Anil Chandramani

Chief Investment Officer and Global

Relationship Executive, Chemicals & Fertilizers

1

Managing Risks & Facilitating Private

Investment in Mexico’s

Chemicals & Petrochemicals Industry

ANIQ Conference

Mexico City October 15, 2015

The World Bank Group and IFC

IBRDInternational Bank for Reconstruction and Development

IDAInternational Development Association

IFCInternational Finance Corporation

MIGAMultilateral Investment and

Guarantee Agency

To promote institutional,

legal and regulatory

reform

Governments of poorest

countries with per capita

income of less than

$1,025

- Technical assistance

- Interest Free Loans

- Policy Advice

To promote private

sector development

Private companies in

member countries

- Equity/Quasi-Equity

- Long-term Loans

- Short-term Finance

- Risk Management

- Advisory Services

To reduce political

investment risk

Foreign investors in

member countries

- Political Risk Insurance

Est. 1945 Est. 1960Est. 1956 Est. 1988

Role:

Clients:

Products:

To promote institutional,

legal and regulatory

reform

Governments of member

countries with per capita

income between $1,025

and $6,055

- Technical assistance

- Loans

- Policy Advice

Private Sector Support Public Sector Support

2

The Mission of IFC is to promote private sector investment in developing countries to reduce poverty and improve people's lives

Holding $50Bn Portfolio

IFC in FY14

S&P, Moody’s AAA

Committed 2014 $22.4 billion- Syndicated $5.1 billion- Own Account $17.3 billion

# of projects 599# of countries 98

Committed Portfolio (IFC balance) by region

Committed Portfolio (IFC balance) by sector

* Manufacturing includes the following subsectors: Chemicals/Petrochemicals, Construction Materials and Energy Efficient Machinery

� Largest multilateral source of loan and equity financing for the private sector in emerging markets

� Takes market risk with no sovereign guarantees

� Promoter of environmental, social, and corporate governance standards

� Resources and know-how of a global development bank + flexibility of a merchant bank

� Portfolio of over 2,000 companies worldwide

� Holds equity and quasi-equity in over 800 companies worldwide: Honest Broker Role

� Loans may be foreign currency or, in several countries, may be in local currency

Manufacturing,

Agribusiness

and Services

29%

Financial

Markets

43%

Infrastructure

and Natural

Resources

28%

East Asia and

the Pacific

14%

Europe and

Central Asia

21%

Latin America

and the

Caribbean

21%Middle East and

North Africa

10%

South Asia

11%

Sub-Saharan

Africa

15%

RoW

8%

3

�US$6.5 billions invested (own

account)

�308 projects

�53 countries

Chemicals, Petrochemicals & Fertilizers Sector

Key Features

(historical)

Key Features

(historical)

Committed Amount by Sector

� In-house industry specialists with global experience in

the sector and benchmarking capabilities

� Strong regional knowledge with exclusive focus on

emerging markets

� Climate change strategy

� Promotion of sustainable economic growth and

competitiveness with creation of direct and indirect

jobs, know-how transfer

Committed Amount by Region

4

Investments of about $1 Bn in FY14 in the IndustryInvestments of about $1 Bn in FY14 in the Industry

Engro Corporate, PakistanICS, Senegal: phosphoric acidIndo Jordan, Jordan: phosphoric acidEngro Chemicals, Pakistan: ammoniaTrigen II, Trinidad & Tobago: ammoniaFosfertil, Brazil: SSP, TSP, MSP, DAPGNFC, India: ammonia, ureaDeepak Nitrate, India: ammonia,Urea,DAPPQB, Bolivia: ammonium nitrateKuAz, Russia: ammonia, ureaIndo Egyptian, Egypt: phosphoric acidKoyo, China: ammonia, ureaAbocol, Colombia: ammonium nitrate,NPKJIFCO, Jordan: DAPJPMC, Jordan: phosphateEngro Emergency, Pakistan: ureaOCI Egypt: Corporate loan for fertilizersParadeep Phosphates, India: DAPItafos Brazil: PhosRock & Acid

A Sample of IFC’s Industry Experience

ERC Refinery, EgyptPSPC (Shell), PhilippinesStar Petroleum (Caltex), ThailandRefisan (Pecom), ArgentinaPetrotel-Lukoil, RomaniaAlliance Oil Company, Russia

Refineries

Petrochemicals

Continental Carbon of India Ltd.NPC, Thailand: gas crackerCopesul, Brazil: naptha crackerCopene, Brazil: naptha crackerSamsung, Korea: petrochem/aromatics

complex restructuringHMC Polymers, Thailand: PPPetroken, Argentina: PPPoliteno, Brazil: PEIpiranga I & II, Brazil: PE, PP Indelpro, MexicoProfalca, Venezuela: PPGrupo Zuliano, Venezuela: petrochem complexSuzhou, China: PVCVinythai, Thailand: PVCEngro PVC, Pakistan: PVCTuntex, Thailand: PTARhodiaco, Brazil: PTARhodia-ster, Brazil: PTA/PETOxiteno, Brazil: EO/MEG Girsa, Mexico: EO/MEGPralca, Venezuela: MEGGidesa, México: EG, PSTrikem, Brazil: PSInnova, Brazil: styrene/PSDaaboul, Syria: LABJose Methanol, Venezuela: methanolKuAz, Russia: caprolactamEleme Petrochemicals, Nigeria: PE, PPXinao, China: Coal-to-DMEDCM Shiram, India: PVCHimadri, India: Carbon Pitch, carbon blackGalaxy Chemicals, India: SurfactantsEIPET, Egypt: PET

Others/InfrastructureFertilizers

Inorganic Chemicals

Engro Polymers, PakistanKanoria Vizag, IndiaAtul Ltd, IndiaAlexandria Carbon Black, Egypt: Carbon blackContinental Carbon (CCIL), India: Carbon BlackMaanshan I & II, China: Carbon blackRain Calcining, India: calcined carbonPeroxythai, Thailand: hydrogen peroxideChengdu, China: potassium hydroxide & PVCProdesal, Colombia: caustic soda, chlorineMeghmani Finechem, India: ChlorAlkaliMagadi Soda, Kenya: soda ashLukovac Soda, Bosnia: soda ashKanoria Chemicals, India: ChlorAlkaliJiuda Salt, China: industrial salt

JPMC Terminal, JordanIFC / SCB FacilityEngro Vopak, Pakistan: Chemical terminalMesser, Trinidad & Tobago: industrial gasesOpet Petrolculuk, Turkey: fuel distributionAntai, China: metallurgical cokeEcogreen I & II, Indonesia: oleochemicalsDarong, China: specialty chemicalsUPL, India: pesticides, herbicidesGapco, Kenya: storage terminalZhong Chen, China: storage terminalGalnaftogaz, Ukraine: petroleum retailerDongyue, China: fluorine chemicals,

organicsiliconeAtul, India: Dye and pesticide intermediatesHikal, India: PharmaceuticalsVinati Organics (JV), India: specialty chemicals

5

All Economics Is Driven By Politics……

IFC Chemicals 6

?

Political Risk: Far Away Issues Also Impact Us

Where is France Going?

?

What about

the Migrants

Crisis

US: Playing Political Games – With No Rules

Presentation Title 7

The New Normal : Shut the government down and flirt with debt default every 3 months?

Prospect Prospect Prospect Prospect of of of of prolonged and prolonged and prolonged and prolonged and

frequent frequent frequent frequent fights fights fights fights on on on on

Capitol Hill Capitol Hill Capitol Hill Capitol Hill

The next politicoThe next politicoThe next politicoThe next politico----economic crisis is just a few weeks away !! economic crisis is just a few weeks away !! economic crisis is just a few weeks away !! economic crisis is just a few weeks away !!

MIGA: Multilateral Investment Guarantee Agency

�Umbrella of deterrence

� MIGA’s Shareholders are the same as the Host Countries of investments

� Only a small proportion of MIGA-supported projects encounter difficulties

�MIGA guarantees provide downside protection on long-

term investments

� Equity covered up to 90%; Debt covered up to 95%

� Tenor covered up to 15-20 years

8

•Political (Country) Risk Insurance

Currency

Transfer

Restriction and

Inconvertibility

Expropriation War and Civil

Disturbance

Breach of

Contract

Coverage

•Guarantee holder can pick any combinations of coverage

Non Honoring of

Sovereign

Obligations

�Facilitation of settlement of disputes

•Host Country is motivated to find a solution

•Project sponsors and financiers have a vested interest in continued success of project

•5 claims paid out of 980 guarantees for total of 616 projects since 1990

MIGA’s Risk Mitigation Solutions

China: Yuan versus Dollar

IFC Chemicals 9

Source: IMF, SEI

Chin

a:

Avera

ge B

ase

Meta

ls

Consu

mpti

on a

nd G

DP p

er

Capit

a

The Asian Giants: China and Japan

BOJs twin aims— generating inflation and bringing down yields—

may be somewhat contradictory

Bank of Japan

Due to economical & political instability

Volatility has been Increasing

IFC Chemicals 10

Source: IMF

Chinese Stock Market 2014-15

Emerging Markets are driving global growth. All Companies are increasingly focusing on EM.

11

-1

0

1

2

3

4

5

6

Historical and Forecast GDP Growth

Source: IMF

-6

-4

-2

0

2

4

6

8

10

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

World

Advanced economies

Emerging and developing economies

Economic Insights: We know Emerging Markets

As a member of the World Bank Group, IFC has unparalleled insights into Emerging Markets.

12

Phosphatic Fertilizers : An example

Source: Fertilizer International, Deutsche Bank

Volume growth is volatile and pricing is often lagged to volumes

Cyclicality: we have to live with it

Counter-Cyclical Role: AAA-rated

•IFC has committed over $6.0 billion of local currency loans in a variety of currencies since 1999

•(31 currencies currently available)

13For more information see Annex 3

Local and Foreign Currency capabilities

14

B-Loans & Parallel Loans

•A loan is for IFC’s own account

•B loan is for account of participant commercial banks

•Only one loan agreement, signed by the borrower and IFC

•IFC is the lender of record for the entire loan (A+B)

•IFC Loans exempt from withholding tax

Participants

IFCBorrower

Loan Agreement

A + B Loans

B LoanParticipation

Agreement

1. Calyon

2. Cordiant Capital

3. Citigroup

4. ING Bank

5. ABN AMRO

6. BayernLB

7. Societe Generale

8. HSBC

9. Natixis

10. KBC Finance Ireland

Top 10 IFC B-Loan Participants

IFC Mobilizes Others: Lenders & Equity Investors (AMC)

•Established in 2009 to manage third party capital in a private fund structure. •$8.1b •Assets under management

•27 •High Caliber

Investors

•$4.6b •Investment

Commitments by Funds

•8•Funds

•75• Staff

•65•Portfolio

Investments

• A wholly owned subsidiary of IFC

• IFC is an anchor investor in AMC funds,

• IFC also invests directly in underlying deals, and

• AMC funds invest in IFC’s proprietary transactions.

• AMC provides investors with a unique platform to invest in IFC’s proprietary transactions in emerging markets.

• AMC’s investors benefit from exclusive access to IFC’s

• Emerging markets deal origination capability and pipeline,

• On the ground footprint,

• Investment resources,

• Proven risk management.

• Different funds raised to focus on specific regions and sectors.

• Separate subsidiary for independent decision-making process.

•AMC Family of Funds: World Class Investments for World Class Investors

IFC Global Capitalization

Fund

Africa Capitalization

Fund

IFC Russian Bank

Capitalization Fund

IFC Global Infrastructur

e Fund

IFC African, Latin

American and Caribbean

Fund

IFC Catalyst Fund

Financial Markets$3bn

Financial Markets$182mn

Financial Markets$550mn

Infrastructure$1.2bn

Multi-region, Multi-sector

$1bn

Resource Efficiency$418mn

Selected AMC

Investors

IFC’S CHINA-MEXICO FUND & ASSET MANAGEMENT CO, LLC

•31

16

Priorities Innovation hot spotsIFC Cleantech Clients

Clean energy & access

1▪ Solar

Industrial efficiency

3

Sustainable urbanization

2

Agriculture, water, and

forestry

4

▪ Water

▪ Energy storage

▪ Biomass

▪ Green Buildings

▪ Water

▪ Energy storage

▪ Energy efficiency

▪ Waste

▪ Biomass

▪ Energy efficiency

▪ Biomass

▪ Energy efficiency

IFC holds an annual Cleantech Workshop which is attended by 150 investors, companies, and IFC

staff to exchange ideas on innovation

IFC has also committed US$254 million in

12 climate funds

IFC has also committed US$254 million in

12 climate funds

IFC is pushing innovation via its new direct venture/growth capital investment program (US$136 million committed since 2009)

Strong Equity Track-Record: Different from PE

17

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010North America Latin America

Western Europe Central and Eastern Europe

Africa and Middle East Asia Pacific

Historical Global Chemical Capital Spending

(billions of dollars)

2010 Global Chemical Capital Spending and

as % of regional shipments

(billions of dollars)

� Fertilizer Plant (Amonia, Urea) costs $1-2bn

� A new Refinery costs $5-8bn, while a Polyethylene Plant

costs $2-4bn

� 2010 Capex was around $247bn in 2010

-20%

-10%

0%

10%

20%

30%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Growth Global Capital Spending Growth Global Shipments

0

50

100

150

200

250

300

350

400

Central and

Eastern

Europe

Latin America Africa and

Middle East

North

America

Western

Europe

Asia Pacific

19%

5%4%13%4%7%

Capital Spending vs. Shipments Growth

(%)

Include Pharmaceuticals

The Chemicals Industry is Capital Intensive

Long term player – On both debt and equity sides

• IFC would enter into Risk Sharing Agreements (“RSAs”) with one local banks in each

country, selected jointly by Client Company and IFC. Under each RSA, IFC would

share losses with the Bank on its portfolio of financings to Client’s distributors

and/or farmers in that emerging market, typically on a pro-rata and pari-passu basis.

• Under a separate Framework Agreement between Client and IFC, Client would

provide a pooled first loss cover and reimburse IFC for its payments under the RSAs,

up to a maximum cap to be agreed between them(“First Loss Amount”).

• Structures of individual RSAs can vary, depending on each banks’ requirements and

each target portfolio.18

Short Term Finance: Crisis Mitigation

Bank 2

Country 2IFCIFC Client

Company

FarmerFarmerFarmerFarmerFarmerFarmer

FarmerFarmerFarmerFarmerFarmerFarmer

DistributorDistributorDistributorDistributorDistributorDistributor

Bank 1

Country 1

Bank 3

Country 3

Global

Framework

Agreement

RSA

RSA

RSA

Risk Sharing Facilities

19

In-house Technical and Market Expertise

The Global Economy is Highly Volatile

The Global Crises shook us

out of complacency.

The world continues to change dramatically.

It is Very Important to Understand and Manage Risks

Let your risk capabilities drive your strategy.

IFC’s mandate is to Builds Partnerships

to Share Its Expertise to Supplement

Risk Management Capabilities of Companies,

so they can Enhance Competitiveness

and Build Leadership positions. 20

21

IFC Value Add: Tailored To Each Customer

� Equity

� Fixed/Floating Rates, Local Currencies

� Up to 15 year Loan Maturity

� Flexible Amortization Profile

� Catalyst for other Investors and Lenders

� Equity Participation

� Capital Mobilization

� 50 Years of Sector Expertise

� Greenfield

� Expansion/Modernization

� Corporate Strategy

� Access to International Investors

� Technical Advice

� Advice on Environmental and Social Best Practices

� Equator Principles Modeled after IFC Standards

� Local Consultation and Disclosure

� Local Supplier Development

� Environmental/ Social Advice

� Corporate Governance

� Local Economic Development

� HIV/AIDS Prevention

� Community Development Funding

Sustainability Toolkit

Environmental & Social Risk Management

GlobalChemicalsExpertise

Long-term Competitive Financing

21

� Government Relations: 184 Finance Ministries form IFC’s BoD

� Neutral broker Role

� Reduced Risk of Expropriation, Breach of Contract, Convertibility

� World Bank Synergies

� Withholding Tax Benefit

� Partnership with MIGA

Country Risk Mitigation

� Extensive Local Office Network

� Local Transaction Experience

� World Bank Synergies

Regional Knowledge

In Summary

22

How We Finance Projects

•Umbrella for participants in IFC’s syndication program: IFC lender of

record, immunity from taxation and provisioning requirements.

•IFC’s total financing must be less than 25% of total company

capitalization, and IFC does not manage or own largest stake.

Project Type IFC Investment

Greenfield, total cost

less than $50 million

Greenfield, total cost

more than $50 million

Expansion or rehabilitation

Greenfield, expansion,

rehabilitation

Up to 35% of project cost

for IFC’s account

Up to 25% of project cost

for IFC’s account

Up to 50% of project cost

for IFC’s account

100% project cost for IFC

and participating banks’

accounts

23

IFC’s Works With A Broad Array Of Products and ServicesSeniorDebt

Global TradeFinance Program

StructuredFinance

MezzanineFinance

PrivateEquity

• On-lending

• Liquidity management

• Acquisition financing

• Warehousing facilities

• Syndicated loans

• Partial credit guarantees

• Securitization

• Bond underwriting

• Credit Enhancement

• Convertible debt

• Subordinated debt

• Other Tier II instruments

• Common shares

• Preferred shares

• $1 billion program

• Guarantees to issuing banks

• 46 issuing banks in 24 countries

• 92 confirming banks in 62 countries

• $579 million of issued guarantees in first 12 months

AdvisoryServices

• Corporate governance

• Risk management

• Small and medium business banking

• Housing finance

• Energy efficiency finance

• Privatization

SustainableFinance

• Carbon finance

• Renewable energy

• Supply chain financing

• Corporate governance financing

24

Approaching IFC

• Foreign or Domestic Sponsors

� New venture or expansion; private sector majority ownership only

� Project must be developmentally sound and commercially viable

• Sponsor Commitment is Required

� Equity participation; pre-completion support/guarantees

• Submit Preliminary Business Plan or Feasibility Study

� Brief project description, incl. technical feasibility and market study

� Information on sponsors and operator

� Environmental studies

� Information on requirements, financing plan and cash flow projections

25

IFC’s Project Cycle

Early Review

• Client needs determined

• Contribution of project to development assessed

• Project screened for potential risks & issues

• Site visit

• Mandate letter

Due Diligence Negotiation DisclosureInternal

Approvals and Commitment

Disbursement

• Assessment of business potential, risks, opportunities

• Financial and economic Evaluation

• Compliance with IFC’s social and environmental performance standards reviewed

• Terms and conditions of the IFC investment

• Action plan agreed

• Environmental and social information disclosed

• Opportunity for public comment

• Board consideration

• Board approval

• Legal review

• Signing of legal documents

• Fulfillment of conditions of disbursement

• IFC funds disbursed

We Agree on a Specific Timeline to Meet Client’s Needs

26

INTERNATIONAL FINANCE CORPORATION

Anil Chandramani

Chief Investment Officer & Global Client Relationship Executive,

Chemicals & Fertilizers Sector

Washington DC

Phone: +1-202-473-4081

Cell Phone: +1 202 830 8398

E-mail: achandramani@ifc.org

Cecilia Ocon

Senior Investment Officer; Manufacturing

Agribusiness & Services Department

Mexico City

Phone:+52 55 3098 0235

Cell Phone: +52 1 4188 8506

Email: Cocon@ifc.org