DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH

DEG – Deutsche Investitions- und
Entwicklungsgesellschaft mbH
Financing private investments in Latin America
Berlin, 14.09.2012
Justus Vitinius
DEG - Our business is developing.
DEG…
…is
the German development finance institution (DFI) for the promotion
of private companies in developing and emerging market countries;
…provides
long-term investment capital for private enterprises on market-oriented
conditions: Equity, Mezzanine finance, Long-term Loans, Guarantees;
…invests
in projects that are financially sound and keep with the principles of
sustainable development and are in the sectors agribusiness, processing industry, services, infrastructure, and in the financial sector;
…contributes
to sustainable economic growth and thus to poverty reduction.
Ecological and social acceptance according to international guidelines are a vital condition.
DEG – Promoter of entrepreneurial development
cooperation
Corporate data
Founded:
1962
Employees:
457
Seat:
Köln
Shareholder:
KfW, Frankfurt
Equity 2011:
Total assets 2011:
EUR 1.7 billion
EUR 3.9 billion
New commitments in 2011:
EUR 1.2 billion
(supporting investments worth EUR 6.8 billion)
Portfolio 2011:
EUR 5.6 billion
(supporting investments worth EUR 39.0 billion)
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DEG offices abroad
● Moscow
● Beijing
● Istanbul
● New Delhi
● Bangkok
● Accra
● Nairobi
● Mexico City
● Singapore
● Jakarta
● Lima
São Paulo ●
● Johannesburg
Representative offices in 70 countries through KfW Bankengruppe
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Financing criteria
● Qualified management
● Sound business plan
● Credit standing
● Investment plan
● Proven track record
● Market analysis
● Corporate Governance
● Due-diligence study
● Environmental and social standards
● Expected return
● Developmental effects
● Financing shares of owner and
co-lenders
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Long-term loans
●
Amount:
-
Own account: between 8 - 35 mm USD
-
Higher amounts by club deals and/or arrangements
-
Max. 50% of total assets of a company
-
Max. 90% new investments
●
Currency:
USD or EUR, various local currencies, incl. MXN
●
Term:
generally 4-10 years, longer tenors possible (up to 15 y)
●
Period of grace:
Cash flow oriented, up to 3 years (in Mezz more)
●
Repayment profile:
Cash flow oriented
●
Interest rate:
Fixed or variable, market-oriented, exempt from withholding
tax in Mexico & most countries in Central America
●
Collateral security:
mortgages, pledges etc (project-specific arrangements)
●
Others:
“tenor extension” of commercial banks
Mezzanine Finance
Realization of mezzanine instruments
Expected return
Equity
Sub Debt +
Warrants
Preferred equity
Sub Debt + CPU
Convertible debt
Sub Debt + PIK
Subordinated debt
Senior unsecured debt
Senior secured debt
Risk
Mezzanine Finance: Advantages
Mezzanine finance can have the
following benefits:
●
●
●
●
●
Cashflow-based lending vs. balance
sheet/security mentality
Improve equity ratio and expand debt
capacity
Avoid dilution from capital raising
Leverage equity return, improve ROE
Tax deductability of interest expense
Situations:
●
●
●
Growth capital
Leveraged buyouts
Pre-IPO
Example for improving of the overall financing
structure by DEG mezzanine funds: funding
needs for 40mUSD of fixed assets:
Assets
Liabilities
Fixed
Current
60
40
Equity
Liabilities
30
70
Total
100
Total
100
Assets
Fixed
Current
Total
Liabilities
100
40
140
Equity
DEG Mezzanine
Liabilities
30
15
95
Total
140
Equity: Features of a participation
Structure
●
Own account: between 8 - 35 mm USD (higher amounts by club deals)
●
Not to exceed 30% of share capital
●
Shareholder/minority rights, in some cases Board representation
●
Exit strategies to be defined: trade sale, IPO, put option, tag along
Why having DEG as an equity partner?
●
DEG/KfW brand increases value of the company
●
“DEG vs hedge funds” – long term partnership vs short term IRR expectations
●
Complementary long-term funding of DEG, technical assistance
Public Private Partnership / PPP
Technical Assistance / TA
TA
PPP
Partner: European companies and their
subsidiaries, existing clients of DEG
Objectives: Co-financing of private sector projects
with high developmental effects
Focus areas: Renewable Energy, environmental
protection in manufacturing industry
Requisites:
- high developmental and economic impacts
- promotes structural development, broad effect
- cannot be realized without public contribution
Contrib.: max. 50% of costs / max. 200.000 €
Example in Mexico: Financing of Pilotplant for
Biogas to avoid emission of Methane, objective:
repetition of concept, contrib. 30% of 600kEUR
Grants can complement financing to DEG clients.
-
Training and qualification measures
Social and environmental measures
Business consulting / studies
Corporate Governance
Funds provided by the Federal Ministry for
Economic Cooperation and Development (BMZ)
and DEG own funds.
Example in Mexico: Introduction of an
Environmental and Social Management System for
a SOFOL, costs for Consultant & Training of
Management and Credit Officers shared 50 / 50
Global new business development
Recent development and sectoral distribution
Mio. EUR
1.226 1.223
1.206 1.225
1200
1.015
930
1000
702
800
558
600
601
464
400
200
0
2002
2003 2004
2005 2006
2007 2008
2009 2010
2011
New commitments by sector; as per 31 December 2011
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New business 2011
Regions: Latin America contributes to 28% of DEG´s new business
New commitments: EUR 1,223 million
Of these risk capital: EUR 509 million
(42%)
Disbursements: EUR 1,078 million
Products:
● Loans: EUR 945 million, of these
mezzanine financings EUR 235 million
● Equity participations: EUR 274 million
● Guarantees: EUR 4 million
New commitments by region; as per 31 December 2011
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DEG Portfolio in Latin America
Sectoral distribution and most important countries
Portfolio: Sectoral distribution
Portfolio: Country (EUR million)
Stand: 31.05.2012
Developmental effects
DEG Latin American new business 2011
With its new commitments in 2011 DEG contributes together with its partners to:
●
expected government revenues EUR 40 million p.a.
●
expected net foreign currency inflows of EUR 104 million p.a.
●
Employment effects: creating/securing of 12,500 direct jobs; additionally 44,500
employees at suppliers/final borrowers in financial sector projects
61% of the projects contribute to at least one of the eight MDGs. In addition, the project
companies have to comply with internationally acknowledged environmental
and social standards.
Climate Protection
What DEG does
Climate protection = strategic issue
●
Climate protection investments since 1990s:
¾
Renewable energies
(wind, water, geothermal, solar)
¾
Energy efficiency
¾
Renewable raw materials
¾
CDM/JI projects / carbon credits
●
New business 2010: EUR 235 million
●
New business 2011: EUR 193 million
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Investments in renewable energy
Energias Renováveis S.A., Brasilien
Project partner:
Brazilian providers of
equity and debt capital
German economy
German DC
Investment project:
ERSA Holding
[development and set-up of
projects and operation of
small hydro-electric,
windpower and biomass
plants to produce renewable
energy]
Equity provider:
DEG
[equity investment to the
amount of EUR 23.2 m]
Developmental contribution: The lack of equity frequently represents a bottleneck in the
development of "renewable energy" projects. By providing the ERSA holding with initial
capital, DEG acts as an anchor investor that is attracting further equity investors. Thus, a
huge amount of projects can be developed and set up, which in turn leads to a number of
positive developmental effects such as the creation of jobs, diversification of power
generation as well as technology transfer.
About our project partner: Next to its already mentioned role as an anchor investor,
DEG brought ERSA in contact with players from the German economy and the German
DC. ERSA, for example, formalised a cooperation with Siemens in order to successfully
participate in a call for projects. Consultancy prior to the tendering process was provided
by GIZ. The projects generate additional income through carbon certificates, which are
purchased by the KfW Carbon Fund. Debt financing is generally carried out by the
Brazilian development bank BNDES, which is partly refinanced by KfW Entwicklungsbank.
About our commitment: ERSA is a good example of how the different instruments of
KfW Bankengruppe or the German DC are interrelated in order to jointly achieve the
strategic goal of the German development cooperation: Climate protection through
renewable energy.
PPP-project on environmental protection and resource
conservation
Decentralised water treatment plant designed for use in rural regions in Brazil
Project partner:
Project was elected as
"Beacon Project 2009"
by UmweltCluster
Bayern (Environment
Cluster Bavaria)
Grünbeck
Wasseraufbereitung GmbH
PPP project:
reliable decentralised
water treatment
plant designed for use in
peripheral regions in
Brazil
Developmental contribution: The introduction of the water treatment plant directly contributes to
environment protection while promoting natural resources and nature conservation. In addition,
the
project
demonstrates
that
a
reliable
and
high-quality
water supply is possible also in remote areas, especially for the rural population. The project helps
to raise awareness of a gentle use of water resources among the population as well as among the
project partners' employees.
The PPP-project: The PPP project involves know-how transfer by training and further education
of technicians of a Brazil water supplier in the context of a demonstration project.
DEG
Consulting,
Structuring,
Monitoring,
Financing
About our partner: Grünbeck Wasseraufbereitung GmbH is a German medium-sized enterprise
in the water treatment business, which supplies its customers worldwide with technologically
advanced special machines for, among other things, water treatment.
About our commitment: By providing PPP funds, DEG supports and advises a German
enterprise on opening up new markets.
Selected DEG clients
Central America & Caribbean
Portfolio
PortfolioCAC
CAC
USD
USD430
430million
million
41
companies
41 companies
Ferretería EPA S.A.
Ferretería EPA S.A.
(Costa Rica)
(Costa Rica)
Building Centers
Building Centers
2 Senior Loans
2 Senior Loans
USD 27 million
USD 27 million
Banco Ficohsa
Banco Ficohsa
(Honduras)
(Honduras)
Financial Sector
Financial Sector
Equity
Equity
USD 15 million
USD 15 million
Polaris Energy
Polaris Energy
(Nicaragua)
(Nicaragua)
Geothermal Plant
Geothermal Plant
Senior Loan
Senior Loan
USD 19 million
USD 19 million
West Kingston Power
West Kingston Power
(Jamaica)
(Jamaica)
Power Plant
Power Plant
Senior Loan
Senior Loan
USD 13 million
USD 13 million
Focus
Focusof
ofNew
New
Business
Business
Agribusiness
Agribusiness
Manufacturing
Manufacturing
Services
Services
Caucedo
Caucedo
(Dominican Republic)
(Dominican Republic)
Container Terminal
Container Terminal
Senior Loan
Senior Loan
USD 17.5 million
USD 17.5 million
Bantrab
Bantrab
(Guatemala)
(Guatemala)
Financial Sector
Financial Sector
Senior Loan
Senior Loan
USD 15 million
USD 15 million
LAICA
LAICA
(Costa Rica)
(Costa Rica)
Sugar
Sugar
Senior Loan
Senior Loan
USD 12 million
USD 12 million
Scotiabank
Scotiabank
(Costa Rica)
(Costa Rica)
Financial Sector
Financial Sector
Senior Loan
Senior Loan
USD 30 million
USD 30 million
Financial
FinancialSector
Sector
Infrastructure
Infrastructure
Get in touch!
Justus Vitinius
Director Latin America
DEG – Deutsche Investitions- und
Entwicklungsgesellschaft mbH
Kämmergasse 22
50676 Köln
Germany
Phone: ++49 (0) 2 21 / 49 86 - 1144
Telefax: ++49 (0) 2 21 / 49 86 - 1582
E-mail: [email protected]
Internet: www.deginvest.de
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