17.40 chris ruth
TRANSCRIPT
SUPER RETURN, DUBAI
14 OCTOBER 2009
Iraq Investment: Opportunities and Obstacles
CHRISTOPHER RUTH | MANAGING PARTNER
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Contents
Introduction
Iraq Overview
Sector Highlights
Investment Landscape
Conclusion
Northern Gulf Partners LLC
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Northern Gulf Partners Overview
Our asset management activities include:
― Private equity (corporate, real estate and infrastructure)
― Marketable securities (long-only equity fund management)
We are building leading Iraqi companies in important sectors, including:
― Commercial Banking
― Upstream Oil and Gas
― Construction Equipment Rentals
We also provide financial advisory services, including:
― Corporate finance
― Mergers and acquisitions
― Market entry
NGP is headquartered in Baghdad and New York
NGP’s investment partners include leading investment funds, corporate entities, family offices, high net worth individuals, and development finance institutions
Northern Gulf Partners
(NGP) is the leading
investment firm and
provider of financial
advisory services in Iraq.
We have three main
activities: asset
management,
greenfield investment,
and investment
banking.
Northern Gulf Partners LLC
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NGP Strategy
Create value from strengths that competitors cannot replicate
Partner with Iraq’s leading industrialists, business families
and entrepreneurs
Work closely with Government of Iraq and US Government
Form strategic partnerships to accelerate growth
Employ rigorous deal selection methodology driven by
proprietary research
Access global capital markets (GCC, Europe, US)
Highest-caliber service,
a strong local presence,
and rigorous analysis –
these factors create the
NGP advantage.
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Iraq is the next major emerging market…
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Oil reserves among largest in the world: possibly 300+ billion barrels
Rapidly stabilizing environment
Growing economy with large population
Educated and enterprising people
Iraqi assets are not only undervalued but under-analyzed
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…with strong core economic indicators.
KEY FIGURE 2009 ESTIMATE
GDP GROWTH 7.5 %
GDP $85.4 BILLION
CPI INFLATION 6.0 %
CURRENT ACCOUNT BALANCE - $15.7 BILLION
FOREIGN EXCHANGE RESERVES + $48.0 BILLION
IRAQ GOVERNMENT BONDS (YTM) 11.9 %
ID / USD EXCHANGE RATE 1170
EXPORTS $23.5 BILLION
POPULATION 28 MILLION Est.
Iraq is a rapidly stabilizing
emerging economy that is
growing strongly today
and possesses exceptional
growth prospects for the
future.
Northern Gulf Partners LLC
Source: IMF, Central Bank of Iraq website (www.cbi.iq).
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Iraq recent news headlines show positive signs…
“BP says it may spend as much as $20B in Iraq”October 9th, Bloomberg
“Russian minister expresses investment interest in reconstruction” October 7th, Aswat al-Iraq
“Iraq commission prepares conference to promote US investment”October 6th, 2009; Aswat al-Iraq
“Motorola signs contract with Zain Iraq”October 6th, 2009; Business Intelligence Middle East
“IMF: Iraq has made ‘good progress’ in loan talks”October 6th, 2009; AFP
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…but investors still face serious challenges…
Security concerns
Visas
Payment issues
Perception of corruption
Foreign ownership restrictions
The considerable market
opportunity in Iraq must
be balanced with
reasonable expectations
and an understanding of
the multiple challenges
facing investors.
Northern Gulf Partners LLC
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…and regional differences must be understood.
Conflicting regulatory framework
Higher stability / lower near-term security concerns in
the North tempered by smaller market size, value
Tenuous relationship between KRG
and GoI
Competing external interests
Investors must
understand the
distinction between the
Kurdish north and the
rest of Iraq and how it
relates to the overall
investment climate and
consideration.
Northern Gulf Partners LLC
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Investment is required across multiple sectors…
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OIL & GAS
HEALTHCARE CONSTRUCTION AGRICULTUREMETALS & MINING
CONSUMER
FINANCIAL SERVICES
TELECOM & MEDIA
INFRASTRUCTURE REAL ESTATE
After 30 years of sanctions, war, and socialism, Iraq needs everything.
Almost all sectors across the economy have attractive investment
opportunities and will require considerable capital.
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100
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Proven Reserves
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Oil & Gas Sector Overview
Massive oil reserves on par with Saudi Arabia
Low cost production ($1-2 per barrel) and high quality crude
Oil revenues represent vast majority of GDP
Kurdish north PSA’s at odds with central government
Existing oil infrastructure requires significant rehabilitation
Limited success with oil auctions
Iraq boasts the world’s
3rd largest proven
reserves, and arguably
existing reserves on par
with Saudi Arabia.
However, a shortage of
infrastructure,
challenging security
situation, and stalled
legislation have
hampered the industry
and restricted inevitable
economic growth in
Iraq.
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Top 10 Global Oil Reserves and Production
Source: BP Oil Report 2009
BBL
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Oil & Gas Opportunities & Challenges
Exploration & Production
Refining & Downstream activities
Oil Field Services and related activities
Only significant producer with capability and intention to double (or more) production in next 5 years
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Opportunities Challenges
Decades of infrastructural neglect
Regional disagreements
Highly politicized sector
Considerable public scrutiny
Stalled hydrocarbon legislation
Cash based economy
Limited access to financial products and services
Underdeveloped equity capital markets with limited liquidity
No debt capital market, other financial services are nascent
Banking sector dominated by state owned banks (90% of assets)
Private banks provide limited range of products and services, scale
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Financial Services Sector Overview
In order for the Iraqi
economy to grow, a
developed financial
services sector is critical
to both the flow of
domestic and
international capital, as
well as a key enabler to
sustainable growth, job
creation and economic
expansion.
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Iraq20 Index ($)1
1. The NGP Iraq Top 20 index comprises the top 20 stocks by market cap, updated quarterly
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Financial Services Opportunities & Challenges
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Thin competitive landscape
Lack of modern products and services
Growing SME market
Government commitment to sector growth
Retail and commercial banking
Leasing, insurance, mortgage finance
Opportunities Challenges
Private sector financial services crowded with traditional players
Shortage of qualified human resources
Untested regulatory framework
Culture shift required (e.g. lending, insurance)
Identify attractive industries, scalable businesses
Draw from regional and emerging markets
Experienced international operators, local Iraqi capability
Identify strategic local partners, deep due diligence
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A disciplined investment process is required.
NGP has a unique
network and
unparalleled access
to proprietary
knowledge enabling
them to gather
information and gain
perspectives typically
unavailable to others.
Leverage information advantage, research driven approach
ACTIONABLE OPPORTUNITIES
SECTOR
PROVEN MODELS
MANAGEMENT
PARTNERSHIP
RESEARCH
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Conclusion
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The investment
opportunities in Iraq
outweigh the obstacles
Organic Growth
Large Population
Barriers to Entry
Corruption / Transparency
Some Foreign Ownership Limitations
Stabilizing Politics
SecurityExtensive Natural
Resources
Under Analyzed
Disclaimer
This communication is for informational purposes only. This communication is not intended as an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. No part of this presentation may
be copied or distributed without the express written consent of Northern Gulf Partners.
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