Iraq Investment:

Opportunities and Obstacles

CHRISTOPHER RUTH | MANAGING PARTNER

SUPER RETURN, DUBAI
cr@northerngp.com
14 OCTOBER 2009
Contents

Introduction

Iraq Overview

Sector Highlights

Investment Landscape

Conclusion

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Northern Gulf Partners Overview

Northern Gulf Partners Our asset management activities include:

(NGP) is the leading ― Private equity (corporate, real estate and infrastructure)
investment firm and ― Marketable securities (long-only equity fund management)

provider of financial
We are building leading Iraqi companies in important sectors, including:
advisory services in Iraq.
― Commercial Banking
― Upstream Oil and Gas

We have three main ― Construction Equipment Rentals

activities: asset
We also provide financial advisory services, including:
management, ― Corporate finance
greenfield investment, ― Mergers and acquisitions
and investment ― Market entry

banking.
NGP is headquartered in Baghdad and New York

NGP’s investment partners include leading investment funds, corporate

entities, family offices, high net worth individuals, and development finance
institutions

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NGP Strategy

Highest-caliber service, Create value from strengths that competitors cannot replicate
a strong local presence,
Partner with Iraq’s leading industrialists, business families
and rigorous analysis –
and entrepreneurs
these factors create the
NGP advantage. Work closely with Government of Iraq and US Government

Form strategic partnerships to accelerate growth

Employ rigorous deal selection methodology driven by

proprietary research

Access global capital markets (GCC, Europe, US)

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Iraq is the next major emerging market…

Oil reserves among largest in the world: possibly 300+ billion barrels

Rapidly stabilizing environment

Growing economy with large population

Educated and enterprising people

Iraqi assets are not only undervalued but under-analyzed

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…with strong core economic indicators.

Iraq is a rapidly stabilizing

emerging economy that is KEY FIGURE 2009 ESTIMATE
growing strongly today
GDP GROWTH 7.5 %
and possesses exceptional
growth prospects for the GDP $85.4 BILLION
future.
CPI INFLATION 6.0 %

CURRENT ACCOUNT BALANCE - $15.7 BILLION

FOREIGN EXCHANGE RESERVES + $48.0 BILLION

IRAQ GOVERNMENT BONDS (YTM) 11.9 %

ID / USD EXCHANGE RATE 1170

EXPORTS $23.5 BILLION

POPULATION 28 MILLION Est.

Source: IMF, Central Bank of Iraq website (www.cbi.iq).

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Iraq recent news headlines show positive signs…

“BP says it may spend as much as $20B in Iraq”

October 9th, Bloomberg

“Russian minister expresses investment interest in reconstruction”

October 7th, Aswat al-Iraq

“Iraq commission prepares conference to promote US investment”

October 6th, 2009; Aswat al-Iraq

“Motorola signs contract with Zain Iraq”

October 6th, 2009; Business Intelligence Middle East

“IMF: Iraq has made ‘good progress’ in loan talks”

October 6th, 2009; AFP

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…but investors still face serious challenges…

The considerable market Security concerns

opportunity in Iraq must
be balanced with
Visas
reasonable expectations
and an understanding of
the multiple challenges
Payment issues
facing investors.
Perception of corruption

Foreign ownership restrictions

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…and regional differences must be understood.

Investors must Conflicting regulatory framework

understand the
distinction between the
Higher stability / lower near-term security concerns in
Kurdish north and the
the North tempered by smaller market size, value
rest of Iraq and how it
relates to the overall
investment climate and Tenuous relationship between KRG
consideration. and GoI

Competing external interests

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Investment is required across multiple sectors…

FINANCIAL TELECOM &

OIL & GAS INFRASTRUCTURE REAL ESTATE
SERVICES MEDIA

METALS &
HEALTHCARE CONSTRUCTION AGRICULTURE CONSUMER
MINING

After 30 years of sanctions, war, and socialism, Iraq needs everything.

Almost all sectors across the economy have attractive investment
opportunities and will require considerable capital.

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Oil & Gas Sector Overview

Iraq boasts the world’s Massive oil reserves on par with Saudi Arabia
3rd largest proven
Low cost production ($1-2 per barrel) and high quality crude
reserves, and arguably
existing reserves on par Oil revenues represent vast majority of GDP
with Saudi Arabia. Kurdish north PSA’s at odds with central government
However, a shortage of
Existing oil infrastructure requires significant rehabilitation
infrastructure,
challenging security Limited success with oil auctions
situation, and stalled Top 10 Global Oil Reserves and Production
300
legislation have
250
hampered the industry
200
and restricted inevitable
150
economic growth in
100 Proven Reserves
Iraq. 50

0
BBL

Source: BP Oil Report 2009

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Oil & Gas Opportunities & Challenges

Opportunities Challenges
Exploration & Production Decades of infrastructural neglect

Refining & Downstream activities Regional disagreements

Oil Field Services and related Highly politicized sector

activities
Considerable public scrutiny
Only significant producer with
capability and intention to double Stalled hydrocarbon legislation
(or more) production in next 5
years

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Financial Services Sector Overview

In order for the Iraqi Cash based economy

economy to grow, a
Limited access to financial products and services
developed financial
services sector is critical Underdeveloped equity capital markets with limited liquidity
to both the flow of
domestic and No debt capital market, other financial services are nascent
international capital, as
Banking sector dominated by state owned banks (90% of assets)
well as a key enabler to
sustainable growth, job Private banks provide limited range of products and services, scale
creation and economic
Iraq20 Index ($)1
expansion.
130
125
120
115
110
105
100

1. The NGP Iraq Top 20 index comprises the top 20 stocks by market cap, updated quarterly

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Financial Services Opportunities & Challenges
Opportunities
Thin competitive landscape
Lack of modern products and services
Growing SME market
Government commitment to sector
growth
Retail and commercial banking
Leasing, insurance, mortgage finance
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Challenges
Private sector financial services
crowded with traditional players
Shortage of qualified human
resources
Untested regulatory framework
Culture shift required (e.g. lending,
insurance)
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A disciplined investment process is required.
NGP has a unique
network and
unparalleled access
to proprietary
knowledge enabling
them to gather
information and gain
perspectives typically
unavailable to others.
ACTIONABLE OPPORTUNITIES
Northern Gulf Partners LLC
SECTOR Identify attractive industries,
scalable businesses
Draw from regional and emerging
PROVEN MODELS markets
Experienced international
MANAGEMENT
operators, local Iraqi capability
Identify strategic local partners,
PARTNERSHIP deep due diligence
Leverage information advantage,
RESEARCH research driven approach
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Conclusion

Extensive Natural
Security
Resources

Stabilizing Politics Barriers to Entry

The investment

Organic Growth
opportunities in Iraq Corruption /
Transparency
outweigh the obstacles
Large Population Some Foreign
Ownership Limitations

Under Analyzed

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Contact

Thank You
Christopher Ruth

cr@northerngp.com

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Disclaimer

This communication is for informational purposes only. This communication is not intended as an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. No part of this presentation may
be copied or distributed without the express written consent of Northern Gulf Partners.

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