54 financing “WE COMBINE FINANCING AND OPERATIONAL RESPONSIBILITY” MAN <strong>Ferrostaal</strong> offers customers a range of financing solutions to help them realise projects. In the interview below, Jens Gesinn, Executive Board Member with responsibility for Finance, Accounting, Controlling and IT, gives some examples of the main financing options available and outlines the essential features of each.
Mr. Gesinn, MAN <strong>Ferrostaal</strong> and its partners recently received an award for the financing of a petrochemical plant in Chile (see the article on page 50). What was so special about this financing package and why did it receive an award? The greatest challenge in this project was finding a way to incorporate private capital into a new plant that was to be owned and operated by the Chilean state-owned company ENAP [Empresa Nacional del Petroleo]. This demanded a financing concept that was fully tailored to suit the needs of the customer and the particular situation. And MAN <strong>Ferrostaal</strong> managed to do just this. Yes. We and our partners made this a reality. Admittedly, we had previously worked on similar projects for the same customer and we were able to tweak and improve the model from one project to another. We have lots of experience of customizing financing concepts for individual customers. Can you describe a typical financing concept? For MAN <strong>Ferrostaal</strong>, there is no such thing as a typical financing concept. In fact, that is the defining characteristic of our financing solutions. They are always tailored to our customers’ individual needs. Our financing options assume different forms, depending on the sector, region and project. What they all have in common is that they form an essential foundation for our business. So you always start from scratch with each new financing project? No, of course not. We have certain prototypes. Broadly speaking, there are three different types of financing concepts that we can offer our customers: Project financing for large plants, export financing for machines, and advance financing in the area of steel logistics. We will leave aside the financing of production plants in our automotive segment for the moment because this involves investing in our own means of production. The most individual type of financing is probably used in the industrial plants business. That’s correct. The industrial plants business is certainly very complex. We focus on the construction of large plants and very clearly on project financing, where we can play a very important role. We occupy a unique position in the market as a processindependent constructor of large plants and engineering company with a project management focus. Our most important capability in this area is that we develop projects from the ground up, and sound financing models are an essential component of this. This is exactly where our strength lies and what attracts customers: We combine financing expertise and operational responsibility, <strong>THE</strong> <strong>ECHO</strong> 1/2006 55 and can therefore judge very well what makes for a sound project and how it can best be realised. Who are MAN <strong>Ferrostaal</strong>’s partners on these kinds of projects? We have been collaborating for years with KfW (the Reconstruction Loan Corporation) and Hermes and this has worked very well. For example, all methanol plants in Trinidad with a total volume of 2.5 billion were completed with the help of these partners. But we have also used these partners to get many other projects up and running. The construction of these kind of plants would be inconceivable without the necessary financing. However, we also work with a range of foreign credit institutions and credit insurance providers, depending on what combination of partners makes the most sense in each case. Our track record must be pretty long then. Indeed it is. We have been doing this for about 25 years. But we still employ a flexible approach. Financing models that may have worked well yesterday and today are not necessarily a recipe for success in tomorrow’s projects. Innovation is essential, and with our new Board Members Dr. Knothe (Projects and Contracting) and Dr. Lesker (Service and Sales), both of whom previously worked very intensively on financed projects, we are most definitely looking forward in order to conceive new financing models. Which areas require new financing models? New technologies, for example. This is perfectly illustrated by the example of biodiesel and renewable energy form, but power plants also require new financing models on an ongoing basis. There are many projects in this area, but also a huge demand for financing. Financing plays a crucial role in new technologies that have not yet been tried and tested in the market. The risk involved in employing new technology in a plant also requires new market mechanisms. Not everyone is willing to invest their own private capital in such a venture. With these kinds of projects, we try to come up with financing models that spread the financing risk among various parties. This is the very essence of project financing: Placing the burden of risk on several different shoulders, so that everyone feels their own share of the risk is acceptable and everyone can enjoy watching the project unfold. However, we are not indiscriminate when it comes to projects involving new technologies. We select opportunities where we can asses the risk and where the benefits are obvious. How does MAN <strong>Ferrostaal</strong> distinguish itself from the competition in the area of project financing? According to the definition of the VDMA (Verband der deutschen Maschinen- und Anlagenbau – the German Engineering Federation),
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