In a seven-year personal experiment, fund manager Lee Freeman-Shor gave 45 of the world’s top investors $25m and $150m to spend on business ideas. He discusses which investors had the best outcomes, and why.
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World Finance speaks with emerging markets economist Charles Robertson to discuss what is behind Africa’s emergence, and how its new prosperity is impacting on the rest of the world.
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Minas Gerais State had its first legal framework approved for PPP contracts in Brazil back in December 2003. At that time, the government outlined a number of laws that would shape the future of the state and provide support for PPP activity long into the future.
With the legal framework in place, partners, goals and objectives outlined, Minas Gerais started to pioneer this unique form of project development. Since then, the PPP Unit has become the operational body responsible for developing this policy, by prospecting new projects, advising governmental bodies and agencies, analysing proposals and coordinating the technical aspects of contractual modelling.
Minas Gerais currently has the most advanced state PPP programme in Brazil
The institutional mission of the Central PPP Unit is to strengthen the capacity of the Minas Gerais Government in attracting private investment in public infrastructure, improving the quality of public services and modernising the infrastructure management in general. The fulfilment of the overall operation depends on the belief of the private market as well as the state’s population with regards to a number of key objectives that rely on administrative efficiency, inter-organisational cooperation and a focus on the ultimate user of the infrastructure equipment. The belief in these values have led the PPP team to prioritise a number of objectives:
Another relevant point is the organisational structure of PPPs in Minas Gerais, which includes consultation among a number of units. The PPP Central Unit – which is responsible for operational activities and coordination of partnerships, as well as the advice of the Management Council of Public-Private Partnerships (CGP). The PPP Central Unit focuses on a number of activities:
Enhancing Brazil
Minas Gerais currently has the most advanced state PPP programme in Brazil. From an institutional perspective, the state has been planning a great deal of social and economic development, offering all kinds of support for entrepreneurs through well-known public companies. The result of a wide range of synergies between government and society can also be verified by the success of the PPP.
With this programme, the government has engaged about BRL 2.7bn ($717.8m) of private investment for public infrastructure in sectors like logistics and sports equipment, creating services and public safety for citizens. Such has been the success of the team that nine PPP contracts have been signed in the last decade. The clarity and promise behind the state’s projects has seen the state stand out among emerging market participants by the World Bank.
Brazil’s first highway sector PPP was put into practice in Minas Gerais in 2007. The agreement will help the recovery and operation of 327km of the interstate MG-050, which connects Belo Horizonte with São Paulo. In 2009, a contract was signed for the construction and administration of the Penitentiary Complex, which will house more than 3,000 prisoners. The first prison unit was opened in January 2013. In 2010, the government signed up to a PPP for the improvement of the Mineirão Stadium, which reopened in December 2012.
Another great project was signed in July 2014 involving the PPP of the Solid Urban Waste Management. A contract was signed between the government and the private sector in which the two would act together for a period of 30 years. During that period those involved will work together to better consider transhipment, treatment and final disposal services for urban solids residues in the Belo Horizonte metropolitan region. The state is responsible for payments and contractual obligations, while each municipality is responsible for domestic waste and prioritising selective collection and recycling associations.
The arrangement is considered an efficient alternative for municipalities who can utilise adequate solid waste disposal, while enabling investment of around BRL 342m ($90.9m). This PPP arrangement is an innovative and integrated solution to solve waste management issues that threaten the environment of the municipalities and, because of that, it is also an example of good practice for others governments that suffer with similar problems.
Greater horizons
With the new arrangement, the PPP Unit is expanding its activities and assisting municipalities to structure PPP projects in several sectors, such as basic sanitation, solid waste management, public lighting and education, aiming to ensure a better quality of projects developed by municipalities.
The State of Minas Gerais has also become a reference to other states and academic institutions in Brazil, which often conduct technical visits to learn about the PPP projects and structure implemented in the state. The PPP Central Unit still has an important role in dissemination practices and methodologies applied in Minas Gerais, which occurs through the promotion of interstate events. These play a substantial part in promoting the training and dissemination of PPP concepts and practices. The PPP Central Unit already produces many manuals and guides to good practice, such as the operations manual, in order to present the guidelines and procedures adopted in PPP projects; the key standards manual, which includes guidelines on major issues faced in PPP projects, including the methodologies and best practices; and the independent verifier manual, that intent on contributing to build efficient independent verifier contracts.
The experience of Minas Gerais demonstrates that the use of available mechanisms of partnership has enormous potential to streamline the deployment and management of public infrastructure. Through partnerships, the state government re-establishes standards for services and creates opportunities to enhance and accelerate the development of economic and social infrastructure in Minas Gerais, and consequently in Brazil.
By 2020, the number of travellers passing through Beijing could hit 142 million, a report by the Chinese Ministry of Environmental Protection found in 2014. Outbound tourism is on the increase – Chinese travellers accounted for almost 10 percent of global outbound tourists in 2014 and increased their overseas spending by 28 percent in 2015, according to the World Tourism Cities Federation (WTCF). Inbound travel is meanwhile surging on the back of the nation’s growing economy.
Saturation point
All of this means that Beijing’s current international transport hub (Capital Airport) has reached bursting point, with 83.7 million passing through its doors in 2013 – well above the originally intended capacity of 76 million. It’s the second busiest hub in the world, ranking only just behind the US’ Hartsfield-Jackson Atlanta International Airport, and with limited room for further expansion it’s clear that China requires an alternative.
As a solution, approval was granted in 2011 for the $13.1bn construction of Beijing’s second international airport. Its first terminal, stretching across 700,000 square metres, is set to become the biggest in the world, with a capacity for 45 million people, which will later to be increased to 72 million. The final airport will have seven runways and, with an anticipated handling capacity of over 100 million, be one of the world’s largest overall air travel hubs. By 2020 it’s expected to witness 620,000 landings and lift-offs every year.
Construction of Terminal One begun in December 2014, and is touted for completion in 2018. Located 46km south of Beijing in the Daxing district – on the opposite side to the existing international air hub, which lies northeast of the city – the airport is expected to serve the Tianjin and Hebei provinces alongside Beijing. Connections to train services such as the Gao Tie high-speed rail network will grant travellers landing into the new port with access to various other regions across the country.
French airport design firm ADP Ingénierie and Zaha Hadid Architects (ZHA) won a competition in September 2014 to design the new terminal under the direction of Beijing New Airport Construction Headquarters (BNAH). They worked in partnership with Dutch airport specialists Netherlands Airport Consultants (NACO), who won the bid for the master design in 2011.
Well-thought out construction
Blending traditional Chinese architecture with a contemporary style, the airport is designed to become one of the greenest and most compact in Asia, with runways and taxiways located close together in order to minimise the distance from one to the other, and so cut emissions. In Terminal One, international and domestic floors will be stacked vertically, and there will be just one passenger-handling centre, according to ADPI.
“The centralised single-terminal concept provides numerous benefits: efficient and economical to operate, enhanced passenger experience from the many services provided including shopping areas and inter-modal ground transport”, said the firm. “Given the terminal’s compact design, the distance between the terminal centre and the farthest boarding gate is around 650 yards, less than Asian and European terminals with similar capacity.”
As well as making the passenger experience easier, the airport is likely to bring a significant boost to China’s economy. And as travel to the region continues to grow – with the country’s passenger traffic in 2032 expected to be four times what it was in 2012 – this latest megahub might be the most game-changing of them all, forming a rival to the world’s largest airports and giving the country a further boost in its mission to reach superpower status.
Morocco is one of the world’s most affected countries in terms of water shortages. According to the Social Watch Report 2012, supply capacity in dams is becoming ever more restricted, and 35 percent of piped drinking water is wasted due to poor maintenance. The World Bank estimated water supply per head in the wider North Africa and the Middle East region would be just half of its 2008 baseline by 2050 as a result of a growing population and climate change, stressing the importance of new infrastructure projects to help solve the problem.
One solution is the use of desalination plants: complex systems that turn seawater into safe drinking water. These systems have begun cropping up in Morocco, but the Agadir region on the southern Atlantic coast – where demand is soaring as a result of the booming tourist industry – has until now remained severely undersupplied.
In 2008, water stocks in Agadir’s farming regions were seven times lower than in 1982
Project desalinate
Earlier this year, construction began on a new desalination plant that is set to supply over 500,000 people with 100,000 m3 of safe drinking water per day: giving the plant the largest desalination capacity in the region. The €842m project will use an innovative pressurised ultrafiltration membrane system to treat the seawater, which will be collected via a 1,150m-long underground pipeline and reverse osmosis to desalinate it. The plant will operate for a period of 20 years.
Located 42km from the city of Agadir, the project is being led by global firm Abengoa, which develops technologies to promote sustainability in the environment and energy sectors, and has already worked on a number of other water supply projects across the world. Abengoa was chosen to manage the design, construction, technology, maintenance and operation of the project by Morocco’s National Power and Drinking Water Office (ONEE) – which is responsible for water supply and distribution throughout the country and is involved in the project’s development.
The project is being financed by investment fund InfraMaroc alongside a consortium of local banks, led by Banque Marocaine du Commerce Extérieur (BMCE). This PPP model marks a milestone in the region, according to Abengoa. “This is the first project that the National Power and Drinking Water Office has developed under a public-private partnership system, putting Abengoa at the forefront of this model in Morocco”, the company said.
Socioeconomic development
As well as supplying much-needed potable water to households, the new plant is set to help the fast-developing Agadir region grow on a socioeconomic level, supporting the industries upon which its economy lies – most notably tourism and agriculture. The latter accounts for 80 percent of water usage in the country as a whole, according to the Social Watch report, but its access to safe water is declining. In 2008, water stocks in Agadir’s farming regions were seven times lower than in 1982. That’s likely to become yet more of a concern as yearly average rainfall drops. One study (Climatic Change and Drought Mitigation: Case of Morocco) predicted a 10 percent reduction in the country’s precipitation between 2021 and 2050.
The difference the Agadir desalination plant will make to those sectors and the region’s economy at large is clear, and it’s part of a global effort. “The Agadir desalination project is part of a strategic plan to solve water supply problems in those parts of the world most affected by water shortages”, said Abengoa. It’s also a means of bringing local partners in Morocco together through an innovative financing model that combines public and private expertise to provide help where it’s most needed. That’s a move that should inspire other such partnerships throughout the country and beyond, as investors seek to support infrastructure projects that have a real impact on the communities in which they’re built, and which leave a lasting change on the countries in which they operate.
Over recent years, Turkey has become increasingly aware of the need to improve its healthcare infrastructure; the number of hospital beds for every 1,000 people in the country amounts to just 50 percent of the OECD’s average, and demand is growing. With that in mind, the government launched a €12bn Healthcare Transformation Programme in 2003 in order to improve, modernise and expand its hospital infrastructure across the country through public-private partnerships (PPP).
It took some time for that to take off, however, and in December 2014 Turkey’s healthcare sector achieved its first financial close of a PPP project; the Adana Integrated Healthcare Campus (IHC) – helped along through backing from the European Bank for Reconstruction and Development (EBRD). The €542m hi-tech hospital, which has been under construction since March 2015, is set to take three years to build and will be leased to the Ministry of Health under a 28-year concession.
Improving the quality of essential infrastructure through private sector participation is one of the EBRD’s priorities in Turkey
Private eye
Under the innovative PPP model, private developer ADN PPP Saglik Yatirim – comprised of a consortium of Turkish and global companies – will provide some of the financing and manage the design, construction, facilities and maintenance, while the Ministry of Health will be responsible for its medical services. The consortium includes Turkish infrastructure company Rönesans Holding, SAM, TTT, Sila and international leading infrastructure firm Meridiam, which will see its first foray into Turkey, and which will become the first global investor and asset manager to finance a PPP project in the country.
A further nine financial institutions will provide the rest of the funding through a €433m long-term package, with the International Finance Corporation, Germany’s development bank DEG and French development institution Proparco providing combined parallel financing of €120m. EBRD, Siemens Financial Services, BBVA, HSBC, Sumitomo Mitsui Banking Corporation and Korea Development Bank will supply the rest of the debt facility. Among those, EBRD will be the largest lender, providing €100m through its A loan, syndicated to commercial banks for 15 years, and €115m through its 18-year maturity B loan.
The EBRD believes the PPP model will ensure a higher-quality service at all stages of development and operation. “The partnership between the public and the private sector will deliver better hospital facilities for a community of almost two million people living in Adana,” said Jean-Patrick Marquet, EBRD Director for Municipal and Environmental Infrastructure. “The arrangement allows the Ministry of Health to focus on what it does best – providing healthcare – while working with private investors doing what they do best – raising finance, and designing, constructing and managing what will be a state-of-the-art hospital facility.” According to the EBRD, the project will ensure better value from an all-in cost service perspective than public funding might, guaranteeing high-quality and efficient equipment, medical technologies and overall business practice and monitoring.
The new health complex seeks to meet growing need in the Adana area – a city located in the southeast of Turkey – providing 1,550 additional hospital beds in the region. It will be located in the Yuregir District, where it’s set to spark other infrastructure development, including the construction of a new access road.
Spread across more than 250,000m2, the campus will house a general hospital (with 584 beds) alongside a 349-bed women and children’s hospital, a 185-bed cardiovascular hospital, a 182-bed oncology hospital, a 150-bed physical medicine and rehabilitation hospital, and a 100-bed forensic psychiatric hospital. “Designed as an integrated campus, the project will deliver a full range of healthcare services with state-of-the-art equipment in a single location, thereby affording patients in the region efficient access to high-quality healthcare”, said infrastructure firm Meridiam.
The project’s potential environmental and social impact has been put as a top priority, with an Environmental and Social Impact Assessment (ESIA) carried out which looked at effects on biodiversity, noise, geological impact and other factors. The campus was shown to be in accordance with the EBRD performance requirements, as well as Meridiam’s ESG requirements, the IFC performance standards and the World Bank’s Environmental, Health and Safety Guidelines. A stakeholder engagement plan was drawn up in October 2013 based on meetings with NGOs, government authorities and a public consultation meeting on the draft ESIA.
Growing PPP trend
The EBRD hopes the project will inspire other PPPs and concession contracts to unfold across Turkey. The bank has been collaborating with the Ministry of Health over the past couple of years to encourage more cooperation between the private and public sectors, and its participation in the Adana project has already, as intended, helped to attract other private investors, including infrastructure funds – most notably from Meridiam.
“By supporting – both through investment and advice – Turkey’s vast programme of hospital-building under a PPP scheme, we want to promote the role of the private sector in developing and financing these essential infrastructure projects”, said Michael Davey, EBRD Director for Turkey. “Improving the quality of essential infrastructure through private sector participation is one of the EBRD’s priorities in Turkey”, the bank added. Under the Health Transformation Programme, the Turkish government aims to create 30 new health complexes across 22 provinces while expanding existing hospitals through further private partnerships.
It’s part of a wider trend, according to the EBRD: “In response to the need for large capacity investments in healthcare systems, governments are seeking to tap private sector resources and knowhow to construct and manage infrastructure related facilities more rapidly and more efficiently, while medical service provision remains under the responsibility of the state.” Other PPP projects currently at the development stage across the country include the Istanbul Ikitelli hospital, the Ankara Etlik Health Campus, the Mersin Integrated Health Campus and the Bilkent Integrated Health Campus, which reached financial close in May. The government is also embracing the PPP model outside of the healthcare sector, with financing for a $5bn motorway (Gebze-Orhangazi-Izmi) and for a Petlim container terminal signed through a combination of private and public sector engagement.
The EBRD effect
EBRD’s influence is clearly having an impact, and it intends on continuing to support projects to help realise the government’s goals in the times ahead. “The bank aims to finance several other hospital PPP projects in the future and will continue backing the Ministry of Health with technical assistance and advice”, said Davey. The bank has invested €4.5bn in the country since 2009, when it first began financing ventures there, funding over 130 projects spanning industries as diverse as infrastructure, agribusiness, energy and finance. That makes Turkey one of its biggest focuses in terms of the number of schemes it has backed – which is significant given its investments in 30 countries across Europe.
In backing this latest project, EBRD is setting a precedent for others to follow in Turkey’s project finance field at large, as Meridiam recognises: “The closing… represents a milestone for the local project finance market, bringing together development institutions such as EBRD and IFC as well as global commercial banks for debt financing over long-term tenors”, said the firm. By combining various private sources together with operational input from the government, the Adana project is leveraging the strengths of both sectors. In so doing it’s taking a leap of faith, but it’s one that looks set to pay off – both in terms of financial and, importantly, developmental, progress.
Malaysia’s Puncak Niaga Holdings Berhad Group (PNHB), which was established in 1997, has become a leading integrated water, wastewater and environmental solutions provider in the region, as well as an emerging player in the oil, gas and construction sector. With a market capitalisation of MYR 1.23bn ($2.8m) and an employee base of more than 4,000, PNHB has done much to address the region’s prevailing challenges and lay the foundations for future generations.
PNHB subsidiary Puncak Niaga (M) Sdn Bhd (PNSB) was founded by Tan Sri Rozali Ismail, one of Malaysia’s brightest minds with experience in law, banking, water, and, more recently, construction, oil and gas. Not content with achieving the technologically advanced supply of treated water, Ismail later moved to take over water distribution in Selangor, the Federal Territories of Kuala Lumpur and Putrajaya in 2005. There he was forced to confront Malaysia’s water supply issues, and Ismail and PNSB have resolved to improve the country’s infrastructure deficiencies and, in doing so, ensure adequate and safe water for all.
In 2013, Jernih was put to the test when Typhoon Haiyan hit the Philippines and the water supply in several areas was completely cut off
A responsible enterprise
The company’s ambitions and that of its subsidiaries are closely in keeping with its commitment to CSR, as the group strives to realise a sustainable and ethical way of doing businesses. Crucially, the group makes sure it gives back to the communities in which it operates, and supports a number of programmes and services intended to strengthen these communities. In 2014, the PNHB Group – including its subsidiaries – contributed MYR 4.3m ($98,000) to various CSR programmes via sponsorship and community care.
The River Rescue Brigade, for example, is a club that was founded in March 1998 by the PNHB Group’s Executive Chairman, and was intended to educate the public, particularly children and young people, about the importance of preserving the environment. As of 31 December 2014, there were 9,905 members comprising of students from 480 primary, secondary and tertiary schools in Selangor, Kuala Lumpur and Putrajaya.
Tabung Budi, founded in 2010, is another CSR initiative focused on those in need of financial aid in and around the region. Throughout 2014, the programme reached communities under stress owing to water-related issues, and MYR 469,008 ($107,24) has been contributed as part of the said programme since its inception. In November 2013, the company participated in Pasukan ATM Untuk Misi Bantuan Bencana Alam at Tacloban, Philippines, in which the group delivered ‘Jernih’ field water purification system tanks to the areas worst affected by the Haiyan Typhoon, providing clean water for the victims. Again, at the end of last year, the group attended to flood victims in Kelantan and Pahang. Far from excluded to the above initiatives, the group’s impressive financial performance and strong commitment to environmental and social preservation means that it is often seen as a major contributor to the region’s continued development.
Completed projects
PNSB holds five water treatment concessions with the Selangor State Government and is today the nation’s second largest water supply concessionaire, operating, managing and maintaining 29 water treatment plants with a combined capacity of 1.9 million litres per day. The company last year delivered 716.2 million m3 of treated water, and completed a string of plant improvement works. Over the course of the year, PNSB also initiated further projects in a bid to enhance operational reliability and efficiency, enabling the company to achieve some of its key performance parameters for water quality and production.
Under a separate concession agreement with the Federal Government and the Selangor State Government – another of PNHB’s subsidiaries – Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS) supplies treated water to consumers in Selangor, Federal Territories of Kuala Lumpur and Putrajaya, or 7.5 million users, including industrial and commercial users. SYABAS also undertakes the maintenance of 27.4km of water pipes, 1,561 service reservoirs, elevated water tanks and suction tanks and 632 booster pumping stations in the same areas.
Elsewhere, Puncak Niaga Construction Sdn Bhd (PNC), a wholly owned subsidiary of PNHB and the group’s construction arm, has entered into its second full year of operation, undertaking several construction projects for PNHB.
Going back to 2010, under the Malaysian Federal Government’s initiative to upgrade the living standards of the rural population of Sarawak, the company was awarded a contract worth MYR 422.6m ($96.5m) by Konsortium Puncak Niaga Holdings Berhad–Quality Concrete as per the state’s Rural Water Supply Project.
Completed in February 2014, the project’s benefits extend to 23,650 homes across six divisions in Sarawak, and have contributed to the supply of clean piped water to some 91,356 homes, increasing the water coverage of the state from 59 percent to 90 percent. In May of last year, the Malaysian Ministry of Rural and Regional Development appointed PNHB as the contractor for a project to upgrade the Bayong WTP at Sarikei, which includes the construction, testing and commissioning of a new 30 MLD WTP, a five million litre reservoir at Kim San, the upgrade of the existing raw water intake and the laying of 14 kilometres of new pipeline. Worth approximately MYR 97m ($22.1m), the project is due for completion this year.
Not long after, in June 2014, KKLW awarded PNHB a rural water development project in Pakan, Sarikei, encompassing the supply, jointing and delivery of pumping and gravity pipelines; the construction, testing and commissioning of three water reservoirs and booster stations at Pakan, Wuak and Engkamup; and the supply and installation of mechanical and electrical equipment. This MYR 53.4m ($12.2m) contract is scheduled for completion by September 2015.
In development
In 2014, the Malaysian Sewerage Division of the Ministry of Energy, Green Technology and Water selected PNHB as the contractor for Package D44, which leads to the construction of sewer pipe networks at Bunus, Kuala Lumpur.
This project includes the design and construction of sewerage works in the Bunus catchment area; the upgrade of two existing sewage pumping stations; the construction of seven new sewage pumping stations; the decommissioning of 73 or more existing sewerage treatment plants; construction of 600 new manholes; and the construction of new and extension of existing sewerage lines. Covering 72 square kilometres in Kuala Lumpur and Ampang Jaya, the MYR 394m ($90.2m) project is slated for completion in February 2018. In 2010, Prasarana Malaysia Berhad (Prasarana) awarded the Kelana Jaya Line LRT contract project, entailing the construction, completion and commissioning of a water and sewer pipe relocation works LRT extension.
At MYR 15.3m ($3.04) the project was originally slated for completion September 2011. However, additional requirements imposed by the local and utility authorities mean that the completion date was extended and the additional works completed in May of last year. Another project of note is a PNC collaboration with the Malaysian Armed Forces to develop Jernih units, which is a portable field water purification system capable of producing 3,000 litres per day of treated water, described as ‘novel, efficient, robust, innovative and handy’. In response to recent floods, the company deployed five Jernih units to flood-stricken states, namely Kelantan and Pahang, to facilitate clean drinking water for affected communities. In 2013, Jernih was put to the test when Typhoon Haiyan hit the Philippines and the water supply in several areas was completely cut off.
PNHB’s oil and gas division, meanwhile, is interested in the provision of services for offshore logistics and marine management. The company is now in its third full year of operation in the domestic transportation and installation market, having earned its credibility through effective and efficient project delivery for PETRONAS and its contract partners.
In 2014, the company supported the proposed restructuring of the water services sector in the state of Selangor, Federal Territories of Kuala Lumpur and Putrajaya, having signed a conditional sale and purchase agreement with the Selangor State Government for the proposed disposal of its entire equity interest, including its 70 percent in SYABAS. As a result the company can focus on expanding its existing oil and gas business, further develop its construction business and explore opportunities in new sectors and new locations.
Confronted with energy demand increasing approximately six percent per year for the last 10 years and drawing on imports for 94 percent of its energy needs, Morocco has engaged in a sustainable development dynamic, focusing on renewable energy development. Blessed with strong hydro potential, wind sweeping in from the western Atlantic and substantial exposure to solar radiation, Morocco is well placed to make use of hydro, wind and solar power. According to the IAEA, it boasts a “natural advantage” and looks soon to become a regional leader in the renewables sector, buoyed by an ambitious government strategy to ensure that 42 percent of its energy stems from domestic renewables by the year 2020.
A key part of this initiative is the NOOR Ouarzazate Complex, part of the NOOR Solar Plan and the winner of the Project Finance Solar Deal of the Year. In all, the plan aims to install a minimum of 2,000MW in additional capacity, generating investments of more than $9bn along the way. The deployment of the NOOR Solar Plan will help Morocco meet its rising energy demands, greatly improve its energy security while addressing climate change issues. NOOR also follows an integrated and sustainable approach, through the support of a competitive industrial network, meant to maximise local industrial integration tied to the development of solar power plants, but also through the development of local solar-related R&D and skills.
Located in Southern-Central Morocco, Ouarzazate is best-known as a filming site for various desert-based movies and televisions shows, from Black Hawk Down to Game of Thrones
Masen, a joint stock company created in 2010 and consisting of 110 employees in both Rabat and Ouarzazate, oversees the NOOR Solar Plan. Through the successful implementation of NOOR, the company will act as a catalyst in the launching of other effective local development solutions, while also, through its commitment to environmental sustainability, providing a clear picture of responsible corporate citizenship. By keeping to the world’s much-changed global energy landscape and the economic priorities set out by the Moroccan State, Masen aims to make good on the country’s energy promise and, in doing so, further its economic and social development.
Door to the desert
Located in southern-central Morocco, Ouarzazate is best-known as a filming site for various desert-based movies and televisions shows, from Black Hawk Down to Game of Thrones. Yet its location, 1,160m up and in the middle plateau, south of the High Atlas Mountains and just north of the desert, makes it the perfect location for solar energy development. Known as the door to the desert, the area enjoys over 3,400 hours of sunshine a year and looks set to play a decisive part in Morocco’s low-carbon transition.
For these reasons, Ouarzazate was the first site selected and qualified by Masen for the development of solar plants in the NOOR Ouarzazate Complex, and NOOR Ouarzazate I (NOORo I) represents the first of four. This concentrated solar plant (CSP) makes use of parabolic troughs, and has a capacity of 160MW, as well as three hours of thermal molten salt storage, which sees energy retained for later use. Covering 450 hectares and composing over half a million mirrors, NOORo I was, at the time of its launch, the largest parabolic CSP in the world in terms of capacity.
With NOORo I successfully under its belt, next on the agenda for Masen are three more projects. NOORo II will make use of the same technology, increasing both capacity and storage, with a 200MW gross capacity and a minimum of eight hours of storage; the 20,400 thermal solar collectors span a surface of 680 hectares. NOORo III will see new solar technology in the form of a CSP tower, which will provide an additional 150MW capacity and a minimum of eight hours storage time. Both NOORo II and III reached financial close in May 2015. Finally NOORo IV introduces further technological diversification, with the use of the photovoltaic methods, in which solar energy is converted into direct current electricity by using semiconducting materials and generating a maximum capacity of 70MW.
Enticing investors
Each of these projects have been developed within an innovative financial and institutional framework that has allowed for significant cost reductions, as well as risk allocation optimisation.
For the financing of NOORo I, Masen, with the support of the Moroccan State, has been able to mobilise more than €800m ($900.5m) of concessional financing from major international financial institutions, with the support of ONNE, which it then transmitted to the project company through equity and debt.
The NOORo I plant was developed in independent power producer mode based on a double PPA of 25 years duration. This scheme clearly outlines the risk allocation for each stakeholder. In order to entice developers and investors, Masen ensures the provision of land with a mechanism securing its ownership and it also undertakes the construction of the solar complex’s infrastructure, , which it deemed essential for the proper operation of the plants. This process encompasses roads, reli- able access to electricity, drinkable water, telecoms, drainage, landline telephone access, security, and raw water infrastruc- tures. For the latter, Masen has connected the complex to the nearest dam, which is the first time such an initiative has been undertaken in Morocco.
Integrated implementation
Masen has been instrumental in encouraging Moroccan industry to learn more about the solar power plants’ value chain and understand better the underlying opportunities it presents locally. By acquainting developers with the capacities of the Moroccan solar sector, the commitment to procure goods and services in Morocco for the construction of the first NOOR projects reached 30 percent for NOORo I and 35 percent for NOORo II and NOORo III.
Beyond the obvious benefits of added electricity generation, Masen aims to bring economic, social and environmental benefits to the local area. NOORo I, for example, saw the creation of 2,000 jobs in construction, 85 percent of which were for locals, while NOORo II and III are expected to employ around 3,500 people.
Looking to the future, Masen acts as the Moroccan solar industry’s catalyst and co-develops with its partners the training and R&D capacities in educational institutions, with a view to nurturing solar power related skills and training. For instance, located within the Ouarzazate solar complex is the R&D Platform.
By contributing to the deployment of new solar capacity in Morocco, Masen has boosted not just the country’s renewable credentials and energy security, but furthered sustainable development throughout. Its mission is to value solar resource in each of its aspects, which should help address Morocco’s domestic energy needs, but allow it also to become a world leader in solar power; a sun-shining example to the world.
Solar energy costs have dramatically been reduced over the past year, up to a point where in many countries it is today cheaper to use solar power than to use electricity coming from traditional sources. This incredible milestone has been possible thanks to the contribution of pioneering solar energy companies such as SunEdison, and the support of governments all over the world that are aiming to cover a significant portion of their growing energy demand through renewable technologies. This is the case in Chile, a country that has recently announced its plans to produce 70 percent of its energy through wind, hydro, biomass and solar technologies by 2050.
SunEdison holds the distinction of being the largest global renewable energy development company. Founded in 1959, SunEdison has been active in the solar market for more than 55 years, and its track record serves to underline its reputation as one of the most important renewable energy developers of our time. Over the course of its existence, SunEdison has developed a vision of what the clean energy market should look like, and the Javiera solar power plant in Chile is perhaps the clearest indication of how solar energy can compete alongside traditional energy sources, even without subsidies.
The Javiera project is further proof of the ability of solar photovoltaic energy to compete with rival traditional energy sources in Chile
Systems in motion
Less than a year ago one of the biggest solar photovoltaic (PV) plants in Chile entered into its operational phase in the Atacama region. Today, the 69.5MW solar PV plant, known as Javiera, provides clean energy to Minera Los Pelambres, part of the largest privately held mining group in Chile, Antofagasta Minerals.
What’s impressive is that in less than a year, SunEdison was able to clear all the permitting processes, find financing for the project, build it and operate it. Work first began on the project in mid-2014, when the Greenfield permitting and the negotiation of the Power Purchase Agreement (PPA) started. Then, on September 3 2014, the agreement between Los Pelambres and SunEdison was signed for the long-term sale (20 years) of clean energy.
Taking a closer look at the project, it’s clear that one of its most remarkable aspects was its financing model. SunEdison exhibited unparalleled abilities in this space by creating bankable structures to finance projects portfolios and, to date, the company has facilitated almost $10bn in solar financing globally. It also has close relationships with major financial institutions – including multilaterals, commercial banks and ECAs – as well as equity funds, which has contributed some to its financial competencies.
In October 2014 at the same time as the construction process, SunEdison announced the closure of a $130m non-recourse debt financing arrangement with CorpBanca and BBVA. Javiera became the first solar project in Chile where only commercial banks were involved in its financing. This marked a milestone for SunEdison and, more than that, the solar industry in Chile overall. The company’s previous projects in the country, including 100MW Amanecer Solar CAP, 72.8MW María Elena and 50.7MW San Andrés, all had the involvement of multilateral banks in their financing.
In Javiera’s financing, CorpBanca acted as underwriter and mandated lead arranger, and also participated as administrative and onshore collateral agent, whereas BBVA acted as mandated lead arranger. Both of the lenders also provided a local Chilean Peso VAT facility to the tune of $30m.
Thanks to Javiera, SunEdison has reinforced its positioning as a leading renewable energy company in Chile with almost 300 MW interconnected. SunEdison’s projects include the largest solar power plant in Latin America, Amanecer Solar CAP (Copiapó, Atacama), San Andrés (Copiapó, Atacama), María Elena (María Elena, Antofagasta), and Javiera (Chañaral, Atacama). SunEdison also has contracts in place to build an additional 350MW in Chile throughout 2016 and on into 2017, in order to provide clean energy to regulated clients.
SunEdison was able to arrange financing for all these projects by involving national and international financing institutions. In 2013 it reached a financing agreement with Amanecer Solar CAP with IFC and the Overseas Private Investment Corporation (OPIC) for $212.5m and San Andrés, also with IFC and OPIC, for $100.4m. Also, in June 2014, the company obtained financing for the Maria Elena solar PV plant with BID, OPIC and CorpBanca for $190m.
Multinational benefits
The Javiera project is further proof of solar photovoltaic energy’s ability to compete with rival traditional energy sources in Chile, and demonstrates how clean energy technologies can contribute to the growing energy demand of the country’s mining industry. This energy solution model is replicable in other industrial sectors and in other countries across the region, and it is this model that is fast changing the energy landscape in Latin America.
Chile’s announcement to produce 70 percent of its energy through wind, hydro, biomass and solar technologies reflects that a renewable ‘hybrid solution’ model, which combines a number of different clean energy sources, is the path to benefit from clean energy 24 hours a day, seven days a week.
Latin America – especially Chile – is one of the countries where the 24/7 hybrid solution can be implemented, and even improved, which is SunEdison’s goal. The company has a deep expertise both in solar and wind technologies. Projects like Javiera demonstrate the viability of solar energy in the region and, in this sense, SunEdison has positioned itself as a path-opener for a whole new world of possibilities that right now renewable energy solutions can offer.
The clean energy market is growing daily in Latin America, and the potential for participating companies and developers is huge. Easy access to cheaper, cleaner energy solutions is now a possibility, and we will no doubt be seeing more projects and successes like Javiera in Chile and worldwide as this realisation takes hold.
Shedding its past troubled reputation around debt issuance, the sub-Saharan region of Africa in recent years has increasingly become an attractive location for international creditors. Angola has recently approached Goldman Sachs with the intention of working out how to issue bonds, while Ghana is in talks to issue a bond with some form of credit guarantee from the World Bank. Leader of the pack, however, is Côte d’Ivoire. The country’s issuance of a $750m eurobond in July 2014 marked the country’s successful return to international capital markets.
The price yields of the bond are testament to the confidence investors have in Côte d’Ivoire
Following the success of this bond, Côte d’Ivoire started thinking about a second eurobond issuance in late 2014 and formally launched the process in January 2015. The government intended to have a quick and efficient process, building on the success and the experience of the 2014 eurobond. During an exceptionally short preparation phase of less than two months, Côte d’Ivoire’s Government was advised by Cleary Gottlieb and Rothschild and Cie on legal and financial matters respectively. A highly successful four-day road show followed in London, New York and Boston led by BNPP, Citi and Deutsche Bank as bookrunners. The result was the issuance in February 2015 of a long-dated and uniquely structured $1bn eurobond, with three principled payments spread over 13 years. Its warm reception on the international capital market further anchored market access for Côte d’Ivoire.
Setting the pace
Compared to 2014, the world has seen more constrained and volatile macroeconomic conditions this year, ranging from an economic slowdown in East Asia, to a sovereign debt crises in Europe, and uncertainty over US interest rises, however Côte d’Ivoire itself has seen stable, albeit buoyant, domestic growth. As such, three short-term factors were taken into consideration when structuring the eurobond transaction: US dollar appreciation, protracted volatility in commodity prices and a worsening outlook for global economic growth. Yet despite such market conditions, the issuance of the 2015 bond was carried out smoothly.
Since 2011, the country has had been in a solid credit position. The coupon on the bond is testament to the confidence investors have in Côte d’Ivoire, with the eurobond issuance priced at a coupon of 6.375 percent. This represents a record-low coupon for that maturity, and even compared to shorter dated eurobonds issued by peers. For instance, Ethiopia’s inaugural issuance of a 10-year $1bn eurobond in December 2014 priced at a coupon of 6.625 percent. The tenor of the bond is 13 years, in which equal principal payments will be made to creditors in 2026, 2027 and 2028. This particular structure was intended to ease Côte d’Ivoire’s debt maturity profile, avoid a concentration of maturities, and establish a long-term pricing reference for the country. The importance of optimal debt management in discussions with investors was very well received.
At the same time, the confidence international creditors had in Côte d’Ivoire was also demonstrated by the demand for the bond, which was more than four times oversubscribed. This is nearly double the oversubscription of the aforementioned Ethiopian inaugural issuance, which stood at 2.6. In total, 200 investors from around the world, including the UK and US showed interest.
Investor demand from the US itself was even greater than for the 2014 issuance, with an investment representing 62 percent of total subscriptions, while the UK accounted for 25 percent. Other investors include European nations that, excluding the UK, accounted for 11 percent, primarily composed of German, Danish, Dutch and Irish subscribers. Major investors also included Brazil and the United Arab Emirates.
The 2015 eurobond issuance targeted the same investor base as was in July 2014, suggesting that investors are still willing, and in some cases more so, to support Côte d’Ivoire economic development and transition by purchasing its bonds, confident in increasing their exposure to the country.
Issuing purpose
While the 2014 eurobond was used to finance public spending in education, health and the energy sector, the 2015 eurobond aimed at filling the infrastructure financing gap in Côte d’Ivoire, which is currently undertaking an ambitious reconstruction effort. Following the 2011 post-election crisis, the government of Côte d’Ivoire launched its national development plan, for 2012 to 2015. The plan aims to reduce poverty significantly and to transform Côte d’Ivoire into an emerging economy by 2020, with this partially to be achieved through an increase in public spending to 9.7 percent of GDP and focussing on investment.
The first funded investments focus on infrastructure, education, health and agricultural sectors. In tandem with private investment, public spending from the bond should further support the development of an environment conducive to private sector business, leading to an increase in economic growth and employment. Proceeds of the issuance are now ensuring strong economic prospects for the country, a robust GDP growth and a promising trend in the industrial and services sectors.
This $1bn eurobond issue was also a key stepping stone in a strategy to diversify the country’s funding sources. The dollar debt market was particularly attractive for a number of reasons. First, favourable market conditions made it one of the cheapest sources of non-concessional financing. Looking towards the long term, however, it was recognised that the development of a stable international investor base should be a strategic objective of Côte d’Ivoire. Given the country’s close monitoring of public debt level, the government launches a financing programme only if it can guarantee a stable, low-cost source of financing. Lastly, the government benefits from significant dollar denominated revenue sources, which provide a natural edge against increased foreign currency exposure.
Regional legacy
The bond potentially is the begging of a new age of capital markets on the continent. The eurobond issuance sets a precedent for sub-Saharan African countries. First, it represents the largest issuance for Côte d’Ivoire on international capital markets. Further, it paves the way for other eurobond issuances for sub-Saharan African countries in 2015. With a final maturity of 13 years and an average maturity of 12 years, this eurobond has the longest maturity ever issued by a sub-Saharan African non-investment grade country, suggesting neighbouring states could follow in the footsteps of Côte d’Ivoire. In the past, longest maturities had been obtained by Gabon and Ghana’s eurobonds – two issuances that received mixed reactions from markets – with average maturities of 11 and 11.5 years respectively.
Even though Côte d’Ivoire does not expect to return to the international capital markets in the near future (although the country will consider any opportunity which may arise in the coming years), it has set a precedent and example of the possibilities of good finance in Africa. Other nations can look to the smart structure of the bond issued by Côte d’Ivoire, leading the way forward in the region, ensuring the creation of mutual prosperity for all.
On November 28, Russian President Vladimir Putin enforced economic sanctions on Turkey for shooting down one of its Su-24 bomber jets last week. The plane had flown into Turkish airspace along the Syrian border in the fight against the highly aggressive terrorist organisation, Islamic State (IS). Disputes over whether Turkey had sent warnings have ensued – with the one surviving pilot denying that they had been received.
The incident was the first time that a member of NATO has shot down a Russian jet in over six decades. “The circumstances are unprecedented. The gauntlet thrown down to Russia is unprecedented. So naturally the reaction is in line with this threat,” said Putin’s spokesman, Dmitry Peskov, according to Al Jazeera.
[C]hartered flights to Turkey have been terminated, together with the sale of tourist packages to Turkey
The series of sanctions includes a ban of trade for various goods, which have not yet been specified. Additionally, “certain types of work” carried out by Turkish companies in Russia have been prohibited, while the work permits for Turkish nationals in Russia will be barred from extension as of January 1. It is likely that these two caveats of the sanctions will impact Turkey’s construction industry considerably as the two countries have been working together increasingly on various projects. Increased scrutiny of Turkish shipping companies has also been suggested, with greater security at Russian ports.
Furthermore, chartered flights to Turkey have been terminated, together with the sale of tourist packages to Turkey. As around 4.5 million Russians visit Turkey each year, which accounts for 12 percent of all tourists to the country, the decision indicates a large blow to Turkey’s growing tourism sector.
Although not included in the Kremlin’s announcement on Saturday, other sanctions may soon be ordered, including the end to the construction of a gas pipeline between the two states and a nuclear plant in Turkey.
On the same weekend, EU officials announced that they have reached a deal with Turkey to stem the flow of refugees fleeing from IS. For increasing security along its borders, the Turkish state will receive around €3bn in government concessions from the EU. The deal also includes a pledge to revive negotiations for Turkey’s EU membership and allows Turkish nationals to travel within the Schengen zone without a visa.
With Russia now turning its back on Turkey, and colder relations from Russia’s regional allies also expected, it would seem that Turkey is once again moving closer to the West as it re-launches its campaign for a long-desired seat at the EU table. This is an issue that many have criticised in the past due to Turkey’s failures in terms of human rights, the persistent attack on the freedom of speech for Turkish citizens and the fact that its military still illegally occupies an expansive territory of EU Member State Cyprus.
In the lead-up to Paris, the World Bank Group has called for $16.1bn in funding to boost Africa’s resilience to climate shocks. The so-called Africa Climate Business Plan, which consists of protective measures against natural disasters and plans to up renewables share of the energy mix, will be presented in full at COP21, as the organisation looks to make the conversion about much more than emissions.
[T]he World Bank estimates that approximately 43 million people, mostly in Ethiopia, Nigeria, Tanzania, Angola and Uganda, could slip into extreme poverty before 2030 hits
The strategy, according to the World Bank, has been designed to prevent millions from sliding into climate change-induced poverty, and, if successful, should accelerate climate resilience and low carbon development on the continent. The World Bank and the United Nations Environment Programme estimates that the global cost of managing climate resilience will reach $20-50bn per year by the midpoint of the century, with a considerable part set for Africa. However, the level of investment rests on a willingness to act and keep to the 2°C warming target.
“The plan is a ‘win-win’ for all especially the people in Africa who have to adapt to climate change and work to mitigate its impacts,” said the World Bank’s Senior Regional Advisor for Africa, Jamal Saghir. “We look forward to working with African governments and development partners, including the private sector, to move this plan forward and deliver climate smart development.”
Without the measures, the World Bank estimates that approximately 43 million people, mostly in Ethiopia, Nigeria, Tanzania, Angola and Uganda, could slip into extreme poverty before 2030 hits. And though the continent is responsible for only three percent of global emissions, the consequences are disproportionately large.
“The Africa Climate Business Plan spells out a clear path to invest in the continent’s urgent climate needs and to fast-track the required climate finance to ensure millions of people are protected from sliding into extreme poverty,” said the World Bank Group’s Vice President for Africa Makhtar Diop. “While adapting to climate change and mobilizing the necessary resources remain an enormous challenge, the plan represents a critical opportunity to support a priority set of climate-resilient initiatives in Africa.”
Islamic finance is a burgeoning industry. And with more people looking towards more ethical financial solutions, it’s becoming a part of the mainstream market and offering. Nasr Albikawi, CEO of International Turnkey Systems, discusses the international growth of Islamic finance, and how ITS ETHIX can reduce the costs of Sharia compliance.
World Finance: Islamic finance is a burgeoning industry. And with more people looking towards more ethical financial solutions, it’s becoming a part of the mainstream market and offering. With me now to discuss is Nasr Albikawi, CEO of International Turnkey Systems.
Well Nasr, in what way has Islamic finance evolved over the last 30 years?
Nasr Albikawi: It has evolved in a very noticeable way. Islamic banking started around 30-40 years ago, and all the financial institutions in the region are adopting this model and are enhancing their services as they go.
So as we go, we see more institutes are offering their services, because the demand in the market is increasing. And we expect also to increase as we go for the coming few decades, also.
World Finance: And what role would you say technology has played in the development of Islamic finance?
Nasr Albikawi: As in all other businesses, technology is kind of a platform and enabler. Exactly as technology played a role in conventional, classical banking, it’ll do the same thing in Islamic banking and all other businesses.
World Finance: Looking at ETHIX Finance now – how does it differ from other software packages on the market?
Nasr Albikawi: In terms of addressing the business needs from an Islamic perspective, ETHIX is ahead of all other competitors in all respects. Because we started earlier in this market, we’ve been able to work with our clients, our partners, the banks, to identify those needs and to write the application to meet the Islamic needs that are compliant with Islamic Sharia.
So we ahead of all competitors in addressing Islamic financing business needs.
World Finance: How big a challenge is compliance for your clients, and how has ETHIX been able to overcome this hurdle?
Nasr Albikawi: It is challenging, because the Islamic way of doing finance is a bit different. It’s not straight-forward, there are a lot of calculations to be done. So it is challenging, yes. And because we’re doing it for the first time, it requires a lot of effort, it requires a lot of information from the client side, from the Sharia… the counsellor part, because we have to consult at our side. At ITS, the bank side, we have to go back to the Sharia Islamic Committee or counsellors.
But as I said, for quite some time we’ve been able to add results and enhance it as we go, being ahead of everybody else.
It is a challenging task, and it’s not straight-forward. But we’re up to it, and we’re trying to keep our edge moving forward: meeting the customers’ and the market’s demands and expectations.
World Finance: Likewise how can ETHIX reduce costs and strengthen customer services?
Nasr Albikawi: By being able to complete and accomplish the tasks and the requirements of Islamic banking using our system’s applications and infrastructure. This is definitely will play a major role in enhancing and reducing the total cost of ownership. And the output of the whole process by increasing the productivity of the setup in general, the department, and individuals.
World Finance: Now Nasr, there has been a lot of unrest in the Middle East following the Arab Spring. What sort of impact has this had on the industry?
Nasr Albikawi: From the economic side, it has been impacted negatively, by slowing down projects. But at the same time, people are depending on banks to deposit their money and to keep their money. So from one side, they’re not moving their money, they’re not investing much of their money, and they trust the banks most now.
So that kind of encouraged the banks to expand more on their services, expand their capacity, add more services to encourage people to keep their money with them. So we’ve seen some kind of new services that have been introduced by those banks, and the base of these services have been introduced to the market has increased a bit due to the circumstances in the region.
That’s pushed us of course to start meeting the demand by working with these new requests, new services, as per the compliance with Sharia law.
World Finance: Finally, how do you see the industry developing?
Nasr Albikawi: It’s promising, because we would still like to make the costs of complying with Sharia law and financing low, and methods of complying with conventional banking and market requirements. So that gives us more opportunities to work on more services and introduce more business functions as we go.
In terms of market size it’s also very promising. Because today we receive demand and calls from the west part of the world. So Islamic banking is not limited only to our region and to the Asia-Pacific. We receive requests today from North America, from South America, from China, from Japan. And we know there are some governments that are working on introducing Islamic financial regulations, and regard it as part of their central banks’ rules and regulations.
So I think the future is promising. We plan to go global in 2017 to meet the demand that we see growing all over the world.
As emerging market economies experience strong middle class growth, the insurance realm is blossoming alongside these demographic changes. Farzana Chowdhury and Nasir Choudhury from Green Delta Insurance discuss the Bangladesh insurance market and the potential for greater penetration in insurance in Bangladesh.
World Finance: As emerging market economies experience strong middle class growth, the insurance realm is blossoming alongside these demographic changes.
Here to share insight about how the industry is evolving: Farzana Chowdhury and Nasir Choudhury.
First let’s talk about how the middle class growth has evolved?
Farzana Chowdhury: I think the middle class growth has been enormous, for the last 11 years we have been enjoying this over six percent of GDP growth. I mean, a few years ago, I mean the per-capital income was less than $500 but now it’s over $1,200 and because of the economy growth we are having a lot of opportunities for young people to join in various industries like insurance, banking, non-financial institutions.
Bangladesh is the second largest exporter country in the world, so with this expansion of the economy’s growth, we have seen in the insurance industry a lot of insurance needs are coming up at the moment; in addition, you know, to the traditional insurance covers that we have been giving them.
World Finance: So what I they calling for in terms of their insurance needs?
Nasir Choudhury: Without the insurance, no added economic growth, now we have achieved lower middle class, middle-income group now, we are giving proper protection, insurance protection to the government and industries. And they are getting maximum support from the banks and insurance industry.
And the young generation, a lot of people we are seeing in Bangladesh, they are coming for work, for different industries. And we are getting more interest from industry compare to other countries. We have got cheap labour, of course. In Bangladesh we have a lot of… we are giving them a lot of training facilities, to the workers. And insurance cover they are getting … we are expecting the developed countries to take more labour from Bangladesh.
World Finance: So can you tell me Nasir is it mostly corporate or personal insurance that they are looking for?
Nasir Choudhury: It is both, but mostly in Bangladesh’s insurance industry at the moment, we are giving more attention to the corporate. Because we are getting business from them. Unless you give proper cover, proper insurance protection, the industry will not succeed, you know?
World Finance: Now Farzana tell me how do you start to overcome barriers related to lack of awareness about your industry?
Farzana Chowdhury: We are the largest insurance company in Bangladesh for the last 30 years. Even having the market share of 15 percent you will be surprised to know that our market penetration of insurance is lower than one percent. Awareness is actually embedded everywhere, in every activity. We have a motto; to have insurance coverage for everyone.
We do a lot of activities, we do branding, improving our brand image. And we do a lot of marketing activities. Green Delta has always been a pioneer in coming up with innovative products and services.
We have also gone into the health sector; we have developed a health package for the people of our country. Also, we have joined hands with the government, where we will be giving insurance packages to 30,000 people in one area. That is their pilot project; and then we can, you know, increase all over the country. This is how we are trying to create awareness and branding at the same time.
World Finance: Nasir tell me, what do you think is going to be the growth projections for your country, in the decade ahead?
Nasir Choudhury: This is fast growing now, our people are not very much insurance minded, you know. And we have to teach them how to get their protection from the insurance industries, you know. And we have got an insurance association with all the insurance companies and we are trying together to increase the capacity of interest cover even to the people who are penetrated into the share market. We have gone to the capital market and we are going to the insurance training side. And all the insurance companies are coming together and go for even better services, better covers to the public, to the insurance public.
World Finance: Finally, can you tell me Farzana where do you place your company in the growth plans Nasir has just spoke off?
Farzana Chowdhury: We have the largest market share in the country and the insurance market. We are having 15 percent growth roughly every year. So with the penetration, like I mentioned, the government project that we are in. There are other innovative products that we have: we are into a crop insurance project with the IFC – IFC with us as an equity partner.
We launched a health insurance product for the corporate sector, and we have a comprehensive insurance package for women: which gives trauma allowances for the acid victims, rape victims and those who are exposed to road rage, in addition to the personal accident. So that will give us a first mover advantage. So we will be having 20 to 25 percent growth. This is what we are thinking of: improving the corporate governance. You have the international standard enterprise risk management and give better services to our people and, you know, maximising their benefits at a minimum cost.
World Finance: Farzana and Nasir thank you so much for joining me today.
Farzana Chowdhury: Thank you very much.
Nasir Choudhury: Thank you, thank you.
Concern about the potential disruption by the use of algorithms in trading has forced regulators in the US to decide how best to rein in such automated trading. On November 24, 2015, the Commodity and Futures Trading Commission released a proposal outlining how it plans to regulate automated traders.
The US regulator also outlines that automated traders “must implement standards for development, testing and monitoring
The need for new regulation was underpinned by CFTC chairman Timothy Massad, who noted at the that CFTC open meeting commission, where the new regulations were announced that “over the last few years, more than 70 percent of all trading has become automated.” While he pointed out that automated trading had brought a number of benefits to markets, he also noted that it had been the cause of a number of market mishaps, most infamously the 2010 Flash Crash. Therefore, “the Commission,” had been forced to take a “number of steps to respond to the development of automated trading in our markets.”
According to a fact sheet released by the CFTC, the agency is “is proposing a series of risk controls, transparency measures, and other safeguards to enhance the regulatory regime for algorithmic order origination and electronic trade execution on U.S. designated contract markets.” Massad noted that these new regulations would focus “on minimizing the potential for disruptions and other operational problems that may arise from the automation of order origination, transmission or execution.” Such problems “may come about due to malfunctioning algorithms, inadequate testing of algorithms, errors and similar problems.”
The “interconnection of markets and increased use of high-speed and algorithmic trading,” the CFTC noted, means that there is an increased need for pre-trade risk controls. These pre-trade risk controls include “maximum order message and execution frequency per unit time, [as well as] order price and maximum order size parameters”
The US regulator also outlines that automated traders “must implement standards for development, testing and monitoring,” which includes “the designation and training of algorithmic trading staff.” These standards require “keeping the development environment separate from the production environment; testing prior to implementation; a source code repository; real-time monitoring of such systems; and standards to ensure that systems comply with the Commodity Exchange Act and Commission regulations.” Traders must also submit regular compliance reports.
“No set of rules can prevent all such problems,” Massad argued. “But” he continued “that doesn’t discharge us from our duty to take reasonable measures to minimize these risks. It is our responsibility as regulators to create a framework that promotes the integrity of these markets. And I believe this proposed rule helps do that.”
