NORWEGIAN INVESTMENT FUND FOR DEVELOPING COUNTRIES REPORT ON OPERATIONS 2011 15 years CREATES VALUE | COMBATS POVERTY CONTENT The Norfund History 1 Message from the Managing Director 2 Highlights from 15 Years 4 Between Washington and Beijing Consensus – a Nordic Approach? 9 Norfund – the Little Sister of the DFI-Family 12 Norfund as a Development Investor 13 Strategy for Sustainable Development 14 Investment Areas 16 A Responsible Investor 20 Organization, Management and the Board of Directors 22 Portfolio and Results 25 Portfolio 26 Development Effects 29 Financial Results 30 Accounting Results 32 Activities of the Investment Areas in 2011 33 Renewable Energy 34 Financial Institutions 36 SME-Funds 38 Industrial Partnerships 40 Project Development and New Instruments 42 Overview of all Norfund Investments 44 This is Norfund Bangkok, Thailand Norfund – the Norwegian Investment Fund for Developing Countries – was established by the Norwegian Storting (parliament) in 1997. Norfund’s objectives are to contribute San José, equity and other risk capital, extend loans and Costa Rica provide guarantees for the development of CENTRAL AMERICA SUB SAHARAN AFRICA SOUTHEAST AND SOUTH ASIA sustainable commercial activities in developing • Total investments (NOK m): 3 088 • Total investments (NOK m): 2 597 • Total investments (NOK m): 1 865 countries. Norfund aims to establish viable, • Number of projects: 23 • Number of projects: 58 • Number of projects: 29 profitable activities that would not otherwise • Number of employees: 24 000 • Number of employees:82 000 Nairobi, • Number of employees: 139 000 be initiated due to the high risk involved. • Largest investment area: • Largest investment area: Kenya • Largest investment area: Norfund contributes to economic development Renewable Energy Financial Institutions Renewable Energy and poverty reduction in poor countries through • Countries: Guatemala, • Countries: Kenya, Tanzania, • Countries: Bangladesh, Vietnam, investments in profitable enterprises and El Salvador, Nicaragua, Uganda, Rwanda, Burundi, Laos, Cambodia, Myanmar and the transfer of knowledge and technology. Honduras, Panama and South Sudan, Angola, renewable energy in Nepal Norfund always invests with partners, Costa Rica Namibia, South Africa, Lesotho, Johannesburg, Norwegian or non-Norwegian. Swaziland, Mozambique, South Sudan Zimbabwe, Zambia, Madagascar, Norfund is a hybrid state-owned company and Malawi with limited liability established by a special Investment regions act of the Storting. Norfund is magaged by the Ministry of Foreign Affairs, and the Minister of Norfund’s regional offices International Development has the constitutional responsibility. The activities are to be conducted in accordance with the fundamental principles GEOGRAPHIES INVESTMENT AREAS FINANCIAL INSTRUMENTS 3 % of Norwegian development cooperation policy. 8 % The board of directors is appointed by the 41 % 34 % 47 % 54 % King in Council. 18 % 26 % Norfund and our international sister organisations are often referred to as development finance institutions (DFIs). Norfund is supplied with 20 % capital from the official development assistance 24 % 25 % budget, and is the most important Norwegian Africa Asia Renewable Energy SME Funds Equity PE Funds instrument for combating poverty by promoting sustainable economic development. A well functi- Latin America Rest of the world Financial Institutions Industrial Partnerships Loans oning private sector and access to risk capital are Project Development important preconditions for enabling developing countries to expand their economies and achieve KEY FIGURES NORFUND effective integration into the global economy. 2011 2010 2009 2008 2007 Geographically, Southern and East Africa are Committed investments (NOK m) 7 581 5 844 5 264 4798 3669 Norfund’s main investment areas, and the Number of investments 99 85 81 69 60 Fund has offices in Nairobi and Johannesburg. New investments in 2011 (NOK m) 2 198 844 944 1376 1177 In 2012 Norfund will also open an office in Share of new investments in least developed countries 14 % 45 % 36 % 43 % 12 % Maputo. Norfund also targets selected countries Return on invested capital 9 % 10 % 4 % 21 % 17 % in South-East Asia and Central America and has Profit in investment currency (NOK m) 0 153 262 238 264 regional offices in San José and Bangkok. Capital supplied by owner (NOK m) 1 000 629 585 485 485 Recorded equity (NOK m) 7 735 6 747 5 871 5302 3919 Number of employees in Norfund 49 45 41 40 35 Number of employees in Norfund investments 265 000 167 000 148 000 158 000 147 000 Norfund 15 Years: Capital and Competencies for Continued Growth Highlights from 15 Years The Norfund Between Washington and Beijing Consensus History – a Nordic Approach? Norfund – the Little Sister of the DFI-Family 15 99 7.6 5 years projects in billion offices portfolio invested Norfund 15 Years: Capital and competencies for continued growth Norfund’s Board of directors and management team at a geothermal plant in Nicaragua With the establishment of Norfund in investors, DFIs are able to attract partners. We have learned that know- 1997, a new chapter was added to the additional private capital. The Norfund ledge about local markets and selected Norwegian development assistance mandate is unchanged since inception: industries are vital, and we have experi- policy. Aid and development assistance To be additional – providing additional enced that the key to success is close, must contribute to value creation, not capital to poor countries beyond what long term collaborations with industrial only value distribution. Profitable industry would happen in the market place, and partners. We are proud to be an active and commerce is the backbone of to be catalytic – attract additional capital owner who adds knowledge and sustainable poverty alleviation. Norfund from private sources. expertise in addition to capital. was established to invest in countries where the need for capital is vast, and in 2012 marks our 15th anniversary. Important strategic milestones have been industry sectors particularly important to Through annual capital allocations and to be the initiating partner in establishing development. good returns, the fund has grown to be a the fund managing company Aureos significant investor in our markets. The Capital together with our British sister In addition to supplying much needed Norfund organization has become a fund CDC in 2001, and the joint venture risk capital, investment funds such as professional and recognized player. The SN Power with Statkraft in 2002. Aureos Norfund (so called Development Finance current strategy is based on the experi- has grown to become the world’s largest Institutions, DFIs) function as catalysts. ences gained from our 15 years of manager of capital targeting small and By demonstrating profitability in our investing in the poorest countries of the medium sized enterprises in emerging portfolio, and always partner with other world and from our 14 European DFI and developing countries. SN Power 2 NORFUNd’s REPORT ON OPERATIONS 2011 A feasible target should be that Norfund in a few years time has grown to one per cent of SPU and SPN. KJELL ROLAND, MANAGING DIRECTOR builds and runs hydropower plants in 8 contribution in development policy. countries. We believe there is a need for developing countries, and produces Today, the recognition of the importance a clearer political ambition for the long electricity equivalent to the consumption of business to development is stronger term role of Norfund. Norfund can deliver of 12 million people. than ever. towards many of the expectations on social and environmental standards that 2011 added to a series of very good Norfund will in the coming years continue the Norwegian government will have to years for Norfund. Important measures to systematically build competencies and live up to as a large portfolio investor in were taken to develop the fund further, capacity for doing difficult investments in global markets.Norfund is in fact the third and financial and developmental results the poorest countries in the world, pillar next to The Government Pension in the projects were good. We launched particularly in Sub Saharan Africa. We are Fund Global (SPU) and the Government a new strategic priority, namely agribusi- convinced that local presence and good Pension Fund Norway (SPN). A feasible ness in Africa, opened a new office in partners are keys to success. We are target should be that Norfund in a few Bangkok and recruited several new ready to do our best in contributing to years time has grown to one per cent of employees to the South Africa and Kenya substantially increased activity towards SPU and SPN. Most likely, these offices to strengthen local presence and development of business in poor investments would yield higher returns skills. In total, Norfund invested in 27 countries. This is more than anything compared to what the pension funds projects, and committed investments what the countries in the South are have achieved over the recent years. adding to a record high NOK 2.2 billion. asking for! A survey from January 2012 demonstra- In this years Report on Operations, we tes that Norfund over the last years has It is particularly important to establish have chosen to highlight important succeeded in explaining to the larger businesses in fragile states. Jobs and milestones from our 15 year investor public what we do and why that is so economic growth mean opportunities history, and to tell our story in connection important, and to become a well known and hope, and are very important to to trends in development assistance and attractive partner in the financial create and maintain stability. Through policy. We also wish to raise awareness community. In particular, our business establishing the investment company about Norfund’s active engagement in partners seem to appreciate the work we Kinyeti Capital in South Sudan, Norfund the development of new projects and do and the way we act as a partner. has taken early steps to develop new instruments, far exceeding that of instruments to support micro and small traditional investors. The investment In international development policy, 2011 enterprises.