Making a Difference Through Manufacturing

Driving Growth,

Creating Higher Productivity Jobs,

Enabling Shared Prosperity

The IFC Approach

October, 2014

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I. Manufacturing Market Drivers

II. Development Impact of Manufacturing

III. IFC Experience

IV. Chemicals and Fertilizers-Key Manufacturing Sector

V. How We Finance Projects

CONTENTS

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0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2

1.4 1.5 1.6 1.8 2.0 2.2 2.4 2.5 2.7 2.8 3.0 3.0 3.1 3.2 3.2 3.2 3.2 3.1 3.0 2.8 2.70.4 0.5 0.5 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.9 0.9 0.9 1.0 1.0 1.0 1.0 1.1 1.1 1.1 1.1

0.3 0.4 0.5 0.60.7

0.81.0

1.21.4

1.7 2.0 2.3 2.6 2.9 3.2 3.5 3.9 4.2 4.5 4.9 5.2

0

1

2

3

4

5

6

7

8

9

10

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

World Urban and Rural Population(Billion)

Urban Developing

Urban Developed

Rural Developing

Rural Developed

Source: World Bank

Population Growth & Urbanization in Emerging Markets

Manufacturing Market Drivers

4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2009 2020

Num

ber o

f Mid

dle

Cla

ss (

billi

ons)

Global Middle Class by region, 2009-2020

Middle East and North Africa

Sub-Saharan Africa

Asia Pacific

Central and South America

Europe

North America

Source: World Bank

Which in Turn Drives Their Growing Middle Class

Manufacturing Market Drivers

5

Source: McKinsey & Company

Penetr

ati

on (

%)

Household penetration by country

Take off point Saturation point Per capita income $ thousand, PPP

Refrigerator Washing machine

Demand for Manufactured Goods Rises Sharply With Incomes

Global market growth

concentrated in

emerging markets

where incomes rising

the fastest

Manufacturing Market Drivers

Manufacturing is a Key Engine of Economic Growth Association between growth in manufacturing

value added and GDP growth (2000-2005)

Source: “Role of manufacturing in Development” (Adam Eddy Szirmai), UNIDO Industrial development report (2009); MGI Manufacturing the Future

Inputs into the Manufacturing Strategy: Development Impact of Manufacturing

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Growth of Manufacturing Value Added is a major

determinant of GDP growth across a broad range

of countries. Manufacturing growth has a

correlation of 0.75 with GDP growth.

Manufacturing’s Share of output and employment

rises as income rises through middle income

levels, then declines at higher income levels as

services growth dominates.

IFC Engagement

Development Impact of Manufacturing

Entry to Formal Economy

Manufacturing can absorb large

numbers of workers with

limited skills, providing them

with stable jobs, including

opportunities to acquire new

skills, especially for women in

some sectors.

Higher Wages

Labor productivity and

earnings tend to be

substantially higher in

manufacturing than in the rest

of the economy, enabling

higher wages and benefits.

Increasing Incomes

Manufacturing is an “escalator

activity:” once an industry is

established, productivity tends to

rise rapidly towards that industry’s

technology frontier, these dynamic

productivity gains sustain further

increases in wages.

Indirect Employment Impact

Manufacturing has a higher employment multiplier than Agriculture or Services, creating more indirect/induced jobs.

Manufacturing Makes Unique Contribution to Employment

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IFC Clients Sector, Country Direct Jobs

Indirect Jobs

Multiplier

Ecogreen Chemicals, Indonesia 177 3,646 21

OCL Cement, India 293 7,156 24

Safal Steel, Africa 4,200 24,000 6

The IFC Jobs Study case analyses in

Manufacturing illustrate the high

multiplier effects on indirect and

induced job creation. The direct jobs

in the companies were in higher

skilled categories.

Source: D. Rodrik, “Unconditional Convergence in Manufacturing,” 2012; MAS-CDI microcase studies on job creation

Development Impact of Manufacturing

Manufacturing has a Changing Role as Economies Grow

Manufacturing Strategy

Small industrial base, <10% of GDP/Employment, Local market orientation

Large informal activity in small scale manufacturing

Establishment of formal, large scale manufacturing in isolated sectors where competitive (basic

industries) has impact on market development, linkage and spillover effects, and limited

employment impact

Low-Capabilities Stage

(primarily Agrarian)

Industrial base grows to become 10-20% of GDP and employment; broader range of industries

becomes competitive

Growing consumer markets drive simple manufactures growth

Production at scale for regional markets emerges

Labor-intensive light manufacturing can be driver of mass employment provided the country is

competitive in labor cost/productivity, infrastructure, and transport

Medium-Capabilities Stage

(Transforming)

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Development Impact of Manufacturing

Manufacturing typically >20% of GDP, in some cases up to 25-30%.

Growth of competitive industrial clusters with complex inter-industry linkages, progressively

higher skills, value added and technological sophistication

Manufacturing sector growth drives economic growth; strong export contributor

Increasing skills demands including skilled workers (technical) and professionals (engineering)

Industry competitiveness depends on broad range of factors including infrastructure,

education/skills, market access, depth of cluster and cost levels in related industries, etc.

Industrial Stage

(Urbanized)

Evolution of Manufacturing Investments

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Steady growth with increasing project size for the past 10-11 years

IFC Experience C

om

mit

ted

Am

ou

nt

(Mil

lio

n $

) #

of P

roje

cts

-

5

10

15

20

25

30

35

40

45

-

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2.000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013YTD 4/30

Millo

nes

Manufacturing Committed Amount (IFC Own Account and Mobilization)

Fertilizers Chemicals Textiles, Apparel & Leather

Other Plastics & Rubber Transport Equipment Machinery & Renewables

Other Bldg Mat Metals Glass

Cement # M Projects

10

US$87.5m Risk Sharing

Facility

Ukraine

US$170m

India

US$110m Equity and US$70m

Debt

Tanzania and West Africa

US$25m Debt

Mozambique

US$4b

Global

€ 20m Debt and €5m

Convertible Debt

Yugoslavia

US$25m Debt and US$15m

Concessional Financing

Mexico

Bayer Ukraine Ltd.

Heidelberg Cement Africa Ikea Moscow

BHP Biliton, Mitsubishi,

Industrial Dev. Corp., Gov’t

of Mozambique Joint Venture

Michelin Group Joint Venture with Tigar

Rubber Products Group

Supply Trade Finance Facility “Trade Finance of the Year 2012” award by Euro Money

Global Trade Liquidity

Program

€ 50m Share Issue

Ukraine and Russia

US$15m Debt

Russia

John Deere

Risk Sharing Agreements

Multi-Country

€ 35m Debt

India

Volkswagen India Pvt. Ltd.

EDF La Ventosa

Veolia Voda S.A. A Loan $200MM, B Loan

$125mm

Equity $50MM

Refinancing

Egypt

Select Transactions With Global Clients

IFC Experience

Chemicals & Fertilizers Sector - a Core Manufacturing Sector

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The chemicals & fertilizers sector is one of the most important

manufacturing sectors

This is a huge industry hidden behind finished products

It supplies intermediates for products and articles in everyday use

Well-developed and highly integrated in North America, Western

Europe and Japan

Growth opportunities in Asia and BRIC countries

It has one of the most significant employment multiplier effects

Chemicals and Fertilizers-Key Manufacturing Sector

Global Chemicals Output ($5,213 bn in 2013, +4.0% on 2012)

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Chemicals and Fertilizers-Key Manufacturing Sector

Source: ICIS; American Chemistry Council

Asia-paific; 51%

North America; 18%

Latin America; 5%

Western Europe; 20%

Eastern & Central Europe; 3%

Africa & Middle East; 3%

Data includes pharmaceuticals

5.5% increase in

North America

shipments in 2013

Share of Global Chemicals Output ($3,996 bn excl. pharma in 2013, +2.7%)

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Chemicals and Fertilizers-Key Manufacturing Sector

Source: ICIS; American Chemistry Council

Consumer Products; 11%

Inorganics; 10%

Bulk Petrochemical & Intermediates;

23%

Plastic Resins; 15%

Synthetic Rubber; 1%

Man-made Fibres; 6%

Coatings; 5%

Other Specialties; 16%

Agricultural Chemicals; 12%

Petchems and plastics output

= $1,543bn, +3.5%

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Chemicals and Fertilizers-Key Manufacturing Sector

Source: Cefic Chemdata International, *Asia excluding China and Japan.

Emerging Markets Show Strength

30,5%

27,7%

9,9%

4,0% 2,8%

4,5% 3,7%

1,9%

17,8% 16,8%

5,6% 4,6% 3,7%

19,1%

30,5%

1,9%

EU-27 NAFTA Japan Latin America Other Europe Rest of Asia* China Rest of theWorld

World Sales 2002: €1,363 billion World Sales 2012: €3,127 billion

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Chemicals and Fertilizers-Key Manufacturing Sector

Asia Chemicals Sales Dominate

Source: Cefic Chemdata International

China, 952

EU, 558 526

144 60

Rest of Asia, 472

Rest of Europe*, 115

Japan, 176

South Korea, 124

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2.000

Asia Europe NAFTA Latin America Rest of the World

World chemicals sales in 2012 are valued at €3,127 billion.

The Europe Union accounts for 17.8% of the total.

*Rest of Europe = Switzerland, Norway and other Central & Eastern Europe

(excluding the new EU-12 countries)

Chemical Sales (Euro Billion)

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Chemicals and Fertilizers-Key Manufacturing Sector

China - by Far the Largest Chemicals Market in 2012

952

558

175,6 161,1 124,1

82,5 73,1 64,2 63,3 61,1 0

100

200

300

400

500

600

700

800

900

1.000

China USA Japan Germany Korea France Brazil Taiwan Russia India

Source: Cefic Chemdata International

Chemical Sales 2012 (Euro Billion)

Committed Amount by Sector Committed Amount by Region

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IFC’s Total Investments in the Sector: $1.5Bn in FY13 (including $800M Own Account)

Chemicals and Fertilizers-Key Manufacturing Sector

US$6.5 billions invested (own account)

307 projects

54 countries

Portfolio well diversified across sectors and

geographies, small and large projects

Key Portfolio Features

Chemicals and Fertilizers Strengths of IFC

In-house industry specialists with global experience in the sector and

benchmarking capabilities

Strong regional knowledge with high exposure in fast growing in

emerging markets - Brazil, India, China, Mexico, Russia, Thailand

Expertise on Environmental and Social Best Practices

Promotion of sustainable economic growth and competitiveness with

creation of direct and indirect jobs, know-how transfer

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Chemicals and Fertilizers-Key Manufacturing Sector

How IFC differs from Other Equity Partners

IFC can provide debt, equity, or a combination of both depending on the client’s needs.

IFC has a longer investment horizon (5-7+ years) and is less cyclical than most financial

investors.

With its equity investments, IFC can act as an “honest broker” in joint venture situations,

give additional comfort for minority shareholders, and be a catalyst for other investors.

Leading multilateral source of development finance – IFC’s breadth of investment

expertise and years of experience in emerging markets add value to its clients.

IFC strong reputation adds credibility to investee companies that access international

capital markets.

Best practice know-how on corporate governance, environmental management, local

communities, and insurance requirements.

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Chemicals and Fertilizers-Key Manufacturing Sector

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Sub-Sectors

Petrochemicals

Refineries

Distribution

Specialty Chemicals

Inorganic Chemicals

Fertilizers and Crop protection

Project Type

Greenfield

Expansions

Modernization and rehabilitation

Energy Efficiency

Acquisition financing

Financial restructuring

Improvements in environmental,

health, and safety performance

Distribution and Supplier finance

Projects Financed

Chemicals and Fertilizers-Key Manufacturing Sector

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IFC Project Solvay/Rhodia - Supplier Finance

IFC’s participation is helping to sustain the financial and physical needs of the guar supply

chain, especially in areas of India, such as the northern region of Rajasthan, where guar

production is largely concentrated. Through the additional working capital provided by the

immediate cash that suppliers receive, IFC is strengthening the value chain by allowing

producers of guar to have several production cycles. IFC facility is enabling Rhodia to

source more guar from its Indian suppliers and is expected to directly benefit over 20,000

farmers. The project won “2012 Deal of The Year” awards from EuroMoney and Trade

and Forfaiting Review.

June, 2012

Location of Project &

Description of Site

Commitment Date

$170 million funded, including $85 million IFC uncommitted participation. Investment

Sponsors & Project

Description

The project is a funded, risk-sharing credit facility issued by BNP Paribas and utilized for

purchases of guar from Indian suppliers by Rhodia, a subsidiary of Solvay International,

one of the world largest specialty chemicals manufacturers. Guar is an agricultural

commodity widely used by the specialty chemicals and food processing industries. Major

price increases of guar in 2012 resulted in a situation in which Rhodia was facing liquidity

issues in its guar procurement and urgently needed a financing solution that was successfully

developed and provided by BNP Paribas and IFC.

Sample Projects

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Sponsor

Location of Project

Commitment Date

IFC Investment $87.5 million risk sharing facility

Bayer AG is Germany-based pharmaceuticals, polymers and agrochemicals conglomerate

with sales of about €40 billion and EBITDA of about €8.3 billion in 2012. The group’s

structure consists of three divisions: Bayer Healthcare, Bayer CropScience and Bayer

MateriaScience. Bayer CropScience manufactures herbicides, insecticides, fungicides, seed

treatment and seeds.

Bayer Ltd. covers the entire territory of Ukraine via the chain of local distributors.

Project Description

Risk sharing facilities with Raiffeisen Bank Aval and Credit Agricole Bank of up to

US$87.5 million on the portfolio of receivables generated by Bayer Ltd. Ukraine on the

sales of crop-protection products to private sector farmers in Ukraine. The RSF covers a

portfolio of seasonal receivables (with maturities less than 1 year) with a total portfolio

amount of up to US$175 million equivalent in local currency.

April, 2011; March, 2012

Sample Projects

IFC Project Bayer - End Customer Finance

Sponsors

Location of Project

Commitment Date

IFC Investment A Loan of up to US$285M. IFC played a leading role on the Mobilization (B Loan) of up

to US$350 million.

The Project sponsors are Braskem S.A. (“Braskem”) and Grupo Idesa S.A. de C.V. (“Idesa”).

Braskem and Idesa have established Braskem Idesa (the “Company”). Braskem and Idesa will

hold shareholding interests of up to 65% and up to 35%, respectively, in the Company.

Braskem is a listed Brazilian company and a leading thermoplastic resin producer. Idesa is a

privately owned Mexican petrochemical company dedicated to the production of

petrochemical products.

The Project will be located in Nanchital de Lazaro Cardenas, in the state of Veracruz, Mexico.

Project Description

Etileno XXI (the “Project”) consists of the development, construction and commercial

operation of a petrochemical complex in Mexico, composed of one cracker facility to

produce ethylene from ethane, integrated to three polyethylene plants with an aggregate

nominal capacity of 1,050,000 tons per year. Etileno XXI, which is located in Nachital de

Lazaro Cardenas a frontier region of Coatzacoalcos, represents the largest investment in

Mexico’s petrochemical sector in the last 20 years. Access to competitively priced feedstock

will make the Project one of the most competitive in the Americas. The Project seeks to

serve the Mexican polyethylene market, which is rapidly growing and currently being supplied

in part by imports.

December, 2012

Project Cost The total Project cost is estimated at US$4.3 billion.

“2012 Latin American Project Finance Deal of the Year” award by Euro Money

Sample Projects

IFC Project Etileno XXI- Large Exposures

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2002 Owned by management and employees, KuAz is identified by IFC as one of the few independent players in Russia's Chemicals industry

2003 IFC engages KuAz through IFC Russia Corporate Governance Project (RCGP); KuAz management is receptive to the RCGP recommendations and proceeds with implementation

2005 First IFC $15mm senior loan approved

2008 IFC approves $20mm equity investment in KuAz to support the Company's upcoming IPO planned for 2008 (equity negotiated with a put and a reset)

2009 In the midst of the financial crisis IFC extends $20mm Energy Efficiency loan to support the cost-cutting measures planned by KuAz and targeting improvements in its competitiveness

2012 IFC extends a second EE loan ($10mm) under the Cleaner Production Lending Facility

2014 IFC disburses $75mm A-Loan and $75mm B-Loan for corporate expansion/upgrades that include the construction & operation of a new ammonia plant, a 50:50 JV with Linde Germany

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Located in Togliatti, Samara region, Kuibyshevazot (KuAz) is the leading Russian

manufacturer of caprolactam (the raw material for synthetic fibers, engineering plastics,

automotive and other downstream products) and one of the top Russian producers of

nitrogenous fertilizers.

Togliatti, Samara region, Russian Federation.

Sponsors

Location of Project

IFC Engagements

Sample Projects

IFC Project Kuibyshevazot - Long Term Partnership

IFC’s Project Cycle

Early

Review

Client needs

determined

Contribution of

project to

development

assessed

Project screened

for potential

risks & issues

Mandate letter

Due

Diligence Negotiation Disclosure

Internal

Approvals and

Commitment

Disbursement

Site visit

Assessment of

business

potential, risks,

opportunities

Financial and

economic

Evaluation

Compliance

with IFC’s

social and

environmental

performance

standards

reviewed

Terms and

conditions of the

IFC investment

Action plan

agreed

Environmental

and social

information

disclosed

Opportunity for

public

comment

Board

consideration

Board approval

Legal review

Signing of legal

documents

Fulfillment of

conditions of

disbursement

IFC funds

disbursed

We Agree on a Specific Timeline to Meet Client’s Needs

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How We Finance Projects

Approaching IFC

Foreign or Domestic Sponsors

New venture or expansion; private sector majority ownership only

Project must be developmentally sound and commercially viable

Sponsor Commitment is Required

Equity participation; pre-completion support/guarantees

Submit Preliminary Business Plan or Feasibility Study

Brief project description, incl. technical feasibility and market study

Information on sponsors and operator

Environmental studies

Information on requirements, financing plan and cash flow projections

How We Finance Projects

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International

Finance

Corporation

Petro-

chemical

Sector

Activities

Working

with

IFC

Kremena Tenev Andre Laude Principal Investment Officer Chief Investment Officer

Chemicals & Fertilizers Manufacturing & Services

Washington D.C. Paris, France

Phone: 202-458-5466 Phone: 33-1-4069-3180

Email: ktenev@ifc.org Email: alaude@ifc.org

How to Contact us: