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Social Impact Fund in CubaThursday, August 6, 2015
Manufacturing and distributing drip irrigation systems
Biomass electricity generation
Cardboard packaging manufacturing
Production of vegetal charcoal (Scrub biomass)
Pharma packaging
Executive Summary
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Herzfeld criteria Macro criteria
Potential return Encouraged by Cuban government
Social impact Positive global trends
Capital requirement FDI encouragement
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Drip Irrigation Manufacturing and Distribution
Drip Irrigation Manufacturing and Distribution
PROBLEM
• 80% of basic consumer food imported
• Low productivity – crop yield
• Only 21% farmed land with irrigation
• Water scarcity
BEING A PART OF THE SOLUTION
• Equity investment into drip irrigation system manufacturing and distribution to small and medium farmers in Cuba.
• Association of Small Agriculture Farmers in Cuba (ANAP)
4
Social Impact
Community
Environment
Project in Pakistan Projections in Cuba
Crop yields by 40%
Input costs by 30%
Dependency on flood irrigation
Reached more than 20,000 farmers
Crop yields by 10 -30%
Input costs by 30 - 60%
Daily income by USD 4
• 40-70% water saving• 90% water use efficiency• Reduce overexploitation of groundwater• Minimizes erosion
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Benchmark: Indian Project
Comparison Cuba x India
Project
• Manufacturing and distributing systems• Fund Investment: 1m• 30% Equity • Project Breakeven: 3 years• Average return: 33%
Low labour cost / qualified people
Low irrigation access: India (35%), Cuba (21%)
Other financial evidence
Jain Irrigation Systems LTD. – IndiaGross margin: 33.9%EBITDA margin: 15%IRR for typical irrigation project = 11.16%
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Biomass Electricity Generation
Biomass Electricity Generation
PROBLEM
• Shortage of electricity of 8-10h a week
• Oil energy dependency (96%)
• Decrease high cost of energy
• Contribute to environmental sustainability (sugarcane waste)
• Outdated technology
BEING A PART OF THE SOLUTION
• Equity (joint-venture) in biomass electricity generation
• Easy access input materials (Marabu, Bagasse)
• Priority in Gov. development plan
• 24% renewable energy by 2030
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Social Impact
Community
Environment
Access to energy
Reduce number of power shortagesJob offer increase between 35-46%Development of supporting industries (plantations, transport)
• CO2 emission reduction by at least 30%
• Waste reduction by 50% (agricultural)
• Renewable energy source
• Sustainable forest development
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Benchmark: Cuban project
Benchmark Project
• Stage I 2008-2014• Fund Size 1.28m• FDI by Swiss Agency for Development and Cooperation• Energy supply alternatives from biomass in rural areas• Project IRR 7.4%• Investment recovery in 2 years• Net profits of stage I 1.82m
Other financial evidence
Projects with different sizes in Cuba:• Macurije: 32.3m• Minas de Matahambre: 14.4m
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Cardboard Packaging Manufacturing
Cardboard Packaging Manufacturing
PROBLEM
• 226m spent on packaging imports in 2014.
• 50% of demand is imported
• 50% local products lack proper packaging
BEING A PART OF THE SOLUTION
• Equity investment in cardboard packaging manufacturing
• 42% projected increase in Cuban per capita consumption of packaged products
• Possibility to export to nearby markets
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Social Impact
Community
Environment
Food waste
Project in the UKIncreasing the shelf-life by 2 days reduced 4% of waste disposal cost and avoided 800,000 strawberries to be wasted.
Tomatoes StudyCardboard increased the useful life by 3 weeks
• Made from easy and fast-growing trees• Cardboard is recyclable • Energy-efficient
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Benchmark: Belarus Project
Comparison Cuba x Belarus
Project
• Production of corrugated board packaging (2012)• CAPEX: 6-8m• Project Breakeven: 2-3 years• Average return: 25-28%
High imports
Main demanding industry is food and beverage
Other financial evidence
• Global revenue is estimated to be over 1 trillion
• Paper and board represent 39% of consumption
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Next Steps
Specific companies to invest1
2 Use the knowledge acquired
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1.71.3
7.0
4.1
5.430.5
Manufacturing and distributing drip irrigation systems
Biomass electricity generation
Cardboard packaging manufacturing
Production of vegetal charcoal
Pharma packaging
Other projects and rounds
Questions?Thursday, August 6, 2015
BACK UP
Next steps in Energy sector:Production of vegetal charcoal from marabù scrubCUBAN Project
Investing into equipment for • harvesting and transportation of marabuensuring sustainable supplies of the biomass required for charcoal production and for forest replanting
In • Granma, Holguin, Camaguey and Ciego de Avila
Cuban party: • Empresas Forestales Integrales
Investment Amount: • 4.1 million USD
Vegetal Charcoal • produced– 3000 metric tons annual
Project available at: http://www.caribbean-council.org/wp-content/uploads/2014/11/Cuba-foreign-investment-projects-Nov-2014-official.pdf
Next steps in Energy sector:Benchmark: Biomass Plantations
Project available at: http://www.eq-cap.com/wp-content/uploads/Investment-Opportunities-in-Biomass-Energy-Clark-Binkley-Ph.D-GreenWood-Resources.pdf
Project in Poland
• Phase I development –10,000 hectares on low-quality agricultural lands to supply
• Long-term take-or-pay contract with International Paper-Kwidzyn for a 50 MW coal CHP facility converted to biomass
• Projected returns: 10-15% real (USD unlevered)
Project in Chile
• Phase I development - 7,000 hectares on marginal agricultural lands
• 3,000 to 5,000 trees per hectare
• Projected returns: 9%-15% real (USD unlevered)
Drip Irrigation System Manufacturing and Distribution
558,000
2,087,800
3,696,600
Land with irrigation
Primary market (farmed land without irrigation)
Secondary market (idle land)
Cuba Calculation provided for the chart: (hectares)Agricultural Land6,342,400
Agricultural land being farmed2,645,800
Land with Irrigation558,000
% of farmed land with irrigation21.09%Primary Market (farmed land w/o irrigation)2,087,800
Secondary market ( idle land)3,696,600
4% 5% 6%
2%
10%
27%
7%4%
12%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Biomass Industry Growth Rate
Biomass Electricity Generation
