Transcript Private Sector Investment in Infrastructure Development

35th Regular Meeting of the ALIDE General Assembly
New Trends of Lending and Funding
Operations at
Development Bank of Japan (DBJ)
June 14, 2005
Eishi Yasunaga
Director General
Department for International Affairs
Development Bank of Japan
1
DBJ’s Overview
Establishment
 Previously known as the Japan Development Bank (JDB), established in 1951
 October 1, 1999 as a special public corporation under the terms of the
Development Bank of Japan Law, supervised by the Ministry of Finance
Objectives and Businesses
 Making financial contributions to the Japanese economy
 Providing long-term loans and equity for private capital business investment
Scale
 Loans outstanding: approximately 140billion US dollars (as of March 2004)
(New loans: approximately 11billion US dollars [FY 2003])
 Employees: 1,362
2
Financial Institutions in Japan
Central Bank
Bank of Japan
City Banks
Regional Banks
Private Financial
Institutions
Trust Banks
Credit Associations
Credit Cooperatives
Agricultural & Fishery Cooperatives
Insurance Companies
Securities Companies
Policy-based
Financial Institutions
Banks (DBJ and JBIC)
Government Finance Corporations
3
Policy-based Financial Institutions
in Japan
Institutions
New loans
(100 million yen)
Loans outstanding
(FY 2002)
(as of March 2003)
Development Bank of Japan (DBJ)
11,602
158,591
Japan Bank for International Cooperation (JBIC)
19,465
209,948
Japan Finance Corporation for Small Business
16,559
75,595
National Life Finance Corporation
30,778
103,396
Housing Loan Corporation
40,409
672,000
3,710
36,407
17,330
245,241
1,441
16,002
141,294
1,517,180
Agriculture, Forestry and Fisheries Finance Corporation
Japan Finance Corporation for Municipal Enterprises
Okinawa Development Finance Corporation
Total
4
Policy-based Finance in Japan
Market Shares of Financial Institutions (%, as of the end of 2002)
(Loans)
(Fund-raising)
government financial
institutions
postal savings
financial
institutions for
agriculture,
forestry and
fisheries
city banks
city banks
19.9
22.3
20.5
28.3
Total
\1,185
trillion
7.4
regional
banks
15.5
12.8
financial
institutions
for small- and
medium-sized
business
12.5
3.9
trust accounts
0.8
Notes:
(1) Funds include deposits, debentures and trusts.
(2) Shaded areas denote banks.
Source: Bank of Japan
4.9
financial institutions
for agriculture,
forestry and
fisheries
financial institutions
for small- and
medium-sized
business
member banks of the
Second Association of
Regional Banks
trust banks and longterm credit banks
foreign banks 0.8
6.4
Total
\790
trillion
regional banks
13.6
17.9
5.1 5.9
1.1
foreign banks 1.2
trust accounts
trust banks and longterm credit banks
member banks of the Second
Association of Regional Banks
5
DBJ’s Contribution to the Japanese Economy
Constantly Revising Its Focus
6
Changes in Major Areas of DBJ Loans
(\ billions )
1955 (56)
32
45
8
14
Coal
Mining
Ocean Shipping
1965 (237)
39
8
6
9
Development
of Technology
13
17
Ocean Shipping
1985 (1,240)
6
9
26
10
Urban
Development
Improvement in
Living
Standards
12
13
Regional
Development
7
30
9
14
NEF’s Regional Development
8
Resources
and Energy
6
7
6
4
Resources
and Energy
11
NEF’s Regional Development
29
2
11
Others
38
Development of Telecommunications and
Technology
Information Network
Improvement in
Living Standards
1995 (1,986)
Others 19
14
Regional
Development
1975 (873)
Others
Electric Power
Regional
Development
Coal
Mining
1
8
6
Improvement in Key
Internationalization Improvement in
Development of
Transportation Systems Regional
of Japan
Development Industrial Technology
Social Capital
2000 (1,200)
Enhancement of Quality
49
of Life
25
22
Economic Revitalization
Creation of Self-Reliant
Regions
0%
20%
4 0
40%
60%
80%
7
100%
Recent Business Focus
 Revitalization of Local Economies
 Support urban renewal projects, regional industries and infrastructure, etc.
 Provide investments and loans for the privatization of public/municipal
enterprises through PFI and PPP in alliance with regional banks
 Restructuring and Economic Revitalization
 Support financial market revitalization, and industrial and business
rehabilitation through funds
 Develop intellectual infrastructure through evaluating technology
commercialization plans
 Environmental Measures and Infrastructure
 Support financing of environment-friendly companies/projects
 Credit decision and interest rate system based on environmental screening, as
well as general corporate credit analysis
8
Eligible Projects and Companies
Eligible Projects
 Capital Investment
• Facilities acquisition, improvement and repair, and related
activities
 R&D Costs
• Construction/purchases of R&D facilities（land, buildings,
machinery, etc.), Personnel expenses
Eligible Companies
 Organizations such as stock companies (listed and
unlisted)
9
Loan Conditions
 Loan Amount
 Max. 50 % of total amount of project cost
 No fixed minimum or maximum amounts
 Maturity and Grace Period
 The average maturity is 15 years （max 25 years).
 A grace period of up to three years is possible.
 The maturity and grace period are determined according to the
useful life and profitability of the project.
 Interest Rate
 Fixed at disbursement
 Based on the lending period and credit risk
 Collateral or Guarantor
 In principle, either collateral or a guarantor is required.
10
Sources of Funds
All capital from the government
Borrowings from the government
(via Fiscal Investment Loan Program: FILP)
Bond issuance
 Government-guaranteed Bonds
• Foreign Bonds
• Domestic Bonds
 FILP Agency Bonds (Non-guaranteed Bonds)
11
Fiscal Investment and Loan Program
Sources of Funds
Uses of Funds
FILP Agency Bonds
Postal Savings
Welfare Pensions
National Pensions, Other
Postal Life Insurance
Banks, Other
Financial
Markets
GovernmentGuaranteed Bonds
Fiscal Loan Fund
Special Account
Policy-based
Financial
Institutions
(e.g., DBJ)
Public
Companies
Industrial Investment
Special Account
12
DBJ’s Annual Budget Settlement in FILP
(Line Ministries for Loan Program at DBJ)
(Demand-based Budget Proposal and Approval by MOF, Cabinet, and Diet)
Ministry of Land,
Ministry of Finance
Ministry of Economy,
Infrastructure and Transport
■Overall management
Trade and Industry
■Urban redevelopment
of FILP
■Support for industrial revitalization
Ministry of Health,
Ministry of Environment
■ Waste disposal and recycling
DBJ
Labor and Welfare
■Welfare, aging and related issues
Ministry of Agriculture,
Forestry and Fisheries
Ministry of Public Management,
Home Affairs,
Posts and Telecommunications
■Regional telecommunications networks
■ Distribution of food supplies
Ministry of Education,
Sports, Science, Culture
and Technology
Financial Services Agency
■Business rehabilitation
■New technology development
13
Ratings
Moody's
JAPAN
DBJ
Governmentguaranteed
Nonguaranteed
S&P
International
Domestic
International
Domestic
Aaa
A2
AA-
AA-
Aaa
A2
AA-
AA-
―
A 2
―
A A -
14
Ensuring Sound Finance
Risk Management for Sound Operations

Credit Risk
• Internal credit-rating system, since FY1999
• Self-assessment of assets, since FY2000
• External auditing by an audit corporation
 Liquidity Risk / Interest Rate Risk
• ALM: Comprehensive management of assets and
liabilities
• Fund management with liquidity taken into consideration
 Exchange Risk
• Currency swaps
15
Financial Highlights
Assets
JPY 14.8 trillion
(USD 140 bn)
Loans
97%
Liabilities

Bonds
13%
100% owned by the Government of
Japan

BIS capital ratio: 13.39%

Ratio of non-performing loans to total
loans: 3.2 %

Net profit: JPY 114 bn (USD 1 bn)

Net profit of1st fiscal half FY04:
Borrowings
JPY 72 bn (USD 0.7 bn)
(FILP)
72%
Other Liabilities
Other Assets
Equity
12%
(Sep. 2004, Japan GAAP Basis)
16
DBJ’s New Directions in Financial Services
High risk
Investment business
Venture fund
MBO fund
Emphasis on coverage
Demand for close
regional connection
DIP finance
Traditional commercial
finance
Low risk
Large scale
Much information
Macroeconomic
Arrangement,
Finance business
Project finance
Asset finance
Traditional scope
of DBJ finance
Refinancing system
Regional businesses
Community projects
Local banks,
NPOs
Investment business
Private equity fund
Privatization projects
Infrastructure projects
Business reconstruction
High-risk bonds
Large-scale M&A
Risk
requirements
Small scale
Little information
Close
regional connection
Emphasis on
risk dispersal
Venture capital
Investment funds
Investment banks
Investment
banks
Securities firms
City banks
Guarantee business
Bonds
Institutional investors
17
Securities firms
Introduction of
Japan’s Effort in the
Environmental Sector
– Clean Development Mechanism: CDM –
18
Japan’s GHG Emission
1400
(m il.t C O 2-e)
1350
1300
8.0%
1250
Level of emissions for base year
14.9%
1200
6%
Reduction target for 2008-2012 under the Kyoto Protocol
1150
B ase 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Y ear
19
Great Potential of Kyoto Mechanism
Example of marginal GHG emissions abatement cost curve
（1985 US$
/carbon ton）
700
Former Soviet Union
Japan
600
U. S. A.
EU
India
500
400
Japan's
MAC
300
China
200
100
EU
0
MAC
0
Marginal Emissions
Abatement Cost
200
400
600
800
1,000
Amount of GHG emission reduction
1,200
1,400
1,600
（million carbon tons）
Source. A.D. Ellerman, H. Jacoby, and A. Decaux, 1998, “The Effects on Developing Countries of the Kyoto Protocol and CO2 Emissions Trading”, MIT
Joint Program Report No.41
20
Clean Development Mechanism
Non-Annex Ⅰparty
Acquired CERs are added to
the allowed emissions
GHG emissions
GHG emissions projection
Baseline
Scenario
Annex Ⅰparty
Project
Credit (CER)
Technology,
Investment, etc.
WIN-WIN
21
Overview of Japan Carbon Finance, Ltd.
(1) Objective:
To purchase certified emissions reductions (CERs) and emission reduction units
(ERs/ERUs) issued for the crediting period until 2012 from CDM/JI Projects
(2) Fund Pool:
Called “Japan GHG Reduction Fund (JGRF),” which JCF can utilize to purchase
ERs
(3) Committed Fund Amount:
USD 141.5 million
(4) Establishment: \
December 1, 2004
(5) Location:
Tokyo, Japan
(6) Fund Providers
Policy-lending institutions (JBIC & DBJ) & major Japanese private enterprises
22
CDM Procedure
Project
Design
Host Country
Government
DOE
CDMEB
Verification/
Certification
Issuance of
CERs
letter
Project
Implementation
PDD
Approval
Investment
Country
Government
Monitoring
DNA
Approval
Project
Participant
Validation/
Registration
Monitoring
on site
Acquire
CERs
letter
DNA
Validate
PDD
Register
The project
Verify the
Monitoring
Report,
Certify the
reduction
Issue
CERs
23
Advantages for Projects
(1) Additional Cash Flow:
Project viability to be improved by cash inflow in USD under ERPA
(2) Development Function:
JCF assistance and orientation to develop CDM/JI projects
(3) Possibility of Co-purchase:
Opportunity for JGRF fund providers to purchase a part or all of the
remaining ERs after the purchase by JCF
(4) Collaboration with and Support from JBIC & DBJ:
At present approx. 50 projects, on a pre-screening list, gained through
JBIC/DBJ networks
24
Operational Flowchart
Project Entity/Sponsor
Submission of PIN
JCF
Clarification & Screening of PIN
Evaluation & Selection of Projects
Execution of Letter of Intent (LOI, which defines basic terms & conditions)
PDD Preparation
Assistance & Orientation
to Develop Projects
Validation & Registration
Execution of ERPA
Exclusivity Period for ERPA Execution
25
For More Information…
Contact:
 Japan Carbon Finance, Ltd. (JCF)
Carbon Finance Department
Hitoshi Kurihara, Director General
[email protected]
Shuji Isone, Deal Manager
[email protected]
Tel: +81-3-5212-8875
Fax: +81-3-5212-8886
1-3, Kudankita 4-chome, Chiyoda-ku, Tokyo 102-0073, JAPAN

Development Bank of Japan (DBJ)
Department for International Affairs
[email protected]
Tel: +81-3-3244-1770
Fax: +81-3- 3270-4099
9-1,Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, JAPAN
26