1 Project Financing to Meet Iraq’s Needs Ravi Suri MD & Regional Head - Project & Export Finance Middle East, South Asia, Africa and Europe January 2014

2 Standard Chartered Bank and Iraq3 Opportunities Galore – Can they be project financed?4-7 Iraq Project Finance Roadmap9-10 Table of Contents

3 Track Record of Award Winning Solutions Recently opened a branch in Baghdad  Bests Asian Currency Bond House  Best Leverage Finance House  Best Project Finance Advisory House  Best M&A House in India  Best Debt House in China, Pakistan and Singapore  Best Global Bank in Emerging Markets  Best Emerging Market Bank in Africa  Best Foreign Exchange Provider in Asia Pacific, Africa and Southeast Asia  Best Emerging Market Banks in Asia  Best Islamic Project Finance House  Best Transaction Bank  Best Structured Trade Finance Bank  Best Treasury and Cash Management Bank  Best Bank in Hong Kong  Best Cash Management House in Asia  Best Investment Bank in Africa and Middle East  Best Project Finance House Africa and Middle East  Best Investment Bank in Africa  Best Investment Bank in the Middle East  Best Bank in Hong Kong  Best Project Finance House Africa and Middle East  Best Bank in Asia  Best Bank in Africa  Best Bank in India  Best Investment Bank in UAE  Best Foreign Investment Bank in Pakistan  Best Foreign Commercial Bank in India  Best Foreign Commercial Bank in Bangladesh 2012  Best Bank for Liquidity Management in Asia, Africa and Middle East  Best Emerging Market Bank in Asia  Best Foreign Exchange Bank in Asia  Best Investment Bank in Singapore and UAE  Best Renminbi Trade Settlement Bank  Best Structured Trade Finance Bank  Best Working Capital and Trade Finance Bank Standard Chartered’s key regions of focus Standard Chartered Office “150 years of emerging market experience and focus on Asia, the Middle East and Africa has helped develop a well-established presence in most of the world’s fastest growing economies“ “Nobody knows how to do business in Asia better than Standard Chartered” “Leveraging cross-border opportunities and its global brand helps to make Standard Chartered stand out among its regional competitors” Standard Chartered Bank at a Glance

4 Iraq – Immense Financing Needs Opportunities galore but can they be project financed?

5 Legal Framework is Evolving  A solid legal framework with enforceable contracts is essential to any financing  Post Saddam, efforts have been made to amend/repeal Saddam related laws and to make Iraq an investment friendly state  National Investment Law enacted in October of 2006  However, National Investment Law does not cover the Oil & Gas sector  Encourages both local and foreign private investors to invest in Iraq and protects investors' property rights  Exempts approved investment projects from certain taxes and fees for at least 10 years.  Allows investors to repatriate investments and profits from investments.  Allows investors to rent or lease land for the period of a project, in some cases for up to 50years  Allows investors to insure projects with any national or foreign insurance company.  Permits investors to open accounts in Iraqi or foreign currency or both at Iraqi banks or at banks outside Iraq.  Ensures the right to employ foreign workers when needed.  Allows non-Iraqi workers to transfer salaries outside Iraq.  Guarantees that the government will not nationalize or confiscate investments. What does the National Investment Law Do?

6  Iraqi Law: Iraqi corporate and commercial law is governed wholly by statute (the Civil Code) and interest on debt is allowed subject to restrictions on usury.  Mortgages: Lenders can take a legal mortgage over real property but the process of perfection is protracted and difficult  Share Pledges: Enforcement of a share pledge requires approvals from various Iraqi Ministries, particularly from the Ministry of Interior which must approve any foreign shareholder in an Iraqi company  Assignment of Contracts: Assignment of the relevant Concession to lenders will require consent from the Ministry of Oil and the relevant regional oil company  Governing Law: Contracts entered into by the government entities with third parties are subject to Iraqi laws. In theory, other Contracts could be governed by any other choice of law.  Sovereign Immunity: Waiver of sovereign immunity is not expressly prohibited under Iraqi law  Enforcement of Foreign Court Judgments: Iraq is not a party to the Hague Convention on Recognition of Foreign Judgments, and a judgment can be enforced in Iraq only if bilateral arrangements exist  Enforcement of Foreign Arbitral Awards: Iraq is a signatory to 1983 Riyadh Convention but not to the 1958 New York Convention (the main treaty that ensures enforcement of foreign awards) Security and Enforceability

7  Regulation of Capital Outflows: The existing regulation issued by the Central Bank of Iraq regulates significant capital outflows which could theoretically impact repayments due to a finance party. In practise, these are seldom observed  Withholding Tax: A 15% withholding tax is applicable to interest payments made by an Iraqi borrower to a foreign lender  Bankruptcy / Liquidation : Any creditor with undisputed commercial debt of more than Iraqi Dinar 500,000, which has not been paid for more than 30 days, may present a petition for bankruptcy or liquidation against the debtor  Environmental Regulations: relatively new in Iraq and details on compliance procedures are being developed. International financial institutions will follow more stringent Equator Principles Other Considerations

8 Working with an Evolving Legal Framework Support from relevant ministries / council of ministers Guarantee from the Ministry of Finance in respect of the payment obligations under relevant concessions Without formal legislation backing up contracts, various mitigating measures can be undertaken for the benefit of all Multilaterals like MIGA ECAs on the back of Government-to-Government relations ECAs looking at Iraq but waiting to agree framework with government ECAs willing to consider moving but on a selective basis Also too many deals hitting some ECAs - “wheat from the chaff” In addition to ministerial support, political risk could be passed on to a third party Some developments with significant government involvement have been financed on a medium term basis with TBI issuing payment guarantees on the back of which international banks have issued LCs to the developers/contractors Some Turkish lenders are getting comfortable lending in parts of Iraq Other Options

9 So how would things evolve if the basic framework was there?

10 Iraq Project Financing Roadmap Time / Better Regulatory Framework / Enhanced political certainty / Track record Debt Liquidity Largely ECA / Multilaterals backed financing JVs between significant government entities and international sponsors with project financing experience Export oriented projects Largely ECA / Multilaterals backed financing with some clean risk by international banks Some local banks – currency, competency and ALM issues International banks take more clean risk but still require some ECA cover Increasing local bank participation Large Government- owned sponsors Domestic and export oriented projects International banks finance without cover Local banks bring significant liquidity Some projects done on pure local bank basis Initially financed primarily by local banks Followed by international banks Iraqi private sector projects Domestic and export oriented projects

11 Thank You