© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Strategic Risk Management Meeting the challenges of increased oil and gas revenues Options to invest revenue windfalls and sustain future growth in Africa Jean-François Casanova, CEO, Strategic Risk Management, France. African Oil Conference - Nairobi, May 24 th, 2007 DAY 2, Session 5, Room B, 8: 45 – 10:15 NOT AN OFFICIAL UNCTAD RECORD

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 “I really like the idea of making money and doing good and I am perfectly happy if it happens in that order” James Cameron Chairman of Climate Change Capital Making money while providing future development

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Africa challenges of increased oil and gas revenues Major imbalances within Africa

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 At least a light of hope GDP over 6% Africa energy leaders are taking off to gather with growth in line with the best

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 A barrel at USD 50 means an additional revenue of 300Bln per year Estimated amount: more than USD 1.5 Trillion

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 What is done with all this money ?

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Major Oil exporters are relatively risk adverse

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 But taking risk pays ! Source: CSFB, Ibbotson Associates, Venture Economics, Callan Associates From a pure investment perspective, investing in Emerging market gives a substantial premium

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Middle East exporters are less risk adverse…

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 … and meet more easily future development Gulf Cooperation Council experience –Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, Oman –Seventh emerging market GDP USD 733 Bln –Close by it size to Mexico or South Korea

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Non Oil GDP are higher and much less volatile !

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 As an additional benefit Dependence on import & public expenditure declines years after years

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 And Private investment increases as public expenditure gain room to expand

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 First conclusion Create the environment and profitable investments opportunities will arise

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 These are from the originals from NASA Clean carbon and making money: Bio-energy as an Entrepreneurial Solution for African investors? Policy & Government Bio-fuels Industry Transportation Equipment Manufacturer Investors Agro-Business Automotive Energy The tropics are the main area for biofuels production today!

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Source: Ministry of Mines and Energy - Brazilian Energy Balance – 2006 and Laura Tetti – USP – BEP FUEL DEMAND FOR LIGHT VEHICLES IN BRAZIL YEAR TOTAL DEMAND FOR LIGHT VEHICLES (GNV INCLUDED) GASOLINE PRODUCTION GASOLINE CONSUMPTION TOTAL DEMAND FOR LIGHT VEHICLES (WITHOUT GNV) This curve shows how much gasoline would be necessary to satisfy the fuel demand for light vehicles supposing the non-existence of the Brazilian Ethanol Program Total economy of 778 million boe or 15 months of the present Brazilian petroleum production. Accumulated economy of 7 years and 9 months of pure gasoline consumption. US$ 61 billions IN THIS PERIOD, WITH THE ETHANOL USAGE, THE EMISSION OF 644 MILLION TONS OF CO 2 WAS AVOIDED + US$ 16 billions One of our favourite option for meeting African future development Ethanol Experience in Brazil : Oil economy and environmental benefits

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 A comprehensive development model for Africa Forward integration by farmers and backward integration by the many end users of Bio energy More acreage put into production, more income for farmers Creation of thousands of jobs in newly constructed plants Appreciation in farm and other real estate values Creation of ancillary industries and services in various sectors Supply chain and logistic companies to meet requirements by palm, oilseeds and ethanol producers Training and development firms to support managers and employees of ethanol plants and for related industry players R&D firms to advance the technology and discover new technologies Local population may get access to cheaper fuel Potential to bring in venture capital to provide these start-ups with capital required Higher number of local plant owners will yield a higher economic impact through tax receipts to local governments

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Is this growth model suited for Africa, and how can it produce an attractive rate of return over time? The Methodology for investing is about evaluating investment allocation Strategies and risks associated –Is it really entrepreneurial? Free market or state control ? –Within the Bio energy value chain: who will really make the money as power in the channel shifts over time (growers, refiners, big energy companies, wholesale distributors, retail sellers)? Analysis goals –Identify portfolio strategies Determine investment allocation guidelines Identify the level of risk capital available or the investment requirements for risk capital –Assess the risk to the overall portfolio Earnings at risk and equity value implications Credit at risk and downgrade risk implications Iterative process –Evaluate current “risk capital” available –Ranking of the investment opportunities –Structuring of investment scenarios among business units

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Second conclusion Use petrodollars windfalls to develop Africa to a new Agricultural age for producing Energy Make money and do good in creating Value through a purchase transaction in which you buy or build asset at a bargain Be part of a Global Entrepreneurial Revolution

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Don’t stay on the side line, be part of the African development “Be the change you wish to see in the world.” M. Gandhi

© 2007 Strategic Risk Management UNCTAD, Nairobi May 24, 2007 Strategic Risk Management Jean-François Casanova 52, rue de Ponthieu Paris Tel : +33 (0) Mobile: +33 (0) For any Question : 21