Transcript Financial Institutions 2003

Verona 28 October 2011
EBRD – a good partner in Russia
Verona 28 October 2011
Eric Rasmussen
Director Russia
Industry, Commerce and Agribusiness
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Verona 28 October 2011
Agenda
- EBRD
- Priorities and presence in Russia
- Private Equity
- Information and Communications Technologies (ICT)
- Pharma
- Annex
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EBRD: A network of 36 offices in 30 countries
More than half our bankers based in the region
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EBRD Global Shareholder Structure
2010 Annual Meeting: 50% capital increase to €30bn




Current paid in capital is €6bn including
an increase of €1bn in May 2010
Triple-A Shareholders Form 60%
EU 27
Countries (1)
62.7%
Current callable capital is €15bn
In 2010, the Board of Governors
approved a 50% increase in the Bank’s
authorised share capital from €20bn to
€30bn
The €10bn increase* will provide
additional investment capacity for the
period 2011-2015 to enhance the Bank’s
response to the global crisis
Japan
8.6%
(1)
*Callable capital to be increased by €9 billion upon receipt of
subscriptions from members, with the provision to review its usage
after 5 years
(2)
as at 1 September 2010
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USA
10.1%
Others
11.3%
EBRD region
excluding
EU(2)
7.3%
Includes European Community and
European Investment Bank each at 3%;
France, Germany, Italy, UK each at 8.6%
Russia at 4%
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EBRD: Cumulative commitments by sector
Agribusiness, 9%
Transport, 14%
Equity Funds, 5%
ICT, 5%
Property and
Tourism, 4%
Financial Institutions,
28%
Power and Energy,
10%
Natural resources,
7%
Municipal & Env Inf,
6%
Manufacturing and
Services, 12%
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EBRD’s historical investments of EUR 60 billion.
About 25% in Russia.
70
60

International financial institution,
promotes transition to market
economies in 30 countries from
central Europe to central Asia

Owned by 61 countries and two
inter-governmental institutions
Cumulative
commitments
of €62.0 billion
EUR billion
50
40
30
20

Capital base of €30 billion*
10
0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
*At the Annual Meeting in Zagreb in May 2010, the
Board of Governors approved the Bank’s capital
increase from €20bn to €30bn authorised capital
Note: Unaudited as at 31 December 2010
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EBRD in 2010
Debt ABV (EUR billion)
55
Net Cumulative Business Volume
(EUR billion)
45
8
35
6
25
4
15
2
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
€9.0bn invested in 2010
5
-5
Source: EBRD data as at 31 December 2010
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Net cumulative business volume
10
1999

Debt 83%, Equity 17% of
EBRD finance
Equity ABV (EUR billion)
1998

Private sector > 79% of
EBRD finance
65
1997

Invested over €62n in
more than 3,119 projects
since 1991
Annual business volume (ABV)

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EBRD’s priorities in Russia
Mittelstand and Larger
Enterprises
Closing the
Infrastructure Gap
• Promote regional growth
– via development of
independent Russian regional
companies
• Reduce transport bottlenecks
and ensure flow of goods via
– support of increased private
provision of transport services
– financing the PPP program
– engagement with reformminded state-owned transport
companies
• Support modernization and
diversification of Russian
industry
– through engagement of
financial industrial groups
committed to corporate
governance
• Build investor confidence and
foster transfer of know how and
technologies
– by pro-active support of
foreign partners
• Improve levels of services to
population and industrial
clients through
– rehabilitation of municipal
infrastructure and
development of new facilities
• Modernize power generation
and remove electricity
transmission bottlenecks
– by financing investment
programs of private and state
companies
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Capital markets and
Financial intermediaries
• Foster sound banking sector
– strengthen bank's balance sheets
and capital base
• Support corporate standards in banks
– leveraging equity investments
• Encourage consolidation
– support M&A
• Develop domestic investor base,
deepen capital markets
– by financing non-bank financial
institutions
• Support development of RUB interest
rate derivative and long term fixed
interest rate bond markets
– promote wide use of Mosprime
– EBRD RUB bond programme
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EBRD products
Equity
Loans
• Non or limited
recourse to sponsors
Direct
EBRD
financing
• Hard / local currency
• Medium / long term
• Floating / fixed rates
Indirect
EBRD
financing
• New equity
• Privatizations
• Underwriting
Guarantees
• Specific risk
guarantees
• Commodity-backed
instruments
• Quasi-equity
• ‘Portage’
• Guarantees to Confirming Banks for trade finance instruments (i.e. L/Cs,
payment guarantees etc.) of local issuing Bank covering the payment risk
• Short-term financing of local Issuing Banks providing exporters/importers
with liquidity for pre-export and post import and local trade finance purposes
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EBRD is more than equity and loans

AAA rated and internationally recognised IFI with long-term view

Willing to share risks, including political risks

Experience gained in problem resolution

Extensive knowledge of local business environment

Good working relations with authorities

Good corporate governance (incl. protection of minority interests)

High quality due diligence and opportunity studies
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EBRD is a trusted partner in the dialogue on innovation
Sustainable Economy
Dependence on Natural Resources
Diversified Industry Structure
Efficient Local Markets
Competitive Growth
Private Sector
know-how, capital
& behaviour
Dialogue and Policy
% innovation absorbed
by industrial companies
Costs and barriers
to grow innovation
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Functioning of
Public Institutions
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Russia’s Modernisation Agenda
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Modernization of Russia in the 21st century will be based on the values
and institutions of democracy
State corporations should be reorganized and privatized
State-run corporations and large companies shall be audited
The government's share in commercial companies, including strategic
businesses, should be reviewed
R&D and technological development (Skolkovo and Rusnano)
Develop new generation nuclear reactors and fuel by 2014
A Russian communication satellites put into operation by 2015
Corruption will decline as transparency increases
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All bankers agree that the Russian industry offer strong
business opportunities ...notably Industrials, Non-Cyclical
Consumer Goods & Services and Utilities show high growth.
Value of Russian Industries
relative to Brazil, India, China and EU
(12 months P/E of top 500 companies in each economy)
1.5
Overvaluation
Cyclical Cons.
Goods & Services
Banks
Utilities
1.0
Non-Cyclical Cons.
Goods & Services
Healthcare
Telecom
0.5
Technology
Industrials
Energy
Basic Materials
Undervaluation
Healthcare - although closer to
overvaluation – has also strong
revenue growth compared to
healthcare in Brazil, India,
China and EU
0.0
0.0
0.5
1.0
1.5
2.0
2.5
Forecasted Revenue Growth in Russian Industries relative to
Brazil, India, China and EU and EU (CAGR 2009 – 2012)
Data: Reuters (Dec 2010)
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However investor perception of slow reforms in Russia
depresses the value of Russian assets compared to Brazil,
India, China, EU…
P/E
(12 months trailing of the 500
largest companies in each economy)
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China
20
India
15
EU
Brazil
Russia
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Russian companies have
lower P/E multiples in spite
of projected strong growth
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Forecast Long-Term EPS Growth
0
0
Data: Reuters (Oct 2010) and BCG analysis
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20
14
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… albeit new reforms focus on barriers to do business.
BEEPS: Key Obstacles to Doing Business in Russia
(response frequency in per cent)
25
20
Russia
EU-10
Finance
Skilled labor
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Corruption
10
Permits
Access
5
Customs / trade reg
Access to land
Transport
Licensing and permits
Courts
Crime
Electricity
Corruption
Tax admin.
Labour regulation
Informal sector
Political instability
Workforce skills
Access to finance
Tax rates
0
Source: EBRD/WB BEEPS 2008-09. EU-10 include Bulgaria, Romania and exclude Cyprus, Malta.
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Investor perception reflect that Russia is a fabric of different
regional investment climates…
Investment Risks (Summary from Expert Magazine)
Very low
Business Potential
Very
high
Saint
Petersburg
Lower
Russia Risk
Very High
Moscow city, Moscow region
Tatarstan, Bashkortostan,
N. Novgorod, Samara,
Perm Krasnodar, Rostov
Sverdlovsk, Chelyabinsk
Higher
Leningrad, Vologda,
Belgorod, Yaroslavl,
Lipetsk, Kaluga Saratov
Volgograd
Voronez, Tula, Tver,
Khanty-Mansiysk-Yugra, YamaloNenetsky AO, Krasnoyarsk,
Kemerovo, Novosibirsk, Irkutsk,
Maritime, Khabarovsk
Sakha-Yakutia
Average
Pskov, Novgorod,
Orenburg, Chuvashia
Stavropol Tomsk
Archangelsk, Komi (Syktyvkar),
Murmansk, Karelia, Vladimir,
Bryansk, Ryazan, Kursk, Kirov,
Penza, Ulyanovsk, Tyumen,
Astrakhan Altai T. Omsk, Amur
Kaliningrad
Lower
Orel
Much
lower
Higher
Mordovia
Khakassia
Nenetsky (Naryan Mar),
Tambov, Ivanovo, Smolensk,
Kostroma, Adygeya, Buryatia,
Sakhalin
Mariy El Tyva, Altai Republic.
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Udmurtia
Trans-Baikal
Kurgan Kabardino-Balkarya,
N.Ossetya-Alania,
Karachayevo-Cherkessya,
Kalmykia, Kamchatka
Jewish, Chukotsky
Chechen,
Ingushetia
Dagestan
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…which necessitates a differentiated approach to regional
development (“European vs Asian modernization models”).
Investment Risk
Higher
% of GDP
% of FDI
% of Population
Average
% of GDP
% of FDI
% of Population
Lower
% of GDP
% of FDI
% of Population
Much
lower
Business Potential
Lower
% of GDP
% of FDI
% of Population
Sum
% of GDP
% of FDI
% of Population
Higher
Russia Risk
Very High
High Potential
2 cities
26%
34%
10%
Average
potential
13%
17%
10%
39%
51%
20%
40%
34%
43%
40%
34%
43%
Lower
Potential
20%
15%
33%
20%
15%
33%
Deeply
Depressed
27%
35%
12%
Sum
46%
52%
58%
17
27%
13%
28%
2%
0%
4%
2%
0%
4%
1%
0%
2%
100%
100%
100%
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A Good Mitigation Against Regional Risks? …EBRD
St. Petersburg RO
Moscow RO
Ekaterinburg RO
Krasnoyarsk RO
Vladivostok RO
Rostov RO
Samara RO
• 7 Offices in Russia with 120 staff on the ground
• EBRD has direct presence in 54 Russian regions.
• A “real” presence is maintained in 25 regions with 4 or more larger projects.
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EBRD in Private Equity

EBRD’s portfolio of funds: over 15 years of investing in
the asset class
 132 funds
 84 fund managers
 EUR 2.8 billion in commitments (USD 3.6 billion) to funds
with capital of EUR 14.2 billion (USD 18.5 billion)
 1,129 underlying investments, up to 70% exited.

Largest PE Fund program dedicated to the region*
* Russia, CIS and CSE
Source: EBRD tracked portfolio as at June 2010, excluding real estate funds
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EBRD in Private Equity:
Investments by Fund Size: Russia/CIS
2,000
Fund Size
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EBRD Signed
Number of funds
EUR Million
1,500
10
1,000
6
500
4
68%
35%
18%
3
14%
0
7%
44%
0-20m
1
20-50m
50-150m
150-300m`
300-500m
0.5-1bn
Fund Size
Note: Percentage is the share of EBRD commitment of the total fund capital
Source: EBRD tracked portfolio as at June 2010
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EBRD in Private Equity:
EBRD Commitments Over Time
CEE
400
CIS
SEE
Number of Funds
14
13
350
12
11
11
10
9
9
250
8
7
200
7
6
6
6
5
150
100
No. of Funds
EUR Million
300
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11
5
4
4
4
5
4
4
2
50
2
0
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: EBRD tracked portfolio as at June 2010
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EBRD in ICT
Selected Transactions in Technology Funds
Russia 2009
Technology Fund - Equity
$ 30 million (own account)
Poland 2009
Loan and equity
€ 22 million (own account)
Bulgaria 2006
Mezzanine
€ 3 million (own account)
€ 10 million (total)
Slovenia 2001
Equity
€ 3 million (own account)
€ 9 million (total)
CEE Regional 2007
Technology Fund - Equity
€ 10 million (own account)
€ 40 million (total)
Croatia 2010
Equity
€ 4 million (own account)
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CEE Regional 1999
Technology Fund - Equity
€ 12 million (own account)
€ 44 million (total)
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EBRD in ICT
Selected Transactions in Telecoms
Russia 2004, 2006 and 2009
Loan syndication
€ 115 million (own account)
€ 420 million (total)
Albania 2008
Privatisation - Loan syndication
€ 30 million (own account)
€ 100 million (total)
Poland 2011
Equity
€ 200 million
Bulgaria 2004
Privatisation - Equity, Debt and Mezz
€ 90.5 million (own account)
€ 374 million (total)
Albania 2003
Loan syndication
€ 35 million (own account)
€ 85 million (total)
Russia 2011
Rouble Bond Issue
RUR 2 billion (own account)
RUR 13 billion (total)
Russia 2006, 2008, 2010
Loan and equity
$ 40 million
Poland 1998
Equity (IPO)
$ 76 million
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Kazakhstan 2003
Loan syndication
$ 60 million (own account)
$ 110 million (total)
Kazakhstan 2005 and 2007
Loan syndication for KaR-Tel
$ 65 million (own account)
$ 130 million (total)
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EBRD in ICT
Selected Transactions in Media
Ukraine 2007
Equity
€ 22.2 million (own account)
€ 200 million (total)
Czech Republic 2002
Acquisition debt
$ 10 million (own account)
$ 35 million (total)
Poland 2003
Acquisition debt
€ 22.5 million (own account)
€ 52.5 million (total)
Romania 2007
Loan and equity
$ 8 million (own account)
$ 15.5 million (total)
Russian Federation 2003 to 2005
Loan syndication
$ 90 million (own account)
$ 130 million (total)
Kazakhstan 2009
Loan to RTS Decaux
$ 5 million (own account)
Romania 2003
Debt Co-financing
$ 7 million (own account)
$ 11 million (total)
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Regional CEE 2006
Loan syndication
$ 50 million (own account)
$ 100 million (total)
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EBRD in Pharma
Selected Transactions
EBRD has invested over EUR 300 millions in the
pharmaceutical sector for manufacturing, distribution
and retail pharmacies.
Ukraine 2006
Loan
€ 32 million
Russia 2010
Equity
€ 15 million
Russia 2004 to 2011
Loan + Equity +Loan
€ 58 million
Armenia 2005 to 2010
Equity and Loan
EUR 1.9 million
Ukraine 2010
Equity
$ 11.5 million
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Hemopharm
Serbia 2002 to 2004
Loans
EUR 40 million
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Petrovax: Background
Petrovax is a Russian pharmaceutical company focused on
development and commercialization of vaccines and drugs in the field of
immunology. The firm had in 2003 one key product (polyoxidonium) an
immune stimulant and an adjuvant for the flu vaccine. Petrovax
turnover in 2003 was EUR 5 millions.
Weaknesses
Strengths

Intellectual property based
on polyoxidonium molecule

Limited financial resources
for R&D

Highly knowledgeable and
ambitious scientific team

Limited production facilities
and capabilities

Key niche products

Low brand awareness
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Petrovax: Vaccine Project
Year: 2004
“Vaccine Project”: Construction of
a state-of-the-art manufacturing
facility for production of flu vaccine
in syringes. And the development of
a new flu vaccine in a partnership
with a leading pharma player.
Partner: Abbott
EBRD Finance: EUR 25 million loan
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Petrovax: R&D Project
Year: 2008
“R&D Project”: Construction of a 2nd
production line. Clinical trials,
registration and commercialization of 2
new products; improvement in the
organizational structure and corporate
governance.
EBRD Finance: EUR 15 million equity
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Petrovax: Next Innovation
Year: 2011
“Innovative Pipeline”: Development
and commercialization of 3 new
innovative medicines.
Potential Co-Investor: Rusnano
EBRD Finance: EUR 18 million debt
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Petrovax Case Story:
Status Today
Industry Position today: A leading Russian pharmaceutical player with
GMP facilities and a strong portfolio of branded products and products at
various stages of development. Petrovax has several IP and production
collaborations with the world’s leading pharma companies.
Partnerships with global companies:
Sales: More than 10x increase in sales and profitability over the last 5
years and growing.
Corporate Governance and Jobs: New jobs for a new generation of
researchers. Implementation of IFRS, modern MIS and corporate
governance practices.
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Comments on Russia’s outlook: Medium term outlook has
improved and Russia has still lots of potential with medium
term growth at 4-5%
14000
GDP per capita in USD has only just
returned to levels of 1991
12000
10000
8000
Collapse of
Soviet
Union
45000
40000
35000
Russia
crisis
30000
Putin promises
to double GDP
within a decade
6000
25000
20000
15000
4000
10000
2000
5000
0
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89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
0
GDP per capita (USD) (left axis)
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GDP (RUB bn) (right axis)
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The root of a tree that grew up in wind is strong
EBRD is the largest financial investor in Russia
o
o
o
o
AAA rated IFI and a long-term view
active in 48 Russian regions
seven regional offices in Russia
120 professionals on the ground with a passion
to support your investment
Thank you!
Eric Rasmussen
Director, Industry, Commerce & Agribusiness
Russia Business Group
Tel: +7 495 787 1111 (ext 164)
Email: [email protected]
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Annex.
How to obtain EBRD financing
Financing requirements
How to obtain finance?
 Provide EBRD with an overview of
Ensure appropriate returns by
carefully assessing the risks:
 Management strength and strategy,
brands
 Clear business plan and project
costs
 Transparency of operations / IFRS
 Disclosed identity of final
shareholders and corporate structure
 Identified and limited tax liability risk
 Recourse to subsidiaries generating
profits and holding assets
proposed investment
 Commitment to cooperation
 clarify role of EBRD
 mandate to initiate transaction
 mutual understanding of
corporate integrity issues
 Project / business plan, market
analysis, strategy, ownership
structure, financial analysis, risk
assessment
 Exit strategy
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