• Business And Markets

    NDFI Collects $3.3B in Outstanding Debt

    The fund's future investment portfolio will include 65% for oil, gas, and petrochemicals, 25% for mining and minerals and 10% for other sectors, namely power plants, water for industries, biotech, healthcare, food, financial markets, export-based industry

    Mehdi Ghazanfari, the head of the National Development Fund of Iran (NDFI), provided a comprehensive report on the fund's performance at a meeting of board attended by President Ebrahim Raisi. 

    “The fund recovered some $3.3 billion of its debt in cash and assets worth over $112 million…Talks are also underway with Bank Mellat, Bank Sepah and the Bank of Industry and Mine to acquire shares of their subsidiary companies,” he was quoted as saying by the NDFI website. 

    On the process of collecting debts through asset ownership, he said, “The fund acquired 33% of Bank Sina shares worth $100 million.”

    NDFI in April acquired Bank Sina shares after approval from the Central Bank of Iran. This move was in the declared policy of the fund that it was seeking to buy shares in commercial banks.

    The Fund said it aims to use the resources of Bank Sina to strengthen its financial clout and play a more effective role in the financial market. He emphasized that to be able to have an impact on  economic development, NDFI should first put its own house in order by cutting losses in financial and banking businesses. 

    Buying a stake in Bank Sina was supposed to help NDFI to start issuing rial and forex guarantees, facilitate credit and provide loans in rial, the national currency.

    “Additionally, the fund acquired $12.5 million worth of assets from overdue currency debts given to Bank Tejarat,” the official added. 

    He recalled signing of a memorandum of understanding with the Oil Ministry to acquire some physical assets the operational phase of which is not complete.

    “From the total collected debts, $1.7 billion was received in the last fiscal year (March 2022-23), nearly $1.3 billion was settled in the second half of the year before and $300 million was collected in the first quarter of the current year.”

    He noted that the total outstanding forex debt owed to the fund from private and non-governmental sectors is near $13.2 billion. “Almost $10.6 billion of the total is related to 56 projects guaranteed by the National Iranian Oil Company, $1.1 billion for 32 power plants and $1.5 billion for 82 industrial projects.”

    According to NDFI rules, the fund must focus primarily on investing in projects worth $100 million or more, whereas it has given money also to smaller projects. 

    “The investment priority of the fund includes export-based projects, knowledge-based businesses and projects that complement the value chain. Furthermore, investment projects must provide strong feasibility plans approved by the board of trustees.”

    NDFI, Iran's sovereign wealth fund, was founded in 2010 to save a portion of the oil and gas revenue for future generations and help promote sustainable growth. Its mandate is to invest in production, create wealth and jobs. 

    Iran's oil and gas revenue has been undermined by sanctions imposed by the United States, hurt the government's budget and hurt NDFI resources. To compensate the loss, governments have focused on boosting non-oil export and attract foreign investment.

    The petrochemical industry has been the main contributor to the non-oil export agenda with the government prioritizing its development and expansion. The industry's output is projected to reach 120 million tons by 2025.

     

    State of IPS

    Ghazanfari highlighted the Investment Portfolio Statement (IPS), which was approved for the first time in the fund's history, adding that the IPS is considered a high-level investment document that outlines the fund's investment strategy. 

    “According to the IPS, the fund's future investment portfolio will include 65% for oil, gas, and petrochemicals, 25% for mining and minerals and 10% for other sectors such as power plants, water, industries, biotech, healthcare, food security, financial markets (capital market and money market), and export-based sectors.”

    He said in terms of asset ownership, the fund will take appropriate measures to collect claims within the framework of the IPS.

    Ghazanfari noted that over the past ten years lending was the main financial focus of the fund, “However, based on the new decisions of the board of trustees, two additional methods will be introduced: participation through equity participation or public/private partnerships, and the establishment of funds in the form of private equity funds or project funds.”

    To be able to diversify its functions and move beyond solely a lender, new combined financial instruments have been developed by the fund. “Firstly, decisions regarding the fund's interests are made at the time of participation (through investment agreements), where alongside providing a loan, the fund has ownership rights, profit-sharing, product sharing and financial benefit. 

    “In the second scheme, the loan is made and decisions regarding the fund's equity, withdrawal rights or participation in the project are made later based on the project's progress,” he said.

    The NDFI invested nearly $35.7 billion in industries since 2012. Almost 63% of this amount or $22.7 billion went to the oil and gas industry. Close to $11 billion given to upstream oil sectors, $9 billion in the gas industry and $2.7 billion to 10 petrochemical companies.