

STRICTLY CONFIDENTIAL

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SLIDE 25

Thank you – Terima Kasih

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Lazeena Rahman Investment Specialist Asian Development Bank Tel (021) 2512721 Lrahman@adb.org Noraya Soewarno Senior Investment Officer Asian Development Bank Tel (021) 2512721 nsoewarno@adb.org