April 17th, 2006
IPEG Event with Len Battiferano of AIG
We have an event scheduled for Thursday, the 20th.
Speaker: Len Battiferano, Vice President and Director of Strategic Alliances at AIG
Topic: Microinsurance and Microfinance in Emerging Markets — The AIG experience
Date and Time: April 20th 2006, Thursday. 6:30 pm
Venue: Warren Hall, Room 208 (second floor). Warren Hall is located on Amsterdam Avenue, between 115th and 116th Streets.
If you would like to attend or have any questions, please e-mail us at ipeg2005 [AT] gmail.com
April 12th, 2006
More Blogs from Washington
Following up on the excellent Private Sector Development blog, the Washington “consensus” have added two new blogs. The World Bank Institute, who I worked for, have put up the Poverty and Growth blog, while the IFC has debuted the Innovation in Emerging Markets blog. Head on over and spend some time at these excellent new online resources.
April 11th, 2006
2006 the Year of Bio-Fuels?
Many IPEG members are interested in bio-fuels are have probably been paying attention to the fast changing landscape of the industry. By the end of this year, for instance, Brazil will become energy self-sufficient with minimum fuss. Driving Brazil’s move away from fossil fuels is its sugarcane-based ethanol industry, nurtured carefully over the last 30 years, which allows ethanol to be sold for considerably less than gasoline. The New York Times had the details.
The use of ethanol in Brazil was greatly accelerated in the last three years with the introduction of “flex fuel” engines, designed to run on ethanol, gasoline or any mixture of the two. (The gasoline sold in Brazil contains about 25 percent alcohol, a practice that has accelerated Brazil’s shift from imported oil.) But Brazilian officials and business executives say the ethanol industry would develop even faster if the United States did not levy a tax of 54 cents a gallon on all imports of Brazilian cane-based ethanol.
With demand for ethanol soaring in Brazil, sugar producers recognize that it is unrealistic to think of exports to the United States now. But Brazilian leaders complain that Washington’s restrictions have inhibited foreign investment, particularly by Americans. As a result, ethanol development has been led by Brazilian companies with limited capital. But with oil prices soaring, the four international giants that control much of the world’s agribusiness — Archer Daniels Midland, Bunge and Born, Cargill and Louis Dreyfuss — have recently begun showing interest.
Brazil says those and other outsiders are welcome. Aware that the United States and other industrialized countries are reluctant to trade their longstanding dependence on oil for a new dependence on renewable fuels, government and industry officials say they are willing to share technology with those interested in following Brazil’s example. “We are not interested in becoming the Saudi Arabia of ethanol,” said Eduardo Carvalho, director of the National Sugarcane Agro-Industry Union, a producer’s group. “It’s not our strategy because it doesn’t produce results. As a large producer and user, I need to have other big buyers and sellers in the international market if ethanol is to become a commodity, which is our real goal.”
The ethanol boom in Brazil, which took off at the start of the decade after a long slump, is not the first. The government introduced its original “Pro-Alcohol” program in 1975, after the first global energy crisis, and by the mid-1980’s, more than three quarters of the 800,000 cars made in Brazil each year could run on cane-based ethanol. But when sugar prices rose sharply in 1989, mill owners stopped making cane available for processing into alcohol, preferring to profit from the hard currency that premium international markets were paying. Brazilian motorists were left in the lurch, as were the automakers who had retooled their production lines to make alcohol-powered cars. Ethanol fell into discredit, for economic rather than technical reasons. Consumers’ suspicions remained high through the 1990’s and were overcome only in 2003, when automakers, beginning with Volkswagen, introduced the “flex fuel” motor in Brazil. Those engines gave consumers the autonomy to buy the cheapest fuel, freeing them from any potential shortages in ethanol’s supply. Also, ethanol-only engines can be slower to start when cold, a problem the flex fuel owners can bypass.
…
Brazilian producers estimate that they have an edge over gasoline as long as oil prices do not drop below $30 a barrel. But they have already embarked on technical improvements that promise to lift yields and cut costs even more.
This brings me to an Economist profile of Vinod Khosla a couple of issues back which explained at some length Khosla’s interest in bio-fuels, especially ethanol. Most importantly, it also explained pithily the single biggest problem I’ve seen with ethanol, namely that the economics seem to work only when the price of oil is sky high, which is not something we can take for granted, knowing what we know about OPEC’s control over oil prices.
Mr Khosla concedes that after he made his ethanol pitch at this year’s Davos meeting, a senior Saudi oil official sweetly reminded him that it costs less than a dollar to lift a barrel of Saudi oil out of the ground, adding: “If biofuels start to take off we will drop the price of oil.” Anticipating this problem, Mr Khosla is lobbying politicians in Washington, DC, to impose a tax on crude oil if the price falls below $40 a barrel to safeguard investments in ethanol.
Nonetheless, Khosla remains undeterred by possible OPEC machinations, and he’s just picked up equity in Praj, an Indian ethanol company. I think he’s got himself a really sweet sub-$5 million deal by getting a slice of a company whose technologies are being picked up in other emerging markets including South Africa.
So, what is the downside to the bio-fuels story? Well, there is a real possibility of loss of forest cover as people fell trees to grow more sugarcane, soyabean etc (which makes wasteland-based crops like Jatropha very interesting). The New Scientist has more on the possible price being paid by forests as green fuels gain in popularity.
The main alternative to palm oil is soybean oil. But soya is the largest single cause of rainforest destruction in the Brazilian Amazon. Supporters of biofuels argue that they can be “carbon neutral” because the CO2 released from burning them is taken up again by the next crop. Interest is greatest for diesel engines, which can run unmodified on vegetable oil, and in Germany bio-diesel production has doubled since 2003. There are also plans for burning palm oil in power stations.
Until recently, Europe’s small market in biofuels was dominated by home-grown rapeseed (canola) oil. But surging demand from the food market has raised the price of rapeseed oil too. This has led fuel manufacturers to opt for palm and soya oil instead. Palm oil prices jumped 10 per cent in September alone, and are predicted to rise 20 per cent next year, while global demand for biofuels is now rising at 25 per cent a year. Roger Higman, of Friends of the Earth UK, which backs biofuels, says: “We need to ensure that the crops used to make the fuel have been grown in a sustainable way or we will have rainforests cleared for palm oil plantations to make bio-diesel.”
April 2nd, 2006
Jobs: Internship at Next Billion
The WRI’s Development Through Enterprise project and their flagship web site Next Billion is hiring full-time interns. More information and job description here.
March 28th, 2006
Vinod Khosla Makes Microfinance Investment
For a long while now, rumours have floated about Vinod Khosla’s personal interest in the microfinance space. People have speculated as to whether Khosla was raising a fund of his own, offering lines of credit etc etc. The Indian newspaper, Business Standard, today confirmed that Khosla has in fact made an investment, with a couple of other VCs, in one of India’s fastest growing MFIs.
Top Silicon Valley venture capitalist (VC) Vinod Khosla, along with other social venture capitalists, Small Industries Development Bank of India (Sidbi) and the SKS borrower community, made a $2.5 million investment in SKS Microfinance today. The deal is the biggest investment in a microfinance institution in the country, a media statement said. SKS will use the money to access commercial debt and increase operations from its current base of 200,000 clients to 700,000 in 2006-07. SKS serves over 3,000 villages spread across five states - Andhra Pradesh, Maharashtra, Karnataka, Madhya Pradesh and Orissa. It has a portfolio of $18 million and has achieved an annual growth rate of 250 per cent.
Of the $2.5 million investment, Khosla contributed about $450,000, while tech entrepreneurs Ravi Reddy and Sandeep Tungare, co-founders of Vistaar Technologies, and Unitus Equity Fund (UEF) also pitched in with about $450K each. The rest of the money was raised by SKS borrowers and SIDBI.
March 28th, 2006
CIS Private Equity Conference in Moscow
I know Moscow is a long way off for most IPEG members, but if you or any of your colleagues are interested in the private equity space in Russia and/or the former CIS countries, this may well be a good conference to attend. You can find the details for the conference on the IPEG Yahoo Groups website (direct link here). Thanks to IPEG member, Tom Nastas, who is a speaker at this conference, for sending this along.
March 17th, 2006
Investing in India: A 20/20 Perspective
The South Asia Business Association (SABA) at Columbia Business School is organizing a fabulous conference on April 14th, titled Investing in India: A 20/20 Perspective. The keynote speeches are by Sam Pitroda (widely regarded as the father of India’s telecom revolution) and Kanwal Rekhi of Excelan and TiE. Other speakers include Jagdish Bhagwati, Anjali Kumar of Acumen Fund, Sonal Shah (a good friend of IPEG), David Good of the TATA group, Sreedhar Menon, chairman of Viteos capital markets, and Ajay Sharma, the director of Merill Lynch’s Pvt Equity Group. There are panels on capital markets, private equity and social enterprise, among others. If you’re in the NYC area on the 14th and have an interest in investing in India (in any form), I’d urge you to attend. You can register for the conference here.
March 16th, 2006
US-Africa Business Conference
The Worcester Polytechnic Institute, in collaboration with the Corporate Council on Africa, is hosting the third US-Africa Business Conference with the theme Building Partnerships for Economic Opportunities in Africa. Plenty of interesting panels including Alternative Energy, Microfinance etc. Speakers include, among others, IPEG member Euvin Naidoo of the Standard Bank of South Africa.
This conference is designed to enhance networking that will identify potential African investment opportunities in specific core sectors of the economy in sub-Saharan African countries. Its prime objective is to promote economic and educational partnerships that will strengthen trade and investment ties between the northeastern United States and Africa. Companies that have been successfully investing in and importing from or exporting to Africa will share their experiences with the participants. Plenary sessions and workshops will be held in Agriculture, Mining, Water Management, Higher Education, Alternative Energy, Health Management, Information and Communication Technology.
The objectives of the conference are:
# To promote linkages among African and U.S. businesses, governments, and educational institutions to facilitate the development of economic partnerships and a healthy and appropriately trained work force
# To promote accelerated development of fair trade and industry, including exports and imports between Africa & the US
# To expand opportunities for small-scale enterprises to become a force in global markets
March 7th, 2006
IFC Global Private Equity Conference
The IFC and the Emerging Markets Private Equity Association (EMPEA) are hosting the 8th Annual Global Private Equity Conference on May 11th and 12th in Washington D.C. The conference is titled Emerging Markets Private Equity: Breaking Through Boundaries. The keynote speaker is David Rubenstein of the Carlyle Group. The conference will include, among others, panels on Views from the LP seat, SME issues, Emerging Secondaries Markets, and discussions on regional/frontier markets among developing countries. I presume this will be a terrific networking opportunity for some of you?
March 7th, 2006
State of the Planet 2006 Conference
The Earth Institute at Columbia University is hosting the annual State of the Planet Conference on March 28-29, at the Roone Arledge Auditorium. The 4 broad areas of discussion are Research and Ingenuity, Tapping into Market Forces and the Economy, Developing Effective Institutional Structures and Challenging Behavioral Patterns and Perspectives. Speakers include, besides Jeff Sachs, Mark Malloch Brown, Carol Bellamy, Rajendra Pachauri, Abby Joseph Cohen, Stuart Hart, Joel Cohen and Nick Kristof. Of particular interest to IPEG members is the panel on market forces. Here’s what the panel looks like:
SESSION THREE: TAPPING INTO MARKET FORCES AND THE ECONOMY
Abby Joseph Cohen, Partner and Chief U.S. Investment Strategist,
Goldman, Sachs & Co.Joseph Romm, Executive Director, Center for Energy and Climate Solutions
Stuart L. Hart, Samuel C. Johnson Chair in Sustainable Global Enterprise, Professor of Management, Johnson Graduate School of Management, Cornell University
David J. Refkin, Director of Sustainable Development, Time Inc.
Amy Davidsen, Director of Environmental Affairs, JPMorgan Chase
I asked Stuart Hart to come speak to our group after the event, but he’s very hard-pressed for time. So, he has personally asked IPEG members who are interested (and have time) to try and make it to the session on market forces. You can register for the event here. If you cannot make it this time, I am sure we can get Stu Hart to come and speak with our group another time.
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