1 © 2004 strategic risk management african oil conference - algiers, april 4th, 2006 strategic risk...

1© 2004 Strategic Risk

ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006

Strategic Risk ManagementStrategic Risk Management

African Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006

An alternative view for investing An alternative view for investing huge revenue windfallhuge revenue windfall

Drawings: The Economist

NOT AN OFFICIAL UNCTAD RECORD



Bests Asset Managers are different!Bests Asset Managers are different!

Yale endowment: an alternative view for investing reserves

Sources: Data consolidated from ”The Yale Endowment 2005 Report”

% Allocation de capitaux

1) Alternative Asset Management

2) Average Value of University American Funds (06/30/2005). Past Yields do not herald future results

(2)

(1)

Present Stand

2005 To30/06/05

2003 1999Institutional Average (2)

ExpectedReal return

Risk

Domestic Equity 14,0% 14,1% 14,9% 15,1% 32,0% 6,0% 20,0% 15,7%

Absolute Return (1) 25,0% 25,7% 25,1% 21,8% 17,6% 6,0% 10,0% 13,1%

Foreign Equity 14,0% 13,7% 14,6% 11,1% 17,4% 6,0% 20,0% 12,7%

Private Equity 17,0% 14,8% 14,9% 23,0% 6,1% 11,4% 29,0% 39,5%

Real Assets (3) 25,0% 25,0% 20,9% 17,9% 7,5% 6,0% 15,0% 17,7%

Fixed Income 5,0% 4,9% 7,4% 9,6% 19,5% 2,0% 10,0% 7,4%

Cash 0,0% 1,9% 2,1% 1,5% 3,5%

Total 100% 100% 100% 100% 100,0% 6,0% 11,1% 17,4%

% Capital AllowanceAnnualized Yield(10years-return from 06/2005)

3) Include Real Estate/Oil & gas/Timberland



Bests Asset Managers use active management Bests Asset Managers use active management

Yale Diversifies Policy Asset Allocation : Target 1985 - 2005

Sources: Data consolidated from ”The Yale Endowment 2005 Report”



African Oil Companies have a social African Oil Companies have a social responsibilityresponsibility

In real term, 2005 extra revenue nearly doubles 1974 and 1980 dollar surpluses

• To face, oil price volatility and declining reserves, windfalls have to be invested in: – oil production and refining capacity, – the world's biggest companies,

– private equity deals at home and abroad



Capital flows are flooding, but Africa is missingCapital flows are flooding, but Africa is missing

Source: Thomson Financial-L’Expansion

CNPC/EnCana (Pétrole)

CVRD/Canico

MinesMittal Steel/Arcelor

Acier

Casino/CBDDistribution

Tata/Millenium SteelAcier

TMNF/Real SegurosAssurances

Nanjing Auto/RoverAutomobile

Mittal/KrivorijstalAcier

Telefonica/O2Telecoms

Hyop/UnicreditoBanking

South/ North

South/ South

North/ South

North/ North

Oracle/I-FlexSoftware



Africa does not appear as well in the Africa does not appear as well in the information loopinformation loop

Source: MichelCartier.com La carte internet du monde

Internet World Map



• Safe and hospitable investment environment where profitable opportunities exist

• Local financial market

• Domestic Corporate finance and Fund management capability

• Technology transfer via financial investments

• Professional platform for M&A.

What miss African Oil CompaniesWhat miss African Oil Companies to be part of the game? to be part of the game?



• Mix increase Oil production capacity with traditional financial investment, private equity at home and abroad

• Take a long term view for managing revenues,

• Enable the development of competencies poles in Energy, Telecoms, Software, Health care, Finance, Tourism, etc...

• Be inspired by Kuwait and South Korea experiences in investing in less cyclical asset in complement to oil investments,

• Create Partnerships controlled by Oil companies with independent financial professionals.

How to achieve it?How to achieve it?



Present and alternativePresent and alternative

1. Direct co-investments and partnership in Oil project and companies

Direct investment

Oil Company

Financial Advisor

Fund 1

Fund 2...

Fund 10

2. Investment via several investment funds

3. Mix investment via Partnerships controlled by oil companies

Oil Company

Controlled Partnerships

Real estate

Companies 1, 2,…10

Alternative funds

Oil Company



Kuwaiti & Korean ExperiencesKuwaiti & Korean Experiences

Kuwait Investment Office (KIO) manage reserves for future generations.

10% of oil revenues, Mix portfolio invested in all type

of asset classes and geographical zones,

Long term horizon and own financial teams,

100 people Kuwaiti and non Kuwaiti

ETRI (Electronics and Telecommunications Research Institute), create the conditions of a long term value creation for future generations

ETRI focus on Industrial Property on four axes : Technology Transfer, Patents, Start up creation, Consulting and

infrastructure for business development.

Emergence of world leaders

Kuwait, a financial approach Korea, an industrial approach



KUWAIT, a financial approachKUWAIT, a financial approach

KIO wants to be a first class asset management company with a complementary mission for developing excellence in the Kuwaiti private sector :

Contribution to Kuwaiti human capital education and training Active participation to investment growth in Kuwait Transparency in operations and application strong governance Development of a dynamic and motivated enterprise environment Constant research of improvement in its investments process.

Controlled by the Board of the Kuwait Investment Authority, mother company, chaired by Minister of Finances, with as members :

Oil Minister Central Bank Governor Finance Secretary Five other Kuwaiti experts on investments and finances of whom three are

totally dedicated to this task



Korea, an industrial approachKorea, an industrial approach

Electronics and Telecommunications Research Institute (ETRI) has been involved in more than 2.700 enterprise projects and more than 1.400 Technology transfers

ETRI spread over 264 companies mainly in Korea and abroad (Singapore …)

Today these companies represent more than 4.000 stable employees and annual revenues of WON 700 bln.

Some of these Companies are World leaders in domains like mobile phone, flat screens, or computers components.

With more than 3.500 international patents, ETRI is just behind American AT&T et IBM.



How to implement it?How to implement it?

– Build an investment platform with a 5 to 8 years time horizon,

– Hire an experienced professional team dedicated to complement actual investment with additional asset classes such as Private Equity, Alternative investment and Real estate, at home and abroad,

– Immerge in-house talents to be part of the team with purpose to train them to the best practice of Corporate finance & Asset management,

– Align the interest of team members with those of the structure to be sure to keep the bests,

– Transfer technologies from investment abroad to local market,

– Use the expertise of your platform team for your own M&A operations.



CD1 CD2 J1 CD1 CD2 J2CD1

How it could be structured?How it could be structured?

Operational Partner

Investment Committee

Oil Co partnership

Oil Company

DO1 DO2 DO3 DO4

F/O* B/O* IT*M/O*

A1

A2

A1

A2

A3

A4

Sec 1

Compt.

Oil co personal

*F/O Market Operations; M/O Post Market Operations; B/O Operations Management; IT Information Technologies; CD Department Managers; J Lawyer; A Deputy Manager; Sec Assistant;Compt Accountant



Where is the Value?Where is the Value?

Oil CompanyLimited Partner

General Partner

General Partneracquires

companies and alternative assets or real estate

General Partner

adds value to investments

through

• Operational Experience,• Capital Markets experience,• Structuration Experience,• Board Involvement.

General Partner

Sold-out Investments Portfolio:

• IPO,• M&A• Recapitalizations• Transfers & Arbitrations for

Alternative Assets and Real Estates

Cash and/or stocks

99% Capital

Profit & returnOf capital

Carried interest1



Expected benefits from this type of structureExpected benefits from this type of structure

Technology Transfersand Education

Financial Performance

Diversification and Risks reduction

Portfolio Management Methods Techniques of M&A, LBO, Structured Finance, Alternative Assets

Management Strategic Risk Management & Coverage Governance Regulations imposed by Venture Capitalists (Rigor &

Transparency) Industrial Technologies from acquired companies

Access to unique opportunities in a vast & growing marketplace of privately held companies

Low correlation with other Asset classes Private Equity and Alternative Assets

Management as Risks mitigators

Long Term Value Creation

Professional Team & Regulatory Environment

Access to a large pool of professional resources Adapted Regulatory Environment

Financial Output over 10% High & Effective degree of influence & control over Investments Legitimate access to non-public information before investment-

decision Strong alignment of Interests between Investors & Management



Strategic Risk ManagementStrategic Risk Management

Jean-François Casanova52, rue de Ponthieu 75008 Paris

Tel : +33 (0)1 45.62.16.64Mobile: +33 (0)6 15 38 64 08

E-mail : [email protected]

For any Question :For any Question :

1 © 2004 strategic risk management african oil conference - algiers, april 4th, 2006 strategic risk...

Documents

african oil companies

alternative asset management

active management yale

oil price volatility

yale endowment

official unctad record

bests asset managers

monde internet world