SACE Guarantees for strategic infrastructures & renewable energy. Bruxelles, 17 th May 2011

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1 SACE Guarantees for strategic infrastructures & renewable energy Bruxelles, 17 th May 2011

2 Our mission SACE is the Export Credit Agency (ECA) of Italy, 100% owned by the Ministry of Economy and Finance. All SACE s commitments are counter-guaranteed by the Italian Government. SACE does not lend funds but its products facilitate the raising of finance. 2

3 What we do Traditional business In order to support Italian exports Export credit Insurance: Political Risk Insurance: Non marketable business, bound by Consensus Rules Non-internationally regulated business aimed at supporting Italian investments abroad against political risks New markets In order to support internationalization of Italian companies and initiatives of strategic interest for the Italian Economy Internationalisation: Market Window: New marketable business, supporting the Internationalisation of Italian Economy New marketable business, supporting initiatives of strategic interest for the Italian Economy 3

4 Italy Russia & CIS Gulf States Latin America Turkey & Middle East Central & Eastern Europe Asia Pacific North America Sub Saharan Africa Other Countries Risks insured by geographical area (year end 2010) 20% 16% 9% 7% 6% 4% 3% 2% 11% 22% SACE s Oustanding Commitments: 32.7 Bn 4

5 to the Borrowers SACE s support: key benefits For the Banks Zero Risk Weight : SACE guaranteed assets are 0% weighted under Basel I and under Basel II (fully guaranteed by the Italian State) Risk Partner: Acting as a risk taker SACE decreases syndication risks For the Borrower Competitiveness: Longer term financings and, for export credit transactions, attractive all-in cost of funding Additional Capacity and Liquidity Provider: Preservation of current bank credit lines Stability: Improvement of balance sheet composition (diversification of funding sources) 5

6 Strategic sectors Infrastructures Expand the national and international transport system (e.g. highway, airport, railway, maritime port ) Promote the diversification of energy sources (e.g. Lng terminals, gas pipelines, gas storage, waste to energy plant) Improve telecommunications networks Renewable energy Research and development Production of machinery Renewable power production plants Energy efficiency investments 6

7 Main projects SACE in the Renewables and Strategic Infrastructures sector Moncada-Sicilia Falck Helios Campidano-Sardegna SunRay- Lazio Helios 29 mln Photovoltaic Modules Production Plant 22 mln 52MW Wind Farm 25 mln 8 MW PV plant 33 mln 70MW Wind Farm 26,5 mln 24MW PV Plant Renewables 2008 AES SOLAR 2008 Veronagest 2009 Falck 2009 HFV 2009 SunRay- Lazio 28 mln 43 MW PV plant 18 mln 16 MW PV plant 27,6 mln 138 MW Wind Farm 17 mln 16 MW PV plant 98,3 mln 52 MW PV Plant Centostazioni-Italia TRM-Torino ASPI- Italia SdP- Italia Strategic Infrastructures 7,5 mln Railroad Station 130 mln Waste to Energy Plant 500 mln Motorway 50 mln Motorway

8 How it works BANK / POOL First demand guarantee SPV Project / Corporate Loan Project contracts CONTRACTORS USERS / PURCHASERS Available to cover construction risk Partial coverage of loan Debt service type guarantee. Acceleration of guaranteed payment only at SACE option Benefit of security package and loss-sharing mechanism on a pro-rata basis between SACE and the lenders Direct voting rights or power to influence guaranteed banks on decisions Time of payment to SACE is aligned to lender remuneration (i.e. partially upfront and partially as risk margin over the life of the guarantee in line with interest payments) Reliance on same consultants with lenders; possible exception for intercreditor issues 8 8

9 The Andromeda transaction SACE ( Project Facility A1 Guarantor ) Guaranteed Amounts Guaranteed Amounts Andromeda PV S.r.l ( Borrower ) Andromeda Finance S.r.l. ( Issuer ) Investors P+I under PF-A1 and PF-A2 P+I under Class A1 and A2 Notes EIB Unconditional and irrevocable first demand guarantee provided by SACE to the Issuer on the PF- A1 (monoline style) Covering nonpayment and claw back risk in respect of PF-A1 scheduled principal and interest The payment obligations of SACE are valid irrespective of any invalidity, irregularity or unenforceability of any of the guaranteed obligations The guarantee does not cover the make-whole amount or any prepayment or acceleration payment SACE has the option but no obligation to accelerate the guaranteed obligations in case of an acceleration of the PF-A1 9

10 to the Borrowers Compliance with state aid rules Borrower/project financial soundness credit analysis performed by SACE structures Attribution of a specific rating to the borrower/project Market oriented price Coverage of expected loss and expenses calculation of risk load Application of excess spread in order to achieve target RAROC Check market data for comparable transactions Maximum coverage of outstanding loan Compliance with 80% rule (exception for debt securities) Preference for balanced risk sharing with lenders (on average 35% of whole lending amount) 10

11 Risk assessment: Rating Models Type of Risk Type of Rating Corporate Bank Counterparty rating Structured Finance Counterparty rating + recovery rate adjustement Project Finance Transaction rating 11

12 Pricing Model Pricing to Risk The transaction is assigned a rating The implicit PD is estimated Counterparty rating for unsecured risk Transaction rating for secured risk For each rating and each tenor: it is computed by the simple moving average Fair Premium Level is defined = Pricing Mark to Market 12

13 Fair Premium Level Expected Loss + Expenses + (Exposure at default) * (Probability of default) * (1 Recovery Rate) Running costs, human resources, etc.. Risk Load Income from Capital - Capital Charge + Excess Spread Level of Profitability Risk Adjusted Performance Measure RAROC - RARORAC 13

14 Spread data obtained from market providers 14

15 Italy Worldwide How to contact us Head Office Rome Piazza Poli 37/ Rome Tel Fax Bari Via Amendola 172/ Bari Tel Fax Lucca Via Dante Alighieri Lucca Tel Fax Milan Via A. De Togni Milan Tel Fax Modena Via Elsa Morante Modena Tel Fax Monza c/o Unione Industriali Monza e Brianza Viale Petrarca Monza Tel Fax Rome Piazza Poli, 37/ Rome Tel Fax Turin c/o ICE - Via Bogino Turin Tel Fax Venice Viale Ancona Venice Mestre Tel Fax Brazil Al. Min. Rocha Azevedo, 456 CJTO Sao Paulo Tel Fax China 40/f Suite Central Plaza 18 Harbour Road - Wanchai, Hong Kong Tel Fax Romania c/o ICE - Str. A.D. Xenopol, nr Sector Bucharest Tel Fax Russia c/o ICE - Office n.1202 Krasnopresnenskaja Naberejnaja Moscow Tel Fax South Africa Two Commerce Square - 39, Rivonia Road Corner Melville Road Sundhurst 2196 Sandton, Johannesburg Tel Fax Turkey c/o Consulate General of Italy in Istanbul Tom Tom Kaptan Sokak, Beyoglu, Istanbul Tel Fax

16 Disclaimer Disclaimer This presentation has been prepared solely for information purposes and should not be used or considered as an offer to sell or a solicitation of an offer to buy any insurance/financial instrument mentioned in it. The information contained herein has been obtained from sources believed to be reliable or has been prepared on the basis of a number of assumptions which may prove to be incorrect and, accordingly, SACE does not represent or warrant that the information is accurate and complete. 16