islamic structured finance seminar. adfimi forum on... · eib ibrd 2018 3q-19 tskb at a glance...

Islamic Structured Finance Seminar

12 November 2019

1

Cases of Infrastructure Financewith IsDB financing

01TSKB at a Glance

2

First Privately Owned Development and Investment Bank

TSKB at a Glance Funding Structure Corporate Banking Sustainability and TSKB TSKB - IsDB Relationship Cases

Long lasting relationship with

Development Finance

Institutions (DFIs)

Privately owned

Development and Investment

Bank

Multi-disciplinary

credit evaluation,

appraisal and monitoring

Access to TR Ministry of

Treasury and Finance guaranteed

funding

Integrated Business Model

with Sustainability

principles

▪ Established in 1950 further to World War II & Marshall AidProgramme with the support of World Bank.

▪ 1st CEO was from World Bank.

▪ Between 1963 and 1979, IFC was a shareholder.

▪ TSKB has been involved in promoting the development of theTurkish economy by providing LT investments for Turkishcompanies.

▪ Independent project appraisal process comprising of separatedisciplines.

▪ Non-deposit taking institution, which primarily funds its lendingfrom DFI’s guaranteed by the TR Ministry of Treasury and Finance.

▪ 52% of non-equity liability is state guaranteed.

CLIENTS

MINISTRY of TREASURY

and FINANCE

DFIs & FIs MISSION CLUBS

NGOs REGULATORY BODIES

•Large Corporates, MidCap Companies & SME’s

•Cooperation in various areas such as; corporate loans, investment banking activities and advisory services

•UNEP FI

•UN Global Compact

•Global Reporting Initiative

•TUSIAD

•DEİK (Foreign Economic Relations Board)

•Long-lasting relationship with policy makers and public institutions

•Opinion provider

•Consultancy services

A trustworthy partner in;

•its field experience

•its capacity to introduce innovative themes w.r.t. investment projects

•documentation & negotiation

•monitoring existing projects

Main Stakeholders

4

•ADFIMI

•LTIC

•ELTI

•IDFC

•IIF

•Theme generation

•Fast utilization

•Add-value generation

•Capacity building


5

Overview

Ratings TSKB Turkey

Fitch LTFC B+ BB-

Moody’s LTIR B3 B1

SAHA 9.56/10

50.9%

8.4%

40.7%Shareholder

Structure

İs Bank Group

Vakifbank

Free Float andOther

▪ TRY 41.6 bn asset size

▪ 13th bank in terms of asset size

▪ 58.4% of free float belongs to foreign investors

▪ 369 employees, 1 branch

Subsidiaries


Main Business Lines supporting the Bank’s mission

Corporate Banking

▪ Direct loan financing – industrial investments, energy and resource efficiency, renewable energy, inclusiveness, women empowerment, education and health investments

▪ Project finance solutions –Renewable energy, PPPs, energy, infrastructure and logistic investments

▪ On-lending of multilateral APEXfunds for SME and Export Finance secured from:

▪ IBRD▪ CEB▪ EIB

Investment Banking

▪ Manages own securities portfolio ▪ Structured risk management and

funding solutions, including currency and interest rate derivatives

▪ Customized corporate finance solutions:▪ Equity and bond issuances▪ M&A advisory▪ Strategic consultancy▪ Asset purchase and sales advisory▪ Privatization activities

Advisory Services

▪ Advisory services: ▪ Economic Research▪ Industrial Research▪ Financial Advisory▪ Engineering & Technical Advisory▪ Industrial Strategy Development

▪ Real estate appraisals▪ Sustainability and environmental

consulting: ▪ ESMS▪ Technical consulting▪ Climate change management▪ Renewable energy consulting▪ Investment monitoring for FIs

% of Assets (2019 Q2)

72%23%

5%

*Advisory services & Other operations

6


Banking Sector vs TSKB

7

35.8%

13.1%

Banking Sector TSKB

Cost to Income

18.4%17.8%

Banking Sector TSKB

CAR

62.3%74.0%

Banking Sector TSKB

Loans/Assets

4.7%

3.2%

Banking Sector TSKB

NPL

* Sector data as of June 30, 2019


02Funding Structure

8

Funding Diversification Important Milestones

9

FIRST GREEN BOND

FIRST SUSTAINABLE TIER II BOND

1951 1967 1969 2000 2005 2011 2014 20162004 2012 2017 2018 2019


%80 of DFI Funding

guaranteed by TurkishMinistry of Treasury and

Finance.

Funding Structure (2019 Q3) Funding / Total Liabilities (exc. equity) Strong multilateral funding base (% of DFI Funding)

▪ 92% of the Total Funding is long term.

▪ Long term funding comprises funds obtained fromDFIs and Eurobond Issuances.

10

1%

1%

2%

1%

2%

5%

5%

7%

12%

28%

38%

1%

1%

2%

2%

2%

4%

5%

7%

12%

28%

37%

AIIB

OEB

JBIC

EBRD

IFC

AFD

CEB

IDB

KFW

EIB

IBRD

2018

3Q-19


DFI Funding Agreements in 2019

China Development Bank – USD 200 mn

First Treasury Guaranteed CDB loan with long maturity in Turkey

Manufacturing sector, SME, Energy, Infrastructure, Health and Education

DFI Funding Agreements in 2018

World Bank – USD 400 mn

Inclusive Access to Finance Project

AIIB – USD 200 mn

Sustainable Energy and Infrastructure

53% 53% 52%

11% 11% 10%

21% 21% 22%

5% 5% 5%4% 4% 4%3% 3% 4%

4Q-18 2Q-19 3Q-19

T. Guarenteed DFI Funding Unguarenteed DFI Funding

Securities Issued Subordinated Debt

Syndication & Other Repo &Money Market

6,540 6,383 6,272

03Corporate Banking

11

Women’s Employment

and Equal Opportunity

Energy and Resource Efficiency

Renewable EnergyOccupational

Health and Safety

Sustainable Agriculture

Sustainable Tourism

Outstanding Project Themes

SME Support

Environmental Pollution

Abatement in Industry

Industrial Development Research &

Development

Social Infrastructure:Health, Education &

Clean Transportation

Infrastructure

Midcap Financing

Supporting Exporters

Innovation

12

Regional Development

& Support Employment



Loan PortfolioLoans by sector (Q3 19)

▪ 73% is attributable to the sustainable investments.

▪ 147 Projects in Energy & Resource efficiency, contributing to 6% ofthe portfolio in the sectors ranging from metal to chemistry.

Medium term focus

Supporting medium-size infrastructure projects, acting as

pioneering institution in renewable energy, energy and resource

efficiency investments, R&D, gender equality, innovation,

healthcare and education projects and investments that will

support sustainable development such as Midcap and SME

financing.

Loans by category (% in loan book)

Loans by currency (Q2 19)

FX, 91.3%

TRY, 8.7%

13

10%

2%

3%

3%

4%

4%

4%

4%

7%

9%

13%

37%

Other

Textile

Health & Education

Tourism

Non-residential Real Estate

Chemistry and Plastics

Construction

Metal and Machinery

Electricity/Gas Distribution

Telecom/Logistics

Finance

Electricity Generation

Other: %4 Food&Beverage, %2 Automative,%1 Packaging, %3 Other

Investment, 71%

Working Capital,

20%

APEX, 9%

Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-19

Renewable Energy and Energy&Resource Efficiency

With respect to their installed capacity (MW), 87% of them are operative.

Within 289 REL projects, 90% is in operation.

Sectors: Tourism, Chemistry, Automotive, Steel, Cement, TextileSteel, Cement, Textile

62 projects

Sectors: Chemistry, Automotive, Cement, Minery, Energy, Steel, Textile

85 projects

Energy EfficiencyResource Efficiency147 Projects in Energy &

Resource Efficiency

14

In terms of MW power, 97% of the operating

energy projects are backed by Feed-in Tariff

Mechanism (Yekdem).


75% 69%51% 46% 37% 35% 35%

3%

9% 14%17% 18% 19%

18% 22%34% 32% 35% 37% 33%

7% 7% 6% 6% 5% 5% 5%

2% 4% 6% 7%

2013 2014 2015 2016 2017 2018 2019 Q3

Renewable Energy Portfolio (Outstanding)

Renewable Energy Portfolio (Outstanding)

Hydro Geothermal Wind Biomass Solar

1.3 bn 1.4 bn 1.5 bn 1.6 bn 1.9 bn 1.9 bn 1.8 bn

Supporting SMEs

While responding working capital needs of SMEs, TSKB also finances theinvestments of the firms in a variety of fields: technology updateinvestments, capacity development, energy efficiency, environmentalprojects.

The financing could be either a direct facility or an APEX loan. Theshare of SME loans within the total loan portfolio is circa 18%.

An innovative facility: The first Turkish InnovFin SME GuaranteeAgreement signed with the EIF to support innovative investments bySMEs.

15


APEX Banking

DFIs

TSKB

PFIs

Companies

TSKB plays a key role in wholesale banking with an aim to reachout the SMEs, which is also a priority to DFIs.

DFIs take TSKB’s risk, TSKB transfers the risk to PFIs, who in turncarries the risk of final beneficiaries.

Under APEX loan schemes, TSKB works through commercialbanks, leasing companies and very recently factoring companiesand participation banks to extend SME & export financing loansthat contribute to proliferating workforce in Turkey.

To this end, TSKB channeled nearly USD 2 bn secured throughIBRD, EIB and CEB since the beginning of such operations, where2,330 companies financed via 30 PFIs*.

16

*PFI: Participating Financial Institutions


17

Multi-Disciplinary Loan Appraisal and Monitoring

Appraisal report submitted to Loan Allocation Department for further evaluation

Subject to satisfactory output, loan allocation request submitted to Credit Evaluation Committee and the

decision is taken unanimously

Board of Directors Approval

Engineering Vision

Financial Analysis

Economic Research

Loan

Eva

luat

ion

, Ap

pra

isal

an

d A

lloca

tio

n

▪Detailed technical analysis of the investment projects

▪Capacity determination of the investments

▪Review and justification of the business model

▪ Establishing & reporting KPIs

▪ Supporting innovative investments

▪Detailed financial analysis of the subject company

▪Cash flow projections

▪ Financial valuation

▪Business model feasibility

▪ Social Impact assessment and measurement

▪ Setting economical value added KPI’s

▪Monitoring the market and sector dynamics

▪Publishing sectoral reports

▪Providing input for project valuation

Monitoring and Collateralization

▪ Loan concentration is prudentlywatched during loan allocation andmonitoring processes, and is alsolimited by internal ratios through RiskManagement.

▪ TSKB has a comprehensive monitoringprocess involving

▪ Compliance rules.

▪ Credit risk monitoring forborrower and its group,

▪ Collateral package monitoring,

▪ Sectoral and regional analysis,

▪ NPL management

▪ Collateral package for project financeloans includes

▪ pledges over the shares,

▪ mortgages over immovable

▪ commercial enterprise pledges

▪ pledges over bank accounts

▪ project completion guarantees

▪ assignment of receivables.


04Sustainability and TSKB

18

Sustainability and Inclusiveness at TSKB

2011

▪ Supporting The “Water Disclosure Project” (WDP)

▪ First Progress Report Under The UN Global Compact

▪ Establishment Of TSKB Sustainability Consultancy-ESCARUS

▪ Founding Member Of International Development Finance Club (IDFC)

2012

▪ First Turkish bank to be granted ISO 14064 Greenhouse Gas Management Standard Certificate

▪ Establishment of the Sustainability Management System

▪ Establishment of the list for sectors and operations not suitable for lending (Exclusion List)

2009

▪ First Bank in Turkey to become a member of the UNEP FI

▪ Partnering With The Global Reporting Initiative (GRI) as a Corporate Stakeholder

2010

▪ Publishing the First GRI-Approved Sustainability Report in the finance sector

▪ Involvement in the Carbon Disclosure Project (CDP)

▪ Signing of the UN Global Compact

▪ Membership to Long-Term Investors Club (LTIC)

1980

▪ Considering the Environmental Factor in Credit Appraisal Processes

1990

▪ First Environmental Loans Offered to Turkish Industry

2005

▪ Environmental Management System

2006

▪ Sharing the Environmental Policy with Stakeholders and the Public

2007

▪ First Turkish Bank To Obtain ISO 14001 Certificate

▪ www.cevreciyiz.com

▪ Launch of ERET Model

2008

▪ Turkey’s First Carbon Neutral Bank

2014

▪ Establishment of the Sustainability Committee

▪ Drafting of the Sustainability Policy and Complementary Policies

▪ First Carbon-Neutral Concert of Turkey

2015

▪ GRI G4 Sustainability Report

▪ Inclusion in the BIST Sustainability Index

▪ Signing of UN Women’s Empowerment Principles (WEPS)

2016

▪ First Green/ Sustainable Bond issuance in Turkey

▪ Publication of TSKB declaration on Climate Change

▪ Inclusion in the FTSE4good Emerging Market Index

2017

▪ First Basel 3 compliant Sustainable Tier 2 Bond in the World.

▪ First Integrated Report of the Turkish Finance Sector

▪ Establishment of a new Working Group under IDFC with a focus of «Gender Equality»

2013

▪ GRI A+ Sustainability Report

▪ Founding Member of European Association of Long-Term Investors (ELTI)

1980-1990 2005-2010 2011-2015 2016-2019

2018

▪ Gender Equality Certification («Equal Opportunities Model (FEM)») led by KAGIDER (Women Entrepreneurs Association of Turkey) and the World Bank

▪ Establishment of the «Social Impact Assessment Analysis» and «Gender Equality» Working Groups under Sustainability Committee of TSKB

▪ Second Integrated Report with second party assurance for the first time in Turkey

▪ Publication of Allocation and Impact Reporting of two outstanding sustainable bonds with the «Assurance» of Ernst & Young

2019

▪ Becoming one of the founding signatories of the UNEP FI «Principles of Responsible Banking»

19


An Acknowledged Environmental Model by TSKB

20

The first implementation of an environmental appraisaland assessment models in Turkey: Environmental RiskEvaluation Tool (ERET)

Engineering Expertise

What is ERET?

An evaluation model used to calculate the environmental and social risksassociated with a Project. It seamlessly overlaps with the criteria in EquatorPrinciples, which have been drafted by the IFC and widely adopted by bankscurrently operating in developed economies.

Where to use it?During the appraisal phase of each project before submitting the appraisalreport to the Credit Evaluation Committee.

In line with the scores for environmental and social risk, how theenvironmental and social impacts will be mitigated and monitored isstructured within the framework of a plan drafted in cooperation with theproject’s sponsor company.

Content:

Composed of thirty five separate headings seeking to assess environmentaland social impact of each project by identifying and analysing every possibleeffect of a Project.

A B+ B- C

Hig

h R

isk

Me

diu

m S

en

siti

veR

isk

Me

diu

m R

isk

Low

Ris

k


Sustainable Development Goals

21

SDG Mapping Beginning from 2019, TSKB has implemented in its credit evaluation process a section dedicated to SDG Mapping of the proposed sub-financing.

TSKB directly contributes to 14 of the 17 SDGs

Ministry of Development SDG Project• SDG Due Diligence Analysis of Turkey• Stakeholder meetings, quantitative and

qualitative analysis on 17 SDGs and 169 targets

• 17 SDG Reports and a Final Report summarizing findings, areas for development policy recommendations and proposed SDG governance structure for the country


05TSKB - IsDB Relationship

23

• 1980• Started with intermediation

of equity participation in private sector companies

• 2010• Search for an applicable

financing models• 2012• Reached an agreement on

applicability of RestrictedMudarabah

• Today• Our work progressed in two

channels• Identifying plausible

financing model• Finding the companies that

would benefit from the IDB funds

Restricted Mudarabah I4 December 2012

Restricted Mudarabah II30 December 2013

• Renewable Energy• Energy Efficiency

Themes

• Renewable Energy• Energy Efficiency

Themes

Relationship with IsDB


24

Restricted Mudarabah Financing


06Cases

26

Total Installed Capacity370 MW

Annual CarbonEmission Reduction1,006,000 tons eqv.

Total Fixed Project Cost641 million USD

Annual Energy Savings270 GWh

2 X

1 X

1 X

6 X Energy Efficiency

Hydro Power

Wind Power

Solar Power

MAJOR IMPACTS


Restricted Mudarabah I – USD 100 mio

27

Total Installed Capacity489 MW

Annual CarbonEmission Reduction1,736,202 tons eqv.

Total Fixed Project Cost1 billion USD

Annual Energy Savings1,338 GWh

1 X

5 X

5 X Energy Efficiency

Hydro Power

Wind Power

MAJOR IMPACTS


Restricted Mudarabah II – USD 220 mio

28

Wind Power Plant27.5 MW


29

Hydroelectric Power Plant

275 MW


30


TSKB Development Finance Institutions Department

31

www.tskb.com.tr

islamic structured finance seminar. adfimi forum on... · eib ibrd 2018 3q-19 tskb at a glance...

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