Transcript Slide 1

Export Development Canada
Political Risk Insurance in support of
Canadian Exports and Investments
in Africa
March 8th, 2011
Presentation Outline
 About EDC
 EDC Involvement in Africa
 The Business Case for Political Risk Insurance
 EDC’s PRI products
 EDC PRI Outlook for Africa
 Q&A
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A Global Financial Services Partner
A Global Financial Services Partner
 Canada’s Export Credit Agency
 Crown corporation wholly owned by
Government of Canada
 Financially self-sustaining
 Operates on commercial principles
 EDC’s roles is to support and
develop Canada’s export trade and
international business efforts
 EDC’s products include financing
and insurance solutions for
Canadian exporters and investors
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EDC 2009 Business Volume
by Geographic Area
EDC Performance Highlights
2008
2009
Business Volume*
85.8
82.9
Business in Emerging Markets*
22
18.7
Customers
8,312
8,469
Number of Markets
184
191
*CAD billions
Canada’s Trade Diversification toward Emerging Markets
 Canada’s vulnerability – Investment and trade
concentration in North America
 Exports growth opportunities in emerging markets
 CDIA is critical to Canada’s growth as a trading nation
EDC and Africa
Long-standing business experience with the continent.
In 2010, EDC supported 476 Canadian companies in
46 African countries worth C$ 1.9 billion in transactions:
Sub-Saharan Africa: C$ 1.3bln
North Africa: C$ 568mln
EDC Volume in Africa – By Product
The Business Case for PRI
 Heightened political risk in the world
 Helping Canadian companies get comfortable with new
emerging market risks
 Continued tightening of credit conditions globally
 Protecting Canadian balance sheets
 Protecting Canadian shareholder value
Recent Political Events on the African Continent
 Nigeria – violence and militancy in the Niger Delta
impacting O&G sector
 Somalia – the destabilizing effect of the failed state of
Somalia on the region
 Côte d'Ivoire - political system thrust into turmoil as a
result of a still unresolved dispute over the November
2010 presidential election results.
 North Africa – wave of protests throughout Tunisia,
Egypt result in the overthrow of longstanding regimes;
security and political situation remain uncertain.
EDC PRI Products
What do we cover?
Expropriation
Catastrophic losses; Government takes total investment or asset, renegotiates pivotal terms of the
investment preventing ownership and/or control of investment or asset
Creeping Expropriation
Series of actions by governments having same effect as direct expropriation leading to catastrophic
loss. e.g. succession of royalty increases; changing of rules
Political Violence
Acts that destroy assets or stop operations. e.g. locals overrun project and damage property; North
Africa’s recent political turmoil
Transfer & Conversion
Trouble getting money out of the country. e.g. CADIVI in Venezuela
Breach of Contract
Investor submits to arbitration but Government does not pay award. e.g. Many cases in Argentina
Public Sector Credit Risk
Borrower or Guarantor does not pay. e.g. Ministry of Finance guarantees, state bank default
Plus many customized variations of the above
EDC Pricing
Average per annum premium rates
 PRI - Equity (0.50% - 1.25%)
PRI – Assets (0.25% - 0.75%)
Non-Honouring of Sovereign – (1% - 3%)
Benefits of EDC PRI
EDC is an important partner in negotiations with foreign
governments
Customized- coverage can be specifically adapted to
company’s individual needs.
Flexible– as business grows, other investments or new
countries can be added to the PRI policy.
Cost efficient - a global PRI policy protects entire
investment portfolio at a minimum cost.
Benefits - 2
EDC takes a long-term view offering stability and
certainty in coverage
In house experience and ability to analyze political and
economic risks can be helpful for companies at all stages
of expansion into emerging markets
Substantial capacity available directly from EDC and
with partners.
PRI can help banks get more comfortable with a
company’s emerging market exposure
EDC PRI in Africa
Country
ALGERIA
BENIN
BURKINA FASO
CAMEROON
CONGO (KINSHASA)
DJIBOUTI
GHANA
GUINEA
IVORY COAST
LIBERIA
LIBYA
MADAGASCAR
MALI
NIGER
RWANDA
SENEGAL
SIERRA LEONE
SOUTH AFRICA
TANZANIA
TOGO
TUNISIA
ZAMBIA
EDC PRI Exposure
33 M
0.5 M
0.5 M
0.25 M
1M
0.025 M
197 M
0.320 M
233 M
0.480 M
33 M
0.025 M
0.505 M
0.480 M
0.025 M
0.505 M
0.480 M
114 M
35 M
0.505 M
43 M
49 M
Examples of EDC’s PRI Experience in the Mining and
Power Sector of Africa
Lumwana Mine
Takoradi Power Project
ZAMBIA
PRI Lead Arranger
GHANA
PRI NHS Lead Arranger
Bulyanhulu Mine
TANZANIA
PRI Co-Lead Arranger
EDC’s perspective on Africa
 Markets where political risks are generally viewed as
acceptable – Angola, Botswana, Burkina Faso, Ghana,
Mozambique, South Africa, Tanzania, Zambia, Algeria, Morocco
 Markets where political risk levels require enhanced due
diligence – Central African Republic, Ethiopia, Mauritania, Nigeria
 Markets where current political/investment conditions
increase political risk levels, rendering EDC support difficult –
Côte d’Ivoire, Chad, Democratic Republic of Congo, Eritrea,
Guinea, Madagascar, Tunisia, Egypt, Lybia
 Off-cover countries: Sudan, Zimbabwe
EDC PRI Contacts