1. BNDES and the
Brazilian Electric
Power Industry
Eduardo Chagas
Manager
Electric Power Industry Financing Department
BNDES – The Brazilian Development Bank
November, 2012
2. BNDES Highlights
• Founded on June 20th, 1952
• 100% state-owned company under private law
• Key instrument for implementation of Federal Government’s
industrial and infrastructure policies
• Main provider of long-term financing in Brazil
• Emphasis on financing investment projects
• Support to micro, small and medium-sized companies
• Brazilian Export Bank
3. Time Line
50´s 60´s 70´s 80´s 90´s 00´s Today
Infrastructure
Heavy Industry – Consumer Goods
Small and Medium-Sized Enterprises
Technologic Development
Imports
Substitution
Energy
Agribusiness
Exports
Privatization Program
Urban and Social Development
Social Inclusion
Innovation
Sustainability
Small Business
4. BNDES vs. Multilateral Banks
US$ million BNDES IDB IBRD CAF China DB
Dec 31st, 2011 Jun 30th, 2011 Jun 30th, 2011 Dec 31st, 2011Dec 31st, 2010
Total Assets 369.720 89.432 312.848 21.535 774.180
Shareholders´Equity 36.102 19.794 38.679 6.351 60.953
Net Income 5.354 20 930 152 5.618
Loan Disbursements 82.676 8.400 21.839 7.694 86.690
Capitalization 9,76% 22,13% 12,36% 29,49% 7,9%
ROA (%) 1,65 0,02 0,30 0,71 0,8
ROE (%) 23,12 0,10 2,40 2,39 9,5
Established 1952 1959 1945 1968 1994
Employees 2.402 2.000 10.000 6.711
IDB = Inter-American Development Bank
IBRD = The International Bank for Reconstruction and Development (World Bank)
(*) Unlike other institutions, 12-month fiscal year ends June 30th
CAF = Corporación Andina de Fomento
CDB = China Development Bank
Capitalization = Shareholders’ Equity / Total Assets
ROA = Return On average Assets
ROE = Return On average Equity
7. Financing Structures
Corporate Finance
Collaterals related to the financed company
´s assets, bank warrants and/or
shareholders
Project Finance
Financing a specific project, not the
sponsoring company’s business as a whole.
Need to segregate the project costs,
revenues and risks in an SPC
8. Project Finance
• Financed Company: SPC
• Project cash flow must be able to support all loan
installments:
- DSCR greater or equal to 1.20;
- DSCR greater or equal to 1.30
(for projects with real IRR lower than 8% p.a.);
• Pledge of all future revenues to loan providers
• Equity minimum: 20% of total investment budget
9. BNDES & Project Finance
Risks
• Project Rating;
• Sponsors analysis;
• Credit analysis of the receivables;
• Engineer, Procurement and Construction – EPC
constitution;
• Risk sharing: participation of other lenders in the
funding;
• Strict compliance to Brazilian Environmental rules.
10. BNDES & Project Finance
General collaterals
• Pledge of SPC shares;
• Pledge of rights of government concession;
• Pledge of Receivables;
• Escrow Accounts (Cash Waterfall);
• Corporate or Bank Warrants;
• Completion Bond and Performance Bond;
• Equity paid in before first loan disbursement;
• Equity Support Agreements.
11. BNDES & Project Finance
Typical DSCR – BNDES Project
Finance
Example: Small Hydro Power Plant (19 MW)
1) Investment = R$ 144 million Financing = R$ 71 million Leverage = 49%
2) Amortization = 16 years Total period = 18 years
3) Constant Amortization System
12. BNDES & Infrastrucuture Project Bonds
• BNDES is willing to share guarantees with Public
Infrastructure Bondholders if Project Bonds meets key
rules;
• Infrastructure Project Bonds may be issued either by the
SPC or by its Holding Company;
• If the Holding Company is not listed in the stock market,
it should sign a commitment to make its IPO at
BOVESPA.
16. Largest Electrical Power PAC Projects
in BNDES (since 2007)
in R$ million
BNDES
Projects Status Support Total Capex MW
Jirau Contracted 7,220.00 10,540.80 3,450.00
Angra III Contracted 6,146.23 10,488.03 1,405.00
Santo Antônio Contracted 6,135.17 13,178.14 3,150.00
Estreito Contracted 2,660.84 3,606.89 1,087.00
Fóz do Chapeço Contracted 1,655.84 2,207.12 855.00
Simplício Contracted 1,034.41 1,666.90 333.70
Mauá Contracted 739.33 991.28 361.00
Serra do Facão Contracted 587.86 849.66 212.58
Caçu e Barra dos Coqueiros Contracted 543.41 693.82 155.00
Dardanelos Contracted 485.09 754.55 261.00
Salto Contracted 289.70 406.68 108.00
Salto do Rio Verdinho Contracted 249.91 342.43 93.00
TOTAL 27,747.79 45,726.30 11,471.28
17. Contact Centers
Rio de Janeiro (55 21) 2172-8888
São Paulo (55 11) 3512-5100
Brasília (55 61) 3204-5600
Recife (55 81) 2127-5800
Montevideo (59 82) 622-8875
London (44 20) 3008-6741
BNDES Card 0800 702 6337
Indirect Operations (55 21) 2172-8800
BNDES Exim (55 21) 2172-8566
www.bndes.gov.br/faleconosco
Ombudsman 0800 702 6307
www.bndes.gov.br/ouvidoria
Hinweis der Redaktion
BNDES founded in 1952, is a 58 years old institution. Just for comparison, Petrobras, the Brazilian oil company, our neighbor across Avenue Chile, was founded in 1954. Thus, BNDES is two years older than Petrobras. BNDES has been supporting all the investment projects of Petrobras from the very beginning of its activities. Many other large Brazilian companies have received funding from BNDES since they were small businesses. BNDES is responsible for the Brazilian industrialization high level and accountable for many major infrastructure investment projects. Under Law 5,662 and Decree 68,786, both dated June 21, 1971, BNDES became a state company under private law and its own equity, subject to general budgetary and accounting standards and specific regulations established by the National Monetary Council (CMN). BNDES is the main provider of long-term financing in Brazil. Our focus is project investment financing to Brazilian companies in order to provide efficient infrastructure, increase the Brazilian industry installed capacity, promote wealth generation, GDP growth and job creation. BNDES does not finance the acquisition of consumer goods, transfer of assets, purchase of land and real estate, export of commodities and cash to help paying down debt. BNDES is not a profit oriented organization, however, backed by excellent assets, has a record of high profitability. BNDES as a 100% state-owned company is not subject to bankruptcy – the Federal Government is jointly liable for the bank’s liabilities. Brazilian commercial banks mainly operate in short term financing. According to the Central Bank their average term for companies loans is measured in days (less than one year) while the BNDES average loan term is seven years.
Today BNDES’ priority is to support innovation projects. Companies that invest in innovation are able to compete in foreign markets, add value to their products, employ high skilled labor and pay better wages.
IBRD is a triple-A-rated financial institution with some unusual characteristics. Its shareholders and clients are sovereign governments, each of which has a voice in setting IBRD’s policies. The IDB 2008 Annual Report states that “there have been no write-offs in the sovereign-guaranteed loan portfolio, which, as of December 31, 2008, represented 95 percent of the $51.2 billion in loans outstanding. As of that date, all loans in the portfolio were performing. Allowances for loan and guarantee losses amounted to $169 million, compared to $70 million in 2007”. As of the end of 2008, the China Development Bank total assets amounted to RMB 3,821.2 billion, out of which loans outstanding were RMB 2,898.6 billion. 31.12.2008 Exchange rate: R$ 2.337 / US$
Gráfico em: J:\\Arquivos_XLS\\BNDES Institucional.xls Source: AP/DEORC US$ Performance Report http://www.bndes.gov.br/english/ Despite the international financial crisis, that became more severe in 2008’s second semester, BNDES’ performance broke a record in 2008. Disbursements amounted to R$ 92.2 billion. This number represents a growth of 42% as compared to 2007. It is worth noting the dramatic rise of disbursements rates, of 26.5% between 2006 and 2007. These amounts reveal expanded investments in the Brazilian economy bringing significant impact on the creation of new jobs, increase of the GDP, greater income per capita and social development. A return to investments is underway in Brazil and is expected to remain strong in the coming years. The BNDES’ disbursements closed 2009 at R$ 137.4 billion, an increase of 49% in relation to 2008, while approvals, at R$ 170.2 billion, rose 40%. The BNDES’ performance shows the strength of the Brazilian economy and reflects the success of the steps taken by the government to face the international financial crisis. Total disbursements include secondary market investments.