Partner to Invest in Transition Economies from
Morocco to Mongolia
Stockholm October 22nd 2014
Contents
Part I: Overview of EBRD
Part II: EBRD’s Co-investment Opportunities
Part III: EBRD’s Equity Participation Fund
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EBRD – Investing from Morocco to Mongolia
2013 Population
612 mn
2013 Nominal GDP
USD 5,417 bn
Countries of Operation
Central Europe
& Baltics
Cyprus
Croatia
Estonia
Hungary
Latvia
Lithuania
Poland
Slovak Republic
Slovenia
South eastern
Europe
Albania
Bosnia and
Herzegovina
Bulgaria
FYR Macedonia
Kosovo
Montenegro
Romania
Serbia
Eastern Europe
& Caucasus
Armenia
Azerbaijan
Belarus
Georgia
Moldova
Ukraine
Central Asia
SEMED1
Russia
Kazakhstan
Kyrgyz Republic
Mongolia
Tajikistan
Turkmenistan
Uzbekistan
Egypt
Jordan
Morocco
Tunisia
Russian
Federation
1 SEMED:
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Turkey
Turkey
Southern and eastern Mediterranean region
3
Key Areas of Business
At a Glance
Portfolio
€37.8 billion
Cumulative Equity Investments
€10 billion
Number of projects (since 1991)
4,088
Cumulative business volume
€92.1 billion
Portfolio by Sector
Portfolio by Region
Central
Asia, 8%
Turkey,
9%
Central
Europe,
16%
Eastern
Europe,
20%
Portfolio by Product
*SEMED,
3%
Guarantee
, 1%
Energy, 22%
Cyprus,
0%
S. E.
Europe,
22%
Russia,
21%
Equity ,
21%
**ICA, 30%
Financial
Institutions,
23%
Infrastructure
, 25%
Debt ,
78%
Data as of Sept 2014
(*) SEMED region (North Africa): Tunisia, Egypt, Morocco, Jordan
(**) ICA: Includes Agribusiness, Property & Tourism, Manufacturing & Services and
Information & Communication Technology
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EBRD Activities in North Africa
Annual Business Volume
700
At a Glance
Cumulative disbursements:
€464 million
Equity Investments:
€105 million
Number of projects:
44 (since 2012)
Portfolio:
€1,218 million
Countries of Operations:
Egypt, Morocco, Tunisia, Jordan
25
600
20
500
400
15
300
10
200
5
100
-
0
YE2012
YE2013
Annual Business Volume
EBRD Portfolio in North Africa by Sector
Industry, Commerce &
Agribusiness.
13%
35%
Sept 2014
Number of Investments
EBRD Portfolio in North Africa by product
Equity
Portfolio
9%
Energy
18%
Infrastructure
34%
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Financial Institutions
Debt
Portfolio
91%
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Contents
Part I: Overview of EBRD
Part II: EBRD’s Co-investment Opportunities
Part III: EBRD’s proposed Equity Participation Fund
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Unique Investment Opportunities
Future Growth of the
Region
Financing Gap for
Equity
EBRD: a credible
intermediary
•Untapped potential for
production growth and
development of local
entrepreneur base
•Continued growth of
middle income class
•Limited investments from
international institutional
investors
•Limited access through
traditional mechanisms
•Achieves market returns
while mitigating risk
•IRR of 18% with 2.1x
gross multiple for 90
realised direct equity
investments since 1992*
(*) Direct Equity Investments over EUR 10m since the inception of EBRD since 1992
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Unique value proposition of partnering with IFIs
1
• Unique position through EBRD’s special preferred creditor status, favourable tax
Risk mitigation
treatment, policy role, political connections, transition mandate and historical
presence within the Countries of Operation
• Exclusive privileges and immunities
2
• EBRD’s ‘Global Sponsor’ programme provides access to inroads into the region while
being supported by a knowledgeable and protected partner
Origination
capabilities
• Access to local sponsors, government led deals (eg privatisations) and FDI sponsors
• Being both a creditor and equity provider creates multiple sources of proprietary deals
• The Bank acts as Limited Partner in a portfolio of private equity funds, providing deal
exposure through co-investments alongside high quality managers
3
• Heavy involvement in areas including banking systems reform, liberalisation of prices,
Target region
understanding
privatisation (legalisation and policy dialogue) and creation of legal frameworks
• Unique ability to apply deal-making experience in specific sectors to different countries
as they progress through the transition process
4
Influential
minority
investor
• As an IFI with strong local presence, political affiliations and local knowledge, EBRD
has a strong influence on the investees even if it invests as a minority shareholder.
This resulted in active co-investments with leading global strategic investors
• Influence on corporate governance via board nominee director who are appointed to
create shareholder value
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Multiple ways of co-investing with EBRD
Co-investment in
Direct Equity Deals
•Partnership with global
strategic investors, private
equity firms and other
international financial
institutions to co-invest in
various sectors
•Direct equity investments
by sovereign wealth funds
and large pension funds in
EBRD’s region have been
limited due to perceived
political and economical
risks, and small investment
size required in the
investees in the region
Co-investment in
Equity Funds
•The largest Limited Partner
in private equity in the
region
•Invested in more than 170
private equity funds,
together with more than
1,300 limited partners to
date, including sovereign
wealth funds and pension
funds
•Investments often lead to
co-investments in direct
equity transactions
Co-investment in
Portfolio Investment
•Equity Participation Fund
aimed at attracting longterm large institutional
investors
•Investors benefit from
unique EBRD governance,
investment standards and
reputation and financial
and political risk mitigation
•Provides large size (€50
mill+), diversified
investment opportunity to
large institutional investors
In addition the EBRD is a natural venue for co-investment in long term project loans
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Contents
Part I: Overview of EBRD
Part II: EBRD’s Co-investment in Equity
Part III: EBRD’s proposed Equity Participation Fund
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Outline of the Equity Participation Fund
Innovative fund structure
Target size
EUR 750 million - 1 billion
Target number of investments
Around 50, depending on average investment size
Expected investment size
EUR 10-100 million
Expected Fund return
Portfolio return of 15% IRR
Participation ratio
30% - The EBRD will retain 70% of the risk of all the equity investments
Underlying Investments
The Fund will acquire an indirect economic interest in all Eligible Direct
Equity Investments made by the EBRD through Equity Return Swaps
Fund term
12 years from the First Closing Date
Fund structure
English Limited Partnership
Carried interest
None
Highly Innovative, efficient investment opportunity, not provided by existing PE Market
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Proposed Fund legal structure
Traditional fund structure under the EBRD umbrella
Structural outline:
• English Limited Partnership to be established (the “Fund”)
EBRD investee companies
• Investors are admitted as Limited Partners adhering to the
terms of the Fund
• General Partner (GP) will be an English limited liability
company (GPCo), owned 100% by a third party administrator
• GP appoints EBRD as the Fund Manager through a
Management Agreement
30% of underlying EBRD
investments
70% of underlying investments
will be retained by EBRD
• The Fund buys an Equity Return Swap (“ERS”) from EBRD in
respect of each eligible EBRD equity investment (ERS =
participation rate x cost of the EBRD’s equity investment)
• A fixed allocation ratio will be followed for Eligible Investments
in Equity with 30% of investment risk allocated to the Fund.
EBRD will retain 70% of the investment risk
• In the Fund structure investors are passive and follow the
EBRD investment process
Equity Return
Swaps
Equity Participation Fund
General Partner
(GPCo)
Investors
(Limited Partners)
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Partnering with global institutional investors
The EBRD Equity Participation Fund will enable global institutional investors to participate
in the EBRD’s direct equity investment portfolio and strategy and benefit from:
1.
Geographic and sector diversification
2.
Long-term capital growth and return opportunity in line with market benchmarks
3.
Robust track record of 23 years
4.
Adherence to the highest ESG standards
5.
Unique access to a universe of both public (pre-privatisation) and private companies
6.
EBRD’s strong local presence and knowledge in all 35 countries of investments
7.
Risk mitigation provided by EBRD’s stringent internal processes and its privileges and
immunities
8.
Low-cost intermediation (cost sharing management fee, no carried interest)
Opportunity to invest in the growth potential across the EBRD Countries of Operation
which is not accessible via public markets or traditional private equity funds
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Conclusion
• Financial markets are undergoing a deep transformation
• Deleveraging, de-risking, changes in regulatory landscape
• In that process there are gaps in financing the real economy
• Need for long term, patient, equity capital
• Development banks that behave under market principles with local
presence can fill that gap
• By further using their risk absorption capacity and reputation
• By facilitating and intermediating transformational investment and
mobilising Institutional Investor Capital
Opportunity for a Public - Public partnership for private sector development
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Contact Details
Manfred Schepers, Senior Advisor
Institutional Investment Partnerships
schepers@ebrd.com
+44 20 7338 7000
Jung Hwa Oh, Associate Banker
Institutional Investment Partnerships
ohj@ebrd.com
+44 20 7338 6342
EBRD Headquarters: +44 20 7338 6000
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