Investments in Biofuel Projects in Emerging Economies

Two Perspectives

Jonathan Morley-Kirk Financial Director, GBTF

Perspectives of potential investors and host emerging economies

• Motives • General needs • Specific areas of interest

• Samuel Montagu & Co./Midland Bank Plc. • S.G.Warburg & Co. Ltd • Continental Capital Management Ltd. • Fox-Davies Capital Ltd.

Jonathan Morley-Kirk

Countries - What do they want from investors?

•Inward investment •Build up specific industrial sectors •Infrastructure enhancements •Employment and training of local workers •Tax generation •Others

Investors –What do they want from the host country?

• Governmental certainties • Fiscal regime • Corruption control • Red tape minimum • Workforce • Business operations – enabling regime

•The only solution •Bottomless pit of investment monies •Allowed to pay bribes •Proxies for their home countries •Mind readers •All the same

Foreign Private Sector Investors are not………

Project Overview

• Planning • Investment monies committed • Development works • Production • Distribution of products • Return of investment monies

Specific Investment Project Considerations

• Legislation • Government Departments involved • Imported Capital rules/restrictions • Double Tax Treaties of host country • Debt/equity swaps / debt for goods schemes • In country taxation / customs duties

Investment Structure

Holding Company

Intermediate Company

Investment Company

Project 2 Project 3 Project 1

Other Jurisdictions

In Country

Investment Structure

• Investment Monies In • Production • Sales -Domestic / Export • Investment Monies Out

Debt / Equity Swaps

Project

Debt $ Investor

Local Currency

1

Central Bank

Local Currency 2 3 4

Debt / Equity Swap Example

• Investor buys $5 million FV debt @ 40 cents on the dollar , cost $2mill

• Central Bank swaps debt for $2.5 mill equivalent of local currency

• Investor invests local currency into local company to invest in the project

Benefits of Debt / Equity Swap

•Reduce sovereign indebtedness and interest payments •Improve balance of payments •Attract more investors •Possible to restrict repatriation of investment funds

Bioenergy Investments

• General Investment Regime vs Specific Sector/Area Development

• JVs and Local Empowerment Laws • Alcohol Related Matters • Non Payment By Local Buyers • Duties and Taxes

Country and Investor Needs

• Need investors • Need to raise

employment levels • Businesses to

successful • Raise taxation • Raise global profile

• Modern legislation • Investment made easy • Fixed and fair taxes • Red tape minimised • Make suitable returns • Corruption stamped

out

Thank you