FMO (“NEDFIN”) INVESTOR PRESENTATION FMO - THE DUTCH DEVELOPMENT BANK March 2018 www.fmo.nl Women-owned business, Cambodia
CONTENTS I. About FMO 3 II. Strong Backing by the State 5 III. Investment Approach 9 IV. Financials & Risk Management 15 V. Liquidity Management & Funding 22 VI. Contact 27 VII. Appendix 29 Cookhouse wind farm, South Africa 2
I. ABOUT FMO 3
FMO AT A GLANCE The international development bank of the Netherlands - incorporated in 1970 ▪ Promoting sustainable private sector growth in developing markets focusing on ▪ green and inclusive development Strong backing by the State of the Netherlands ▪ AAA (Fitch), AAA (Standard & Poor’s) credit ratings and industry leading ▪ sustainability ratings Licensed bank supervised by the Dutch Central Bank ▪ FMO is an eligible issuer under the Public-Sector Purchase Programme of the ECB ▪ WE EMPOWER ENTREPRENEURS TO BUILD A BETTER WORLD 4 4
II. STRONG BACKING BY THE STATE 5
DUTCH STATE IS MAIN PROVIDER OF CAPITAL • Public Private Partnership • The State owns 51% of the shares (A shares). Private sector entities own 49% of the shares (B shares) • Voting rights for A shares and B shares are equal. A shares may only be issued to the State • The State has an economic interest of more than 90% of shareholders’ equity Shareholders’ equity (in EUR mln, per Jun 30, 2017) Shareholders (per Jun 30, 2017) 7% 633 51% 1,478 42% 658 Contractual Reserve Dutch State Development Fund Dutch banks: ABN AMRO, ING, Rabobank Share Capital, Share premium reserve and Other Components* Trade Unions, Employer's Federations, Companies, Individuals * Other components comprise of available for sale reserve, translation reserve, other reserves and undistributed profit, and minority interest. Differences may arise due to rounding 6
EXPLICIT DUTCH STATE SUPPORT Explicit support agreement* ▪ Documented in the bilateral “Agreement State – ▪ FMO of 16 November 1998 ”** Art. 7: Maintenance Obligation: ‒ The Dutch State is committed to covering all losses from operations that cannot be covered by general or specific provisioning and reserves Art. 8: Financial Security Obligation: ‒ The Dutch State shall prevent situations arising in which FMO is unable to meet its commitments on time Valid for an indefinite period and may be ▪ cancelled subject to a twelve-year notice period *) http://www.rijksoverheid.nl/documenten-en-publicaties/notas/2013/10/18/nota-deelnemingenbeleid-rijksoverheid-2013.html **) This is a synopsis of the actual text. The State Agreement should be fully read for a complete understanding. A full copy of State Agreement available at www.fmo.nl 7
FMO MANAGES EUR 1,239 MLN IN GOVERNMENT FUNDS *) Off balance sheet funds for risk of the Dutch Government to finance high risk projects ▪ MASSIF: EUR 594 mln ▪ Resources for financial institutions to aid the development of Micro, Small and Medium-sized Enterprises ▪ (MSMEs) Infrastructure Development Fund: EUR 525 mln ▪ Long-term financing for infrastructure projects ▪ Access to Energy Fund : EUR 93 mln ▪ Private sector projects that create sustainable access to energy services ▪ * Committed per Dec. 31 st 2016; includes FOM-OS of EUR 27 mln 8
III. INVESTMENT APPROACH 9
FOCUS ON 3 SECTORS WITH HIGHEST LONG-TERM IMPACT 8% Access to affordable energy is not just By supporting financial institutions , FMO essential for everyday living – it can also paves the way for financing SMEs, micro- 36% empower those who use it enterprises and individuals as well 31% 24% Financial Institutions Energy Other Agribusiness High-impact initiatives from other sectors can Achieving long term sustainability in global also benefit from FMO’s services, expertise *Based on committed investment agribusiness production requires large and global network portfolio, excl. government funds, of investments targeted at improving farming EUR 7.8 bln per June 30 th , 2017 practices, increasing yields and reducing waste 10
PROVIDING LONG TERM FINANCING • Broad range of financing products Investment portfolio per currency* • Third party financing through FMO Investment Management and syndicated loans 8% 13% Euro • Private equity: USD Fund investments, co-investments with funds and direct ― investments in focus sectors Local currency 79% Typical holding period 5 – 10 years ― Investment portfolio per product* Private equity portfolio (per Dec 31 st 2016) 3%8% Equity Loans 36% 35% Private equity Guarantees funds Mezzanine Direct 64% investments 54% * Based on committed investment portfolio, excl. government funds, of EUR 8.5 bln per Dec 31st 2016 11
INVESTING IN OVER 85 COUNTRIES June 2017 total committed portfolio €7.8 billion Head office The Hague, The Netherlands Local office Johannesburg, South Africa Eastern Europe & Latin America Asia Non-specific region Africa Central Asia & The Caribbean €0.5 bln €2.4 bln €1.1 bln €2.1 bln €1.7 bln 12
OUR INVESTMENT PROCESS clearance in principle financial proposal 2 SCREENING If the financing opportunity meets our investment criteria, we continue to analyze potential risks and challenges. 1 SOURCING 3 DUE DILIGENCE we steer our investments towards To fully understand and map the risks projects that foster a transition to a more and opportunities, we conduct thorough inclusive and greener economy due diligence. 4 STAKEHOLDER 6 MONITORING ENGAGEMENT Throughout the lifetime of the investment Regular meetings, dialogue sessions, we monitor performance and progress . consulting key stakeholders 5 CONTRACTING After internal approval, we sign an agreement with our clients value creation contract (early) disclosure of investments 13
SUSTAINABILITY as a value driver Sustainable investing Environmental Impact Social Impact Corporate Governance Economic Impact • Resource efficiency • Diversity • Board structure and • Consistent profitable • Energy efficiency • Human rights accountability growth • Internal controls, audit and risk • Shareholder value • Biodiversity • Health & safety management • Risk management • Emissions to air • Community relations • Management of conflicts of • Global energy issues • Equal opportunity interest and related party • Water/chemical usage • Respect for transactions individuals • Accounting and disclosure practices • Independence of external auditors 14
IV. FINANCIALS & RISK MANAGEMENT 15
STRONG PAST GROWTH; MORE GRADUAL IN FUTURE Portfolio development 2006 – Jun17 (in EUR mln) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jun- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 17 Committed portfolio* 2,216 2,765 3,543 3,877 4,566 5,046 5,450 5,789 7,065 8,062 8,539 7,760 * Committed portfolio excludes government funds; CAGR: Compounded Annual Growth Rate 16
LONG TERM PROFITABILITY DUE TO DIVERSIFICATION Income composition (in EUR mln) 350 300 250 200 150 100 50 0 -50 -100 -150 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17 Income 202 199 210 166 225 238 271 254 260 320 300 231 Value adjustments 6 -36 -124 -52 -29 -59 -46 -18 -51 -29 -1 -3 Net Profit 134 105 48 60 126 93 146 133 124 174 176 155 17
DIVERSIFIED BELOW INVESTMENT GRADE PORTFOLIO Portfolio breakdown per credit rating* 45% 41% 41% 41% 40% 38% 40% 37% 35% Dec-14 30% Dec-15 25% Dec-16 20% 16% 16% 13% 15% 10% 6% 5% 4% 5% 0% BBB- and higher BB-, BB, BB+ B-, B, B+ CCC+ and lower ratings • Per Dec 2016 approx. 350 counterparties with approx. EUR 15 mln average exposure **) • Credit ratings reflect counterparty credit quality • Internal credit ratings are mapped versus Moody’s • Collateral is acquired on 27% of the gross loan amount *) Gross loan portfolio excluding government funds (disbursed) **) Number of counterparties and exposure relate to the gross loan portfolio 18
RECENT GRADUAL INCREASE IN NPL’S; LOW WRITE -OFFS Non-performing loans development 14% 12.4% 12% NPL % of portfolio 10% 8.4% 8.1% Principals with arrears > 7.5% 8% 6.8% 90 days 6.9% 6.8% 6.0% 5.8% Write offs % of portfolio 6% 5.0% 4.9% 3.8% 3.6% 4% 3.4% 4.1% 2.3% 3.5% 3.2% 2% 0.6% 0.6% 0.6% 0.5% 0.5% 0.2% 0.5% 0.1% 0.4% 0% 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17 • Recent increase in NPL’s due to country and counterparty specific events • Low write-downs as a result of active management and focus on recovery * NPL %: loans value adjusted and loans not value adjusted but past due more than 90 days as % of the gross loan portfolio excluding government funds (disbursed) 19
WELL DIVERSIFIED GLOBALLY Portfolio breakdown per country and sector 8% 7% 6% Other 5% Agribusiness 4% Energy 3% Financial Sector 2% 1% 0% • Exposure spread over more than 85 countries • 10 largest country exposures represent approx. 1/3 of the total portfolio • Country limits based on country ratings and FMO’s capital base • Sector limits capped at 50% of country limit * Based on committed investment portfolio of EUR 7.8 bln as per Jun 30 th 2017 excl. government funds and loans guaranteed by the Dutch State 20
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