Nedbank Group · JSE:NED
Nedbank — JP Morgan Conference 2010
27 slides from Nedbank's conference presentation, Nov 17, 2010
Slide 1: M&A, Private Equity and Renewable Energy
M&A, Private Equity and Renewable Energy Brian Kennedy – Group Managing Executive: Nedbank Capital JP Morgan Conference 17 November 2010
Slide 2: Contents
Contents • Global and Local Advisory and M&A trends • Private Equity trends • Renewable Energy and Carbon credits • Prospects 2
Slide 3: Nedbank Capital in Context
Nedbank Capital in Context Old Mutual plc 52% ±11% BEE shareholders Nedbank Group Limited Nedbank Nedbank Nedbank Capital Business Nedbank Retail Nedbank Wealth Corporate Banking Investment Banking Global Markets Treasury 3
Slide 4: Macro Environment – Investment Banking
Macro Environment – Investment Banking • Post the crisis of 2009, economies were moving into recession • However, by the 1st quarter of 2010, positive sentiment had returned but the rebound in earnings did not materialise • The sovereign debt crisis in the Eurozone reversed the positive sentiment an
Slide 5: Global and Local M&A Trends
Global and Local M&A Trends SA M&A activity Global M&A activity Source: Mergermarket Source: Mergermarket NB. Mid-market = $10m-$250m deal size BEE deals (Value and Volume) • M&A activity is recovering slowly from the previous year lows • Traditional BEE dealmaking has slowed • Much of the BEE activ
Slide 6: M&A in Africa
M&A in Africa • Reliable statistics on M&A activity in SSA (ex-SA) are difficult to obtain but the trend is clear – an increase in African M&A • Sub Saharan Africa one of the fastest growing regions in the world (6.3% - World Bank) • Drivers for M&A activity are : – SA as a conduit for investment in
Slide 7: Nedbank Capital M&A rankings
Nedbank Capital M&A rankings 2005-2009 League Tables House Value (Rm) House Volume RMB 443,276 Investec 236 Deutsche 317,408 Nedbank Capital 142 • Nedbank Capital Corporate Finance has ranked exceptionally against competitors Goldman Sachs 262,287 Java Capital 133 over a five year period Standard Ba
Slide 8: Global Private Equity trends
Global Private Equity trends Private Equity Fundraising • Impact of Basel III – need to hold more capital against exposure on balance sheet • Relatively large effect on earnings leads to increased volatility • Absence of large deals seen previously • Opportune time to raise funds? Source: Emerging M
Slide 9: Private Equity – Key participants positioning in Africa
Private Equity – Key participants positioning in Africa Many participants: e.g. Circling PE Managers Pan Africa incl SSA seeking exposure 3 – “starting out in SA” Many participants: e.g. Primary geographical focus in Africa1 Few participants Many participants: Opportunity in wider Most are gradually
Slide 10: Nedbank Capital Private Equity Performance Summary
Nedbank Capital Private Equity Performance Summary Fund IRR Notional Fund 1 137.0% Notional Fund 2 33.1% Notional Fund 3 40.4% • Team in place since 1996 - stability • Good returns – most success in mid-market space • Portfolio approach to risk management • Concentration risk to counters in sectors
Slide 11: Portfolio snapshot and risk appetite monitoring – Private Equity
Portfolio snapshot and risk appetite monitoring – Private Equity • Portfolio concentration monitored using the Herfindahl-Hirschmann • Monitoring of key portfolio information: Index (HHI) Total portfolio size Number of deals in portfolio Average deal size Number of deals in the portfolio > threshold
Slide 12: Overview of the South African Electricity Sector
Overview of the South African Electricity Sector CURRENT CHALLENGES ANALYSIS • High Demand Growth over past few years • Construction of new generation plants started too late and capacity will therefore be constrained until 2013 • Inadequate generation • New base load power stations take > 5 years t
Slide 13: Future Generation Requirements to Meet Expected Demand
Future Generation Requirements to Meet Expected Demand • South Africa needs to double generation capacity in 20 years to ensure security of supply for the country for the next 20 years • Current expansion plans are based on the moderate growth scenario (averaging 3% electricity consumption growth ra
Slide 14: Electricity Generation Mix
Electricity Generation Mix • An increasing amount of non-coal based electricity generation Nuclear Energy has been identified as the main source of new base load generation Source : IRP 2010 14
Slide 15: SA Government Intervention: Integrated Electricity Resource Plan 2010
SA Government Intervention : Integrated Electricity Resource Plan 2010 • Government through the Department of Energy (DOE) has accelerated the introduction of IPPs to the South African Power landscape by releasing the draft IRP 2010 for the South African revised electricity supply scenario for the p
Slide 16: Renewable Energy for South Africa
Renewable Energy for South Africa The South African • The Renewable Energy Feed in Tariff scheme in South Africa is generally referred to as REFIT government has committed to • South Africa has very good potential for wind and solar power generation. To a lesser extent, landfill produce renewable ga
Slide 17: Main Large Scale Renewable Technologies
Main Large Scale Renewable Technologies Nedbank financed a “CSP” wind farm project in India, through which valuable experience was gained No commercially funded renewable project has been closed in South Africa to date. 17
Slide 18: Concentrated Solar Power (CSP) Technology Options
Concentrated Solar Power (CSP) Technology Options South African climate is ideal for solar power generation Conventional photo voltaic (PV) generation is still very expensive at $6,8 million/MW CSP uses mirrors to concentrate sun light, heating a liquid; the liquid exchanges heat with water at high
Slide 19: Challenges to the REFIT program
Challenges to the REFIT program Challenge Status Identifying the buyer of Renewable Energy • NERSA initially indicated that Eskom would be the “single buyer” of renewable energy. This would be underwritten by Government • Government has subsequently announced that it is planning to set up an indepen
Slide 20: South African Energy Projects
South African Energy Projects 1 $21,400 $21,400 1 1 $16,200 1 $4,000 1 $216 1 $1,000 1 $1,600 6 $1,380 1 No of projects 4 $920 8 $1,410 Coal 1 $1,000 Gas 1 $1,000 Solar 1 Wind $1,000 6 nuclear $1,175 Biomass 3 $60 Hydro 5 $60 Landfill 4 $52 1 $750 3 $30 3 $30 2 $26 Size (MW) 20
Slide 21: Carbon Credits
Carbon Credits • The Kyoto Protocol provides for a mechanism to monetise the benefit of companies shifting to energy efficient or clean energy sources • Carbon credits are the instruments that allows the benefit of these initiatives to be quantified across different projects and jurisdictions CDM Pr
Slide 22: Carbon Markets and Mechanism Overview
Carbon Markets and Mechanism Overview Carbon Project The Kyoto Cycle Protocol (1997) – What does it mean/date/annexure1/2? CDM Exclusions Project Concept Regulated EUA – What does it mean?/ baseline/how they traded Send PIN to DNA for approval Activities (Annual) Measure & Monitor Report Performance
Slide 23: Nedbank Capital Approach: Client
Nedbank Capital Approach : Client 1 • The company, established in 1991, is a high quality brick manufacturer • The company has introduced eco friendly fuel in June 2009 that is used to manufacture the only renewable-energy fired “eco-bricks” in South Africa, if not worldwide, which also uses local r
Slide 24: Nedbank Capital Approach: Client
Nedbank Capital Approach: Client 2 • The Client’s main business objective is to assist with the development and protection of the Kasigau Wildlife Corridor in Kenya • The client qualifies for carbon credits based on their preservation of forest and wildlife in terms of two standards, the Climate, Co
Slide 25: Nedbank Capital Growth drivers
Nedbank Capital Growth drivers... Investment Stable and Franchise Banking Efficient NII + NIR/Fees = growing income stream Shift to sector specialised teams + Capital Corporate Proprietary Total Trading Markets income = and Flow Retail Business + income Nedbank Primary franchise growth Function of r
Slide 26: Steady growth in earnings and economic profit – 6 year EP CAGR 14%
...resulting in steady growth in earnings and economic profit – 6 year EP CAGR 14% Rm Financial crisis • The McKinsey global benchmark for IB shows that, whilst IB earnings can be volatile, on a long term view it returns growth on average 2x GDP • Nedbank Capital targets a growth rate of GDP + CPI +
Slide 27: Nedbank Capital – prospects
Nedbank Capital – prospects • Good credit quality book generating NII − Stable earnings platform • Focus on reduced volatility & disciplined risk management − YTD asset creation & market opportunities lower than expected • Full spectrum of profitable investment banking products & services − Good por