Mongolia Water Challenges & Potential Spanish Delegation to Ulaanbaatar June 5, 2014

IFC Overview IFC Asset Management Company Wholly owned subsidiary of IFC Private equity fund manager Invests third-party capital alongside IFC $5.5 b under mgmt (FY13) Investment Services Loans Equity Trade finance Syndications Securitized finance Risk management Blended finance $49.6 b portfolio (FY13) Advisory Services Access to finance Investment Climate Sustainable Business Public-Private Partnerships $232 m (FY13) 2 Private Sector Arm of the World Bank Group

3 IFC FY13 Committed Investments: $24.8 Billion 3 IFC Also Growing in Mongolia: Over $400m in cumulative financing: Financial Services, Wind-Power, Housing, Hotel, Agribusiness…

LAC $537mm committed 36 investments 30.1mm people reached MENA $232mm committed 9 investments 10.1mm people reached CAF $138mm committed 12 investments 4.6mm people reached SA $229mm committed 22 investments 8.4mm people reached ECA $463mm committed 20 investments 6.4mm people reached CEA $521mm committed 26 investments 21.5mm people reached IFC Water & Waste Business Globally $2.1bn committed across 126 projects since 2003 (1)(2) Note: As of June Includes water related deals in Water, Waterwaste, Manufacturing, Agribusiness and Services sectors. 2.Includes Organica transaction which is not reflected in any above mentioned regions. Including Some Spanish Companies in UB Today: Abengoa, Acciona, Gamesa, GNF (other infra sectors) 4

5 Mongolia: Strong GDP Growth… Recent declining trend: 11.7% 2013, Est. 10% 2014

6 …With Challenges… Investment Climate and Macro-economy need more long-term stability (FDI down 54% 2012, 65% Q1 2014; MNT Depreciated ~30% in past 18 months) Concentrated Markets (China & Russia; landlocked) Infrastructure and logistics gaps need to be developed to lower costs and support growth Standards remain low limiting value-add, exports Small domestic market limits interest by foreign investors and risks oversupply in medium-term

7 …But Improving “Doing Business” Ranking…

8 Mining is foundation of strong growth (OT mine alone expected to contribute more than 30% of GDP once completed; TT and others to come) Infrastructure (power, heat, transport, urban) will need to be built (estimated need of over $20 billion in next several years) Non-mining exports has potential to vastly expand (agri, green power, import substitution) Urbanization, young demographics (56% under 30), and rapid middle class growth (potential to double income every 4-5 years w/low teens GDP growth) …And Long-Term Growth Drivers

9 Mongolia’s Water Challenge: UB Key take-aways: Water demand exceeds current supply capacity in all scenarios. In the high and medium water demand scenarios, Ulaanbaatar will run out of water within the next 10 years. Existing water resources are vulnerable to pollution. The water supply and wastewater infrastructure is in need of a major overhaul and expansion, esp. in the Ger areas. 6 Water supply and demand gap in Ulaanbaatar Source: Tuul Water Basin Integrated Water Management Plan, New Ulaanbaatar City Master Plan, PwC/ Deltares calculations Right Pricing, Investment, Sustainable Use

10 Mongolia’s Water Challenge: South Gobi Key take-aways: In the high demand scenario water demand is estimated to exceed available water resources between 2021 and High water risks, incl. quality and quantity, are expected locally in all scenarios. Competing water demands create conflicts between the mining sector, herders and local communities. Non-compliant (mining) companies and ninjas have negative impacts on the environment. 6 Water supply and demand gap in South Gobi Source: MEGD: Integrated Water Management Plan of Mongolia, 2013, PwC/ Deltares calculations Note: incl. water basins: Umard Goviin Guveet-Khalhiin Dundal Tal, Galba-Uush-Dolodiin Govi and Altain Uvur Gobi Basins Water Mgnt, Monitoring, Info Sharing

11 Rising demand for water (Household & Mining): UB: fast urbanization, rising middle class, more modern housing means higher water consumption – big need for modern water infra Constraining supply: Low precipitation, high evaporation, poor infra (high leakages), climate change impact – Efficient & sustainable usage Old and missing infra capacity: 30% of soums (counties) do not have water systems (MOEGD); Prioritizing fiscal, private, and PPP financing Key Take-Aways (1)

12 Sensible policies (pricing), legal framework (PPP): Subsidized (under) pricing for households, but industrial tariffs have been raised; international standard PPPs framework (water & other infra) Sustainable usage of water (societal awareness): Livestock is biggest water user in Mongolia (need to fix overgrazing); Recycling for mining (i.e. OT recycles 70-80% of water use) Much needed investment & technology: “ Bankability ” is critical to attract private sector. Key: stable & predictable investment climate Key Take-Aways (2)

13 Thank You