Istanbul Discussion Paper - OECD.org · Credit Suisse Solution Partners MENA has a great future...
Transcript of Istanbul Discussion Paper - OECD.org · Credit Suisse Solution Partners MENA has a great future...
CONFIDENTIAL
November 2006
Thoughts on PPPFinancings
Credit Suisse Solution Partners
Discussion Paperfor the OECD MENA Initiativeon Governance and Investmentfor Development
Credit Suisse Solution Partners
W-European experience points to trends to be expected in MENA
� W-European characterictics– Legal frameworks differ significantly from country to country– PPP sector-mix varies from country to country– PPP structures usually enhance delivery quality of large projects and services
� On budget & in time delivery– Potential drawbacks
� Higher cost of capital� Significant transaction advisory costs� Social effects
– Country patterns� Most active: UK, France, Spain, Italy, Portugal� Emerging: Germany, Scandinavia, CEE incl Russia
– Voracious appetite for assets and predictable cash-flows from infrastructure investment funds
� Barriers to development– Lack of specific legal frameworks– Complexity of government structures (e.g. federal, regional, local responsibilities)– Heterogenous political will to apply PPP structures– Intransparent procurement processes
Credit Suisse Solution Partners
Increasing use of PPPs across Europe
Discussion ongoing Project in procurement Many procured projects, some projects closed Substantial number of closed projects
Substantial number of closed projects, majority of them in operation
CANDIDATE &COUNTRIES
Aus
tria
Bel
gium
Den
mar
k
Finl
and
Fran
ce
Ger
man
y
Gre
ece
Irela
nd
Italy
Luxe
mbo
urg
Net
herla
nds
Nor
way
(Not
EU
)Po
rtug
al
Spai
n
Swed
en
UK
Cyp
rus
Cze
ch R
epub
lic
Esto
nia
Hun
gary
Lativ
a
Lith
uani
a
Mal
ta
Pola
nd
Slov
akia
Slov
enia
Bul
garia
Rom
ania
Turk
ey
CentralAccommodationAirports
Defence
Housing
Health & Hospitals
IT
Ports
Prisons
Heavy Railway
Light Railway
Roads
Schools
Sports & Leisure
Water & Waste Water(Incl. Solid Waste)
ACCEDINGCOUNTRIESMEMBER STATES NEW MEMBER STATES
Credit Suisse Solution Partners
MENA has a great future from a bank/investor perspective
� MENA/Emerging Markets– Legal and fiscal situations vary greatly– Mostly low transparency of procurement and privatisation processes– Real GDP growth of 5% p.a.+ is twice the population growth rate and hence is triggering increasing demand
for improved services and infrastructures� transport, healthcare, education, utilities
– PPP specific know-how largely with companies and institutions from outside the region – needs to beimported but each country will develop its own specific PPP model and has to create its own knowledge pool� Legal, financing, policy
– Gulf countries’ financial systems awash with liquidity from oil & gas sector, with inflows also from Central Asia– Public capital markets growing but small compared to needs and fully developed regions– Demand for Islamic investments is driving fast growth of Islamic capital market
� Capacity for corporate issues and PPPs limited – investors need education– Already about 35 private equity funds with about $5bn investment capital domiciled in and focused on MENA
Credit Suisse Solution Partners
But success depends on the objectives
� Valuemaximisationsubject toachieving otherobjectives
� Optimal, but notexcessively riskycapital structure
� Optimise mix ofone-off proceedsand ongoingdividends
OptimiseValue
� Invest in sufficientcapacity to meetpredicted trafficgrowth
� Clarify ongoingrole of authority inplanningprocesses
� Ensure alignmentwith customerneeds: timing,scale, cost
Investment inInfrastructure
� Development ofverticallyintegrated serviceoffering related toinfrastructure
� Focus on profitableand sustainablegrowth
� Secure sufficientfinancial flexibility
� Focusedinternationalexpansion strategy
Support BusinessStrategy
� Majority stake andcontrol remainswith the authority
� Clarify shareholderrights and role ofBoardrepresentatives
� Specific assetownership andpossible rentalterms
OngoingInfluence and
Control
PPP Process Design / Choice of Method�Strategic interests of the authority must be protected in a manner
that can be clearly communicated to and understood by investors�Long term successful solution�Minimise residual risks
� Public� Explore employee
participation� Protection of
rights� Incentive
schemes� Consider
ownershiprestrictions
Share Ownership
Credit Suisse can design a process that enables the authority to achieve its objectives, whilst also takinginto account the objectives of the Company and the requirements of the potential investors.
PPP Objectives
� Impact on:� Economy of the
region� Employment� Environment� Security & safety
� Tariffs and servicelevels toincentivise trafficgrowth
� Third party access� Public consultation
and PR
Protect the PublicInterest
Credit Suisse Solution Partners
Financing Trends
� New debt market technology– Senior debt that PIKs (accreting swaps)– Mega tenor (60 – 80 years)– Allows distributions to equity despite not paying current interest– Hybrids are equity for credit rating but debt for tax deduction: the perfect product
� Investors are searching for yield– Collapse in government bond yields, low IRRs– Investors must go into corporate assets as well as financial investments– Take and hold investors who need a yield but do not want to exit– IRRS can be as low as 10% for a toll road with no project risk – raises equity prices
� Returns– Primary PPPs can be financed with 20-25% equity and yielding 13-15% IRR
� Investors– Most North American pension & life insurance companies can now invest directly into unlisted assets and
infrastructure funds– Universe of specialist financial investors is growing fast: from the beginnings of Macquarie and Babcock &
Brown to 25 and more independent entities
Credit Suisse Solution Partners
Credit Suisse snapshot
� Premier global financial institution� Three divisions: Private Banking, Investment Banking, Asset management� Key numbers/financial information
– Market cap: $62 billion– Assets under Management: $1.15 trillion– Return on Equity: 21.7%– 63,000 employees in 26 countries and 57 locations– 150 years “young”
� Involvement in PPPs has changed its nature over time– Founded to finance the Gotthard railway tunnel through the Alps because there was no state funding– From bank financier…– To capital market oriented financier…– And infrastructure investor
Credit Suisse Solution Partners
Credit Suisse presence in the region
Doha
Representative office
since March 2006
Teheran
Representative office
since 1979
Istanbul
6 Professionals
Cairo
6 Professionals
Representative Office since
1978
Dubai
75 Professionals
Representative office since
1994
Branch office since May 2005
Full banking license DIFX
since January 2006
Abu Dhabi
7 Professionals
Representative office since
1978
Riyadh
Saudi Swiss Securities JV
2006
Beirut
5 Professionals
Representative office since
1999
Credit Suisse Offices
in the MENA region
Credit Suisse Solution Partners
Credit Suisse as infrastructure investor
� Announced on May 30 this year Global Infrastructure Partners (GIP) is a $1bn50/50 partnership between Credit Suisse and General Electric
� Combination of financial market know-how of Credit Suisse and industrial know-how of General Electric and both companies‘ global footprint and financialstrength
� The joint venture will invest world-wide in power generation and transmission, gasstorage and pipelines, water assets, airports, air traffic control, ports, railroadsand toll roads.
� Capitalisation likely to increase with identification of suitable targets� First investment was made in September 2006 together with insurance group
AIG: purchasing London City Airport (GIP‘s share: 50%)
Credit Suisse Solution Partners
Credit Suisse as advisor - recent sector deal highlights
Air Transport Metro Transport Sea Toll Roads
NA
Rendered a fairnessopinion to the board of
abertis on the proposedmerger with Autostrade
Ongoing
Financial Advisor
NA
Feasibility study for thestate of Illinois on the
privatization of Illinois tollroad system
Ongoing
Financial Advisor
2003
Sale of CSX’s shippingbusiness to Carlyle Group
Financial Advisor
US$300m
2006
Provided financing forMacquarie for their
acquisition of APRR,French Toll Road
Approx US$120m
SPO offering 170 millionordinary shares
representing 3.4% of thecompany
2005
Joint Bookrunner /Sole International
Bookrunner
2005
Joint Lead Manager
Macquarie InfrastructureGroup
A$675m placement
2005
Co-Lead Manager
IPO primary offering 26million ordinary shares
representing 28% of thecompany
Approx €950m
US$ 1,100m
2004
Sole Adviser on theprivatisation of MaltaFreeport - a leading
Mediterraneantransshipment terminal to
CMA-CGM
US$304m
Placement of 236,000,000ordinary shares
2003
Sole Bookrunner
Co lead manager andbookrunner for P&O’sUS$190m rights issue
2003
Sole Bookrunner
2002
Sole Advisor
Sale of Ocean Car CarrierDivision to a Consortium
US$1.5 billion
Sole Advisor
2000
Sale of 72% strategicstake to Perez y Cia
US$151m
Advising the DutchGovernment in relation to
the potential privatisation ofConnexxion Group
(Netherlands)
Ongoing
US$1,000m
Joint-Bookrunner forLaidlaw’s US$406m HY
notes and co underwriter ofits US$600m bank deal - to
finance their exit fromChp11
2003
CS advised Roadway Corpon its sale to Yellow Corp.
2003
CS acted as Co-Bookrunner for Deutsche
Bahn’s €850m 15-yr seniorunsecured bond and
€500m follow on
2003
Co-bookrunner
CS is acting as advisor tothe Dutch government on apre-IPO private placement
Ongoing
Advising the city ofChicago on the sale of
Chicago Midway Airport
Ongoing
Chicago MidwayAirport
1994
Adviser to London RegionalTransport in connection with
the disposal of LondonBuses’ 10 operating
subsidiaries
2001
Sole Bookrunner
CS was Sole Bookrunnerfor CSX Corporation’sUS$450m ConvertibleDebentures issuance
Sole Global Coordinator onthe $1bn IPO of Grupo
Aeroportuario del Pacifico
2006
2001–2002
Sole Adviser to the UKGovernment on the saleof a 46% stake in the UKair traffic control (NATS)
to a strategic investor
US$ 1,400m
US$ 2,100m
Advised the HungarianGovernment on the
privatisation of a 75-1%stake in Budapest Airport
2005
Budapest Airport
2004
Acted as sole bookrunneron the CHF500m bondissue of Zurich Airport
Zurich Airport
Sole Bookrunner
Credit Suisse Solution Partners
Credit Suisse was hailed as “the pre-eminent investment bank in the emergingmarkets.” The editors said, “Excellence in debt and equity business combined with asolid M&A platform means that Credit Suisse stands out from its rivals.
- Euromoney Awards for Excellence 2006
Credit Suisse: #1 Global Platform in Emerging Markets
Best Investment BankEmerging Europe
2006
#1
Best Equity HouseLatin America
2006
#1
Best Investment BankGlobal Emerging Markets
2006
#1
“it is in capital markets that the bank shines most.” In equities, Credit Suissewas ranked number one in IPOs in emerging markets globally, as well as numberone in each of the three major regions in 2005, executing landmark transactionssuch as the USD 9.2 billion IPO of China Construction Bank, acting as bookrunneron three of the five largest IPOs in Russia and dominating issuance out of Brazil.
- Euromoney Awards for Excellence 2006
“Credit Suisse has demonstrated its commitment to the region by leading the way inestablishing a presence in the Middle East’s capital markets”, culminating in “thebank’s most innovative equity transaction”, the €825 million exchangeable bond forWeather/Orascom Telecom in Egypt.
- Euromoney Awards for Excellence 2006
Best Equity HouseMiddle East
2006
#1
Best Equity HouseBrazil & Mexico
2006
#1
Best Equity HouseChina2006
#1
US$416mFollow-onJune ‘06
US$1,983mABB
April ‘06
US$795mFollow-onMarch ‘06
US$1,003mIPO
February ‘06
US$457mIPO
February ‘06
US$1,393mConvertibleJanuary ‘06
US$455mIPO
December ‘05
US$983mExchangeableFebruary ‘06
US$891mIPO
December ‘05
US$403mIPO
November ‘05
US$7,585mIPO
October ‘05
US$394mIPO
September ‘05
US$966mIPO
July ‘05
US$1,352mIPO
September ‘05
US$436mABB
June ‘05
US$422mIPO
June ‘05
PyaterochkaUS$639m
IPOMay ‘05
US$1,557mIPO
February ‘05
US$616mIPO
April ‘05
US$320mIPO
May ‘06
Credit Suisse Solution Partners
Consistent Project Finance LeadershipBroad Awards League Tables
Source: Dealogic Global Project Finance Review.
2003Project Finance Bond House ofthe Year
� CSFB
POS. FINANCIAL ADVISOR AMT % SHARE1 HSBC Holdings plc $12,238 11.4%2 Royal Bank of Scotland Group plc 11,734 11.0%3 Citigroup Inc 11,175 10.4%4 Societe Generale 8,990 8.4%5 Credit Suisse Group 5,468 5.1%
2005 Global Project Advisory($ in millions)
POS. BOOKRUNNER AMT % SHARE1 Citigroup $4,404 21.9%2 Goldman Sachs Group Inc 4,088 20.3%3 Lehman Brothers Holdings 2,146 10.6%4 Credit Suisse Group 946 4.7%5 Credit Agricole SA 795 3.9%
2005 Global Project Bonds($ in millions)
POS. ARRANGER AMT % SHARE1 Royal Bank of Scotland Group $6,657 6.1%2 BNP Paribas SA 5,059 4.6%3 Societe Generale 4,734 4.3%4 Credit Agricole SA 4,579 4.2%5 Credit Suisse Group 3,488 3.2%
2005 Global Project Loans($ in millions)
POS. ARRANGER AMT % SHARE1 Credit Suisse Group 2,722 12.5%2 Citigroup Inc. 2,636 12.1%3 Morgan Stanley 1,129 5.2%4 Banco Bilbao Vizcaya Argentaria SA 1,096 5.0%5 BNP Paribas SA 1,025 4.7%
2005 Americas Project Loans($ in millions)
Source: Dealogic Global Project Finance Review.
Source: Dealogic Global Project Finance Review.
Source: Dealogic Global Project Finance Review.
2005Renewables Deal of the Year� Hawkeye Renewables, US$185 mm
- Euromoney- Project Financial Magazine
Merchant Deal of the Year� Boston Gen., US$800 mm
- Euromoney
EMEA Petrochemical Deal of theYear� Q Chem 2
- Euromoney
2004
North American Deal of the Year� Astoria Energy, US$700mm
- Project Finance Magazine
2003
North American Deal of the Year� FPL Energy American Wind,
US$380 mm- Project Finance Magazine- Project Finance International
Renewable Deal of the Year� FPL Energy American Wind,
US$380 mm- Project Finance Magazine
Deals of the Year
2004
Best Global Finance Bank
� CSFB
Best North American ProjectFinance Bank
� CSFB
Best Power Project Finance Bank
� CSFB
Credit Suisse Solution Partners
Note: As of 4/20/2006
Credit Suisse understands the financing markets for project financing - it does morefinancings than any other investment banking
Historic Dominance In Capital Markets Project FinancingsFull Credit To Lead Manager, 1992-2006 YTD
Continued Dominance In Capital Markets Project FinancingsFull Credit To Lead Manager, 2000-2006 YTD
Total Rated Projects 1992-2006 YTD
(US Dollars in millions) (US Dollars in millions)
$34,153
$8,489$9,396
$15,862$16,467
Credit Suisse Lehman Citigroup GoldmanSachs
MorganStanley
98
5137
1925
$3,979$4,720
$7,057$8,993
$15,835
35
21 14
10 4
Credit Suisse Lehman Citigroup GoldmanSachs
MorganStanley
19
98
51
2537
Credit Suisse Citigroup Lehman GoldmanSachs
MorganStanley
Note: As of 4/20/2006
Note: As of 4/12/2006
Comprehensive Financing Capabilities
2005 America’s Project Loans
$1,025
$2,722 $2,636
$1,096$1,129
Credit Suisse Citigroup MorganS l
Banco Bilbao BNP Paribas
Source: Dialogic Global Project Finance Review.
(US Dollars in millions)
Credit Suisse Solution Partners
Credit Suisse – widespread experience in MENA
Middle East Financing Track Record
Strong Investment Banking Franchise
Audi Investment Bank BondIssue
Joint book on MTN issueFloating Rate Note
Lead arranger on $2.4bnacquisition financing of Cell Tell
$2bn Syndicated Term LoanFacility Revolver
The State of Qatar DebutEurobond Offering
Ras Laffan LNG 2009 Sr.Secured Notes
First Public Corporate IslamicSukuk Offering from the GCC
Investcorp Preference ShareIssue
€825m Weather Exchangeableinto Orascom Telecom
2005 $891m privatisation Sultanate of Oman Airport Privatization Joint lead on IPO Advisor on $2.1bn sale of DSMpetrochemical division to SABIC
AMERICAN EXPRESS BANK EGYPT
Sale of Amex Egypt to EAB Sale of EAB to Credit Agricole& Mansour Group
Advisor on Telsim acquisition 2006 Capital Increase (Pending)
Saudi International Bank FalconIV CBO Ltd.
Privatisation of Qatar Telecom(Q-TEL)
Advisory on license acquisition
Advisory Mandate Privatisation of Taweelah A1 andA2, Abu Dhabi
Joint Bookrunneron 14 offerings since 1997
Credit Suisse Solution Partners
Credit Suisse Presence in Turkey
� Branch established in 1998
� Fully operational banking license
� Trading activities performed locally until
2004
� Ongoing discussion regarding the purchase
of a broker license to increase research and
sales / trading platform
� Representative office for coordinating
marketing activities and local coverage� Used as a liaison office and has no local tax
presence
� Strong presence in all product areas with
dedicated resources in Investment Banking,
Debt Capital Markets, Equities, Fixed
Income and Private Banking
� Recent key hires to strengthen Credit
Suisse’s coverage presence in Istanbul
History Today
Credit Suisse Solution Partners
Credit Suisse - highly experienced in TurkeyEC
M
2005
US$216 million
Initial Public Offering
Joint Bookrunner
2004
US$194 million
Efes BreweriesInternational NV
Initial Public Offering
Lead Manager
2005
Advisor to Telefonicain the Turk Telekom
Privatisation
2000
US$286 million
Secondary Offering
Global Co-ordinator
1998
US$55 million
Secondary Offering
Co-lead Manager
1998
US$250 million
Securitisation ofInternational Credit
Card VoucherReceivables
Lead Manager
1997
US$115 million
Secondary Offering
Lead Manager
1998
US$651 million
Privatisation Offering
Co-lead Manager
1998
US$651 million
Privatisation Offering
Co-lead Manager
2006
US$275 million
IPOSole Global
Coordinator & SoleBookrunner
Adv
isor
y
2005
US$276 million
Advisor to Coca ColaIcecek Turkey in itsacquisition of a 51%stake in Efes Invest
Credit Suisse advisedBanca Intesa on the
Disbank process
2005
Credit Suisse advisedTemasek on the
Yapi Kredi process
2005
Credit Suisse advisedNational Bank of
Greece on the Garantiprocess
2005
€275 million
Advising UniCredit andKoç Group´s JV in theacquisition of c.7.3%Yapi Credit Minorities
20062006
Advisor to NationalBank of Greece
in the acquisition of46% of
Finansbank
US$2,774 million
2006
Credit Suisse advisedNational Bank ofGreece on the
Denizbank process
US$2,440 million
2006
Advisor to Kocbank onits merger with Yapi
Kredi
US$4.600 million
Credit Suisse Solution Partners
DISCLAIMER
This document was produced by and the opinions expressed are those of CREDIT SUISSEas of the date of writing and are subject to change. It has been prepared solely forinformation purposes and for the use of the recipient. It does not constitute an offer or aninvitation by or on behalf of CREDIT SUISSE to any person to buy or sell any security. Anyreference to past performance is not necessarily a guide to the future. The information andanalysis contained in this publication have been compiled or arrived at from sourcesbelieved to be reliable but CREDIT SUISSE does not make any representation as to theiraccuracy or completeness and does not accept liability for any loss arising from the usehereof. The issuer of the securities referred herein or a CREDIT SUISSE GROUP companymay have acted upon the information and analysis contained in this publication before beingmade available to clients of CREDIT SUISSE. A CREDIT SUISSE GROUP company may,to the extent permitted by law, participate or invest in other financing transactions with theissuer of the securities referred herein, perform services or solicit business from suchissuers, and/or have a position or effect transactions in the securities or options thereof.
Neither this document nor any copy thereof may be sent to or taken into the United Statesor distributed in the United States or to a US person, in certain other jurisdictions thedistribution may be restricted by local law or regulation.
This document may not be reproduced either in whole, or in part, without the writtenpermission of CREDIT SUISSE. © 2006 CREDIT SUISSE