1. Partner to Invest in Transition Economies from Morocco to Mongolia
Stockholm October 22nd 2014

2. Contents Part I: Overview of EBRD
Part II: EBRD’s Co-investment Opportunities
Part III: EBRD’s Equity Participation Fund
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3. EBRD – Investing from Morocco to Mongolia
2013 Population 612 mn
2013 Nominal GDP USD 5,417 bn
Countries of Operation
Central Europe & Baltics
South eastern Europe
Eastern Europe & Caucasus
Central Asia
SEMED1
Russia
Turkey
Cyprus
Croatia
Estonia
Hungary
Latvia
Lithuania
Poland
Slovak Republic
Slovenia
Albania
Bosnia and Herzegovina
Bulgaria
FYR Macedonia
Kosovo
Montenegro
Romania
Serbia
Armenia
Azerbaijan
Belarus
Georgia
Moldova
Ukraine
Kazakhstan
Kyrgyz Republic
Mongolia
Tajikistan
Turkmenistan
Uzbekistan
Egypt
Jordan
Morocco
Tunisia
Russian Federation
Turkey
1 SEMED: Southern and eastern Mediterranean region
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4. Key Areas of Business At a Glance Number of projects (since 1991)
4,088
Cumulative business volume
€92.1 billion
Portfolio
€37.8 billion
Cumulative Equity Investments
€10 billion
Portfolio by Region
Portfolio by Sector
Portfolio by Product
Data as of Sept 2014
(*) SEMED region (North Africa): Tunisia, Egypt, Morocco, Jordan
(**) ICA: Includes Agribusiness, Property & Tourism, Manufacturing & Services and Information & Communication Technology
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5. EBRD Activities in North Africa
At a Glance
Number of projects:
44 (since 2012)
Portfolio:
€1,218 million
Countries of Operations:
Egypt, Morocco, Tunisia, Jordan
Cumulative disbursements:
€464 million
Equity Investments:
€105 million
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6. Contents Part I: Overview of EBRD
Part II: EBRD’s Co-investment Opportunities
Part III: EBRD’s proposed Equity Participation Fund
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7. Unique Investment Opportunities
EBRD: a credible intermediary
Achieves market returns while mitigating risk
IRR of 18% with 2.1x gross multiple for 90 realised direct equity investments since 1992*
Future Growth of the Region
Untapped potential for production growth and development of local entrepreneur base
Continued growth of middle income class
Financing Gap for Equity
Limited investments from international institutional investors
Limited access through traditional mechanisms
(*) Direct Equity Investments over EUR 10m since the inception of EBRD since 1992
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8. Unique value proposition of partnering with IFIs1
Risk mitigation
Unique position through EBRD’s special preferred creditor status, favourable tax treatment, policy role, political connections, transition mandate and historical presence within the Countries of Operation
Exclusive privileges and immunities
Origination capabilities
EBRD’s ‘Global Sponsor’ programme provides access to inroads into the region while being supported by a knowledgeable and protected partner
Access to local sponsors, government led deals (eg privatisations) and FDI sponsors
Being both a creditor and equity provider creates multiple sources of proprietary deals
The Bank acts as Limited Partner in a portfolio of private equity funds, providing deal exposure through co-investments alongside high quality managers
Target region understanding
Heavy involvement in areas including banking systems reform, liberalisation of prices, privatisation (legalisation and policy dialogue) and creation of legal frameworks
Unique ability to apply deal-making experience in specific sectors to different countries as they progress through the transition process
Influential minority investor
As an IFI with strong local presence, political affiliations and local knowledge, EBRD has a strong influence on the investees even if it invests as a minority shareholder. This resulted in active co-investments with leading global strategic investors
Influence on corporate governance via board nominee director who are appointed to create shareholder value 2 3 4
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9. Multiple ways of co-investing with EBRD
Co-investment in Direct Equity Deals
Partnership with global strategic investors, private equity firms and other international financial institutions to co-invest in various sectors
Direct equity investments by sovereign wealth funds and large pension funds in EBRD’s region have been limited due to perceived political and economical risks, and small investment size required in the investees in the region
Co-investment in Equity Funds
The largest Limited Partner in private equity in the region
Invested in more than 170 private equity funds, together with more than 1,300 limited partners to date, including sovereign wealth funds and pension funds
Investments often lead to co-investments in direct equity transactions
Co-investment in Portfolio Investment
Equity Participation Fund aimed at attracting long-term large institutional investors
Investors benefit from unique EBRD governance, investment standards and reputation and financial and political risk mitigation
Provides large size (€50 mill+), diversified investment opportunity to large institutional investors
In addition the EBRD is a natural venue for co-investment in long term project loans
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10. Contents Part I: Overview of EBRD
Part II: EBRD’s Co-investment in Equity
Part III: EBRD’s proposed Equity Participation Fund
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11. Outline of the Equity Participation Fund Innovative fund structure
Target size
EUR 750 million - 1 billion
Target number of investments
Around 50, depending on average investment size
Expected investment size
EUR million
Expected Fund return
Portfolio return of 15% IRR
Participation ratio
30% - The EBRD will retain 70% of the risk of all the equity investments
Underlying Investments
The Fund will acquire an indirect economic interest in all Eligible Direct Equity Investments made by the EBRD through Equity Return Swaps
Fund term
12 years from the First Closing Date
Fund structure
English Limited Partnership
Carried interest
None
Highly Innovative, efficient investment opportunity, not provided by existing PE Market
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12. EBRD investee companies Equity Participation Fund
Proposed Fund legal structure Traditional fund structure under the EBRD umbrella
Structural outline:
English Limited Partnership to be established (the “Fund”)
Investors are admitted as Limited Partners adhering to the terms of the Fund
General Partner (GP) will be an English limited liability company (GPCo), owned 100% by a third party administrator
GP appoints EBRD as the Fund Manager through a Management Agreement
The Fund buys an Equity Return Swap (“ERS”) from EBRD in respect of each eligible EBRD equity investment (ERS = participation rate x cost of the EBRD’s equity investment)
A fixed allocation ratio will be followed for Eligible Investments in Equity with 30% of investment risk allocated to the Fund. EBRD will retain 70% of the investment risk
In the Fund structure investors are passive and follow the EBRD investment process
EBRD investee companies
30% of underlying EBRD investments
70% of underlying investments will be retained by EBRD
Equity Return Swaps
Equity Participation Fund
General Partner
(GPCo)
Investors
(Limited Partners)
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13. Partnering with global institutional investors
The EBRD Equity Participation Fund will enable global institutional investors to participate in the EBRD’s direct equity investment portfolio and strategy and benefit from:
Geographic and sector diversification
Long-term capital growth and return opportunity in line with market benchmarks
Robust track record of 23 years
Adherence to the highest ESG standards
Unique access to a universe of both public (pre-privatisation) and private companies
EBRD’s strong local presence and knowledge in all 35 countries of investments
Risk mitigation provided by EBRD’s stringent internal processes and its privileges and immunities
Low-cost intermediation (cost sharing management fee, no carried interest)
Opportunity to invest in the growth potential across the EBRD Countries of Operation which is not accessible via public markets or traditional private equity funds
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14. Conclusion Financial markets are undergoing a deep transformation
Deleveraging, de-risking, changes in regulatory landscape
In that process there are gaps in financing the real economy
Need for long term, patient, equity capital
Development banks that behave under market principles with local presence can fill that gap
By further using their risk absorption capacity and reputation
By facilitating and intermediating transformational investment and mobilising Institutional Investor Capital
Opportunity for a Public - Public partnership for private sector development
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15. Contact Details
Manfred Schepers, Senior Advisor
Institutional Investment Partnerships
Jung Hwa Oh, Associate Banker
EBRD Headquarters:
10/22/2014