Presentatie voor SBB

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Title Perspectives from the Private Financial
Sector EnvSec Advisory Board Meeting Bratislava,
September 2005
By Kajetan Hetzer SNS Asset Management, The
Netherlands www.snsbank/assetmanagement.nl
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• Contents
• Business Environment / Playing Field
• Investment Approach
• Innovative Finance Mechanisms

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Problem Zones for Investing in Water

• water problems gt available investments
• Aim gt Sustainability
• Problem zones - a brief selection
• Lack of finance by /- factor 2 to reach MDGs
• Private Investors have cold water fear
• Complexity of water issues
• Lack of comprehensive critical success factors
• Lack of efficiency effectivity
• Political instead of more appropriate approach

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Water sector Playing Field of actors and
conditions

• Private Investment Conditions
• National conditions
• Local (water) conditions
• Multilateral / bilateral conditions

Based on

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Business Environment / Playing Field
Development finance institutions
National Conditions

• Banks
• investment funds

Financial conditions

• Insurance
• re-insurance

Local Conditions of Water Projects

• Export credit agencies
• warranty providers

Multilateral and Bilateral Conditions
Relations
Companies and Associations
Private investors
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FINANCIAL PERFORMANCE
Value Drivers
ORGANIZATION/MANAGEMENT
STRATEGY
Actors
INNOVATION
RISK MANAGEMENT

• VALUE
• Create
• Protect
• Realize

VALUE Create Protect Realize
EFFICIENCY
MANAGEMENT
QUALITY
REPUTATION
CUSTOMER SERVICE
GOVERNANCE ETHICS
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AIMS CONDITIONS OF PRIVATE FINANCIAL
INSTITUTIONS

• MISSION of BANKING

• Profit generation

• Safety of investments

• Continuity of investments

• Efficiency

• Reputation

• Social Responsibility / Sustainability

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AIMS CONDITIONS OF PRIVATE FINANCIAL
INSTITUTIONS
STRATEGIES of BANKING

• Investment risks versus
• business opportunities

• Anticipation

• Analysis skills, valuation methods

• Risk Management

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AIMS CONDITIONS OF PRIVATE FINANCIAL
INSTITUTIONS

• PROCEDURES of BANKING

• Compliance
• Heavily regulated framework internal policies

• Fiduciary role
• Safeguarding and prudently handle funds entrusted

• Efficiency
• Decision making process
• Transaction costs

• Transparency control
• Risk Management
• Trust/Confidence

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AIMS CONDITIONS OF PRIVATE FINANCIAL
INSTITUTIONS
ASSESSMENT METHODOLOGY
Evaluation of projects on

• Commercial viability

• Sound investment / business plan

• Feasability and market analysis

• Transparency Good Governance

• Compliance with legislation

• Execution by international standards

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AIMS CONDITIONS OF PRIVATE FINANCIAL
INSTITUTIONS
ASSESSMENT METHODOLOGY
Evaluation of project owner/sponsor on

• Financially healthy

• Proven track record

• Expertise, capacity

• Ethical / trustworthy management

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Private Investment Conditions

• Environment
• adequate, transparent policies
• legal instruments
• standards
• current water supply systems
• service levels
• operator performance
• (technical) incentives

2. Capable regulatory bodies contracts,
quality, tariffs, corruption

• 3. Price mechanisms
• water tariff reforms politics vs. real value of
  water
• valuation of risks and benefits

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Value measurement and effects on sustainability
Environmental
Human Social
Forms of value
Intellectual
Reputation

• Investors Aims
• Safety
• Liquidity
• Profitability
• Continuity

Financial
Assets
CurrentlyMeasured Value
SustainableBusiness Value
Investors
Customers
Government
Communities
Business Partners(e.g. suppliers)
Stakeholders

• Sustainability?

Water Companies
Water user
NGOs
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Investment analysis
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Investment Approach

• OUTCOMES
• due diligences
• loan schemes
• enhancement policies
• debt recovery strategies
• cash generation policies
• improved financial planning systems
• Etc

Sustainability?
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(No Transcript)
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RESULTS (2)
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Criteria Ranking Tree
PLANET
PROFIT
PEOPLE
Social demands
Profitability
environment
Water as Value Driver
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rISKS
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health
Political circumstances
Time
Agriculture
Climate
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Profit
sanitation
Birth
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Pollution
Available water
Bio Diversity
????
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Local Market
3
Life
????
Reputation
2
Legal Framework
Dividence Fresh water
1
0
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Investing in diversity of water
Stakeholder Analysis
Regions
Sub-themes
Sub-sectors
Sanitation
Climate
Country A
Drinkwater
Pollution
Country B
Infrastructure
Health
Country C
Armoede
Waterkracht
Country D
Network Partners
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Find Critical Succes Factors Step-by-step
 
Allocation volume

 
Time
Etc.
1 2 3

• 1.Start-up stagefase inventory opportunities and
  risks, scouting of business cases 1st
  investment targets aspilots
• 2.Build-up stage Optimalisation of processes
  based on increasing insights, scouting of
  business cases, selection of investment targets
  and further allocation
• 3.Consolidation stage Adjustment of processes
  strategy on basis of experiences in previous
  years, allocation of bulk investment volume in
  projects, credits and/or private equity

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Fund Model
Guarantee Fund
Money flow
Private Bank or Fund
Saving or credit organisation (Local) Bank, Trust
Fund
Intermediary (NGO, Supra, Government,...)
Local beneficiary Community Water user
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The End Discussion