Financing Romanian Agriculture Investment and development options

How attractive is Romanian agriculture versus Europe ?

Agriculture in Netherlands vs. Romania RomaniaNetherlands GDPEuro 140 billionEuro 600 billion Arable land9.5 million ha1.8 million ha Professional farmers (working > 5 ha) Agriculture exportsEuro 4 billionEuro 78 billion Arable land pricesEuro – /haEuro /ha

Total loans to the agricultural sector 2013 LoansAverage Debt / farmer Romania Euro 3.5 billion1 300 Euro Netherlands Euro 40 billion Euro

Total agricultural loans in Romania Aug % granted by banks annual growth rate 3% 25% granted by Non-Bank Financial Institutions (NFI) annual growth rate > 20% *Commercials credit (offered by agribusiness players) is estimated at RON 2.5 – 3 billion per year. Million RON

What is being financed? Working Capital Needs (Banks, NFI, Commercial Credit) Investment Loans  Equipment (NFI)  Projects with European grants (Banks)  Others, such as arable land acquisitions (Banks, NFI) 33%

What investment and development options does a Romanian farmer has?

Extension of the agricultur al area Milling bakery Energy (biogas wind) Silos Trade in cereals FNC Agricultu ral service delivery Livestock breeding (pigs, cows) Vegetabl e and fruit growing Development

» Defensive » Low risk » Moderate increase in cost efficiency » Liquid fixed assets and an increasing trend in the market value during the next period » Facilitates the densification of land ▪ Increases the indebtedness ▪ Investment paid off in the long term ▪ The market becomes extremely competitive, decreasing negotiation power Acquisition of agricultural land

» It may generate a significant profitability in the future » Multiplies the profit centers » Limitation of the specific seasonal character » Using renewable resources » A market with a growth potential in the future » Possible access to non-reimbursable funds ▪ High risk ▪ Increase in exposure, significant investments ▪ Low expertise level, it does not depend on the underlying activity ▪ Dependent on tax incentives that are highly uncertain Energy (biogas, wind)

» Defensive » Storage » Immunity » Allows a better capitalization on one’s own production » Possible access to non-reimbursable funds ▪ Average risk ▪ Increase in exposure, significant investments ▪ Money blocked ▪ Risk of extra capacity ▪ The risk of deterioration of the production stored is taken over Silos for one’s own needs

» Integrated model » Average profitability » Legal limitations that are to reduce the access to the market of the small producers, generating growth opportunities » A market with an increase potential » Possible access to non-reimbursable funds » The integration of activities related to large crops increases profitability ▪ Average risk ▪ Expenses on initial investments ▪ Liberalization of the milk market in 2015, pressure of imports Livestock breeding (pigs, cows)

» Integrated model » Low risk » Average profitability » Market with an increase potential » Possible access to non-reimbursable funds ▪ Expenses on initial investments ▪ Pressure on the price by imports Fruits and vegetables growing

Distribution of development options Low risk High risk High profitability/ efficiency Low profitability / efficiency Energy Inputs Livestock breeding Silo Services Vegetable growing Fruit growing Land Shops FNC Trade Milling, bakery

In conclusion, Romanian agriculture  Has great potential for improving performance  Can contribute significantly more to economic development and export growth  Is hugely under-financed both in terms of working capital needs and investment loans  Will benefit from a significant increase in European funds/subsidies

NFI’s are ideally placed to satisfy the farmers needs for credit  Specialized loan providers, understanding the farmers business  Can provide fast, innovative and flexible credit solutions  Better collateral valuation  Better collection mechanisms

AGRI-FINANCE WHERE AGRICULTURE MEETS FINANCING Thank you !