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Leopard Cambodia Fund  –  Monthly Newsletter Issue 8  –  December 2008



Welcome to the 8th and final 2008 Issue of the Leopard Cambodia Fund (LCF) Monthly Newsletter. As we go to press, Buddhism notwithstanding!… a few Christmas lights are beginning to twinkle around Phnom Penh as hoteliers and restaurateurs cater to the influx of high season, high spending western tourists.  With the rainy season finally behind us and the weather now at its balmiest, the city’s boutique hotels and chic French bistros are enjoying brisker business; we were even turned away from our favourite restaurant Romdeng last week. The plethora of coverage Cambodia has received in the travel sections of the quality British, American and European press these last months has certainly helped: even the usually reserved Financial Times became a touch excited about Phnom Penh and Siem Reap–quite a coup for the country to be written up in the luxury ‘How to Spend it’ section of the world’s leading financial newspaper. But it’s the quality rather than the quantity of the tourists which catches our eye-backpacks are still very much in evidence of course and a staple source of tourism income they are too, but in areas such as the French quarter it’s not the backpack which is so much in evidence, rather it’s the Prada handbag and the cork/bottletop ratio at one or two of the more trendy (and pricey) establishments seems to be inverting. We encourage our investors and other readers to come to Cambodia and help this ‘inversion’ along-come and see it whilst hotels like Le Royal, one of the best in South East Asia is still charging room prices akin to your average B&B in Paris or in London-the value won’t last for ever.


Monthly closures of LCF continue with the next close on Wednesday 31 December. More details can be obtained from our Chief Operating Officer Thomas Hugger at: [email protected]




Investment News


Operating in a country with extraordinary social needs, Leopard Capital likes to invest where possible in projects which deliver not only an excellent financial return to investors but also an above average ‘utility’ return to local people. The power business has the potential to deliver on both fronts. Hard to imagine but the whole of Cambodia has only 195MW of installed generating capacity-that’s what, probably enough to run a section of Central on Hong Kong Island?  Point is of course, there is a structural deficit of this most necessary commodity and with the right take off agreement, the demand inelastic business of power generation and distribution can be highly profitable AND deliver tremendous social advantages to people. We are currently looking closely at a couple of interesting Small Power Projects (SPPs) and Transmission and Distribution projects. Here, Leopard Capital Associate Matt Magenheim gives a brief explanation of just why it looks so interesting.


Matt writes: ‘Cambodia’s energy sector is at a critical stage of development.  Despite expansion of the electricity supply since 1995 when the rehabilitation of the national power system began, capacity is still significantly below the rapidly growing demand.  Electricity costs in Cambodia are among the highest in the world, while the electrification rate remains one of the lowest in Asia.  Currently, less than 20% of Cambodian households have access to the public electricity grid, and tariffs generally range from $0.15 to $0.50 per kilowatt hour.  Rural Cambodians off the grid at best may have access to small community generator sets which may charge car batteries for household use at rates of up to $1.00 per kilowatt hour.      
The domestic electricity supply is fragmented, consisting of 20 to 25 small isolated power systems that primarily rely on diesel or heavy fuel oil.  In 2007, the capacity output of the Electricit√© du Cambodge was approximately 195 megawatts and 1,100 gigawatt hours.  By 2024, required capacity is expected to approach 3,050 megawatts and 16,250 gigawatt hours.          
The Royal Government of Cambodia has targeted hydroelectric generation as a priority and estimates that Cambodia has the potential to generate more than 10,000 megawatts from hyrdro sources.  There are currently several hydroelectric dam projects under development by Chinese firms with plans to add more than 2,000 megawatts of large scale power generation projects over the next ten years.  As a stopgap measure, Cambodia plans to import up to 260 megawatts from Vietnam, Thailand and Lao PDR over the next three to five years.  Several transmission projects for this are now under construction with funding by development finance institutions.
Large scale power plants fueled by gas or coal may be introduced in Cambodia if recent local resource discoveries prove commercial and extraction commences.  However, these projects will require significant investment in expanding the national grid system.
Cambodia is committed to rural electrification and has set a goal of providing quality electricity services to 70% of the rural population by 2030.  It is estimated that only 13% of rural households have access to electricity today.   The limited national grid system will require significant expansion of the domestic transmission and distribution system as well as innovative small power generation projects to ensure electrification of rural communities and emerging commercial centers.
Investment opportunities in the power sector are numerous and include both power generation and transmission.  Greenfield projects for medium to large scale hydropower, coal and gas plants are available.  There is also the potential to acquire smaller oil-fueled plants that are currently operating inefficiently but have attractive power purchase agreements with Electricit√© du Cambodge.  Cross-border transmission lines as well as domestic transmission and distribution systems may offer attractive returns contingent on the agreements investors are able to negotiate with Electricit√© du Cambodge.
Given the unusually high cost of electricity from traditional sources, Cambodia offers unique opportunities for alternative energy projects that would minimize or avoid the negative environmental impacts of generating power from oil, coal or hydroelectric dams.  Leopard Cambodia is currently researching several options including underwater current driven turbines along the Mekong River, biomass, biogas, solar, and wind.  These projects could initially target rural towns off the national grid.

So in sum, power-related projects look to us, attractive indeed-provided sufficient returns can be negotiated. We hope to give you more concrete news in the ensuing months".



The Gloom Boom & Doom Report
Many of you will be avid readers, or at the very least be aware of, Dr. Marc Faber’s iconic "Gloom Boom & Doom Report" which highlights unusual and often contrarian investment opportunities around the world. Marc is also Chairman of Leopard Cambodia Partners GP LLC and in this month’s edition of his report includes a feature on Cambodia. To view Marc’s website please visit: www.gloomboomdoom.com; for subscription information please email his assistant Lucie Wang at: [email protected]



Return of Excess Contribution to the Fund LPs
The GP has elected to distribute the Net Capital (excess) back to the various Fund LPs on 15th December 2008. Thanks to the considerable new commitments last month the Fund has received additional cash from the new investors which will be used to return to the existing LPs their pro-rata share of the capital and expenses previously drawn down. This will also help to clarify and ease the tax issues for some LPs, especially those based in Europe.




LP Advisory Committee

Your GP is pleased to announce the formation of the LP Advisory Committee. The three members of this newly formed committee are all highly experienced investors and we are delighted that they have accepted the invitation to serve.

Dr. Simon Ogus is CEO of DSG Asia, an independent consultancy based in Hong Kong which offers analysis of the economies and politics of Asia. Simon is well known among Asian investors for sounding the alarm ahead of both the 1997 Asian and 2008 US financial crises. Prior to founding DSG Asia Simon was Chief Asia Economist for SBC Warburg.

Boris Zhilin is a co founder of Armor Capital, a Lausanne-based manager of a global investment fund with long experience in emerging markets. Prior to founding Armor Capital in 1998, Boris worked at Bear Stearns where he specialised in screening, executing and then monitoring private equity investments.

Markus Winkler is President of the Board of VGZ Zurich, an independent asset manager which he founded in 1973 after working for Bank Leu and UBS. He is also a founding member of the Swiss Association of Asset Managers and the Swiss Investors’ Association, and serves as Director or Advisor of a number of listed funds investing in Asian and other emerging markets.


Further to the establishment of this committee, LCF’s LPs approved the GP’s proposal to accept a representative of LCF’s feeder fund, Leopard Cambodia Investments BVI Ltd. on LCF’s LP Advisory Committee, and Markus Winkler has kindly agreed to serve as the representative.

The LP Advisory Committee’s function is (a) to review and approve or disapprove any potential conflict of interest transactions between the Partnership or a Portfolio Company, on the one hand, and the General Partner or any employee or Affiliate of the General Partner, on the other hand, (b) to advise the General Partner on such other matters about which the General Partner may from time to time, in its sole discretion, determine to consult the LP Advisory Committee and (c) to review and object to any valuations if it deems such an objection to be necessary. 





Tired of looking at Red on your Bloomberg screen?


Then switch windows for a moment and take a look at this blast from Angkor’s past, courtesy of ‘YouTube’: http://kr.youtube.com/watch?v=7f4cuxQynvY&feature=channel


And if that whetted your appetite then let’s go back not quite so far in time and visit the Cambodia which Lee Kuan Yew visited from Singapore in the mid ’60s when he is reported to have said to King Norodom Sihanouk ‘one day I hope Singapore looks like Phnom Penh’.

And now take a quick look at how just how advanced agriculture was in Cambodia-remember when you look at this film, this was shot when most of us were either at primary school or merely a glint in the proverbial.  Now, the first step for agriculture investors is to bring Cambodia back to where it was 40 years ago.




 In the News


  • Cambodia’s 2009 GDP growth forecasts have been revised down to 4.9% (World Bank), 4.8% (IMF), and 4.7% (ADB), due to the challenging external environment.
  • Donors have pledged a record $951m of Official Development Assistance to Cambodia in 2009, up 38% from 2008. The largest donors are: China ($257m), the EU ($241m) and Japan ($113m).
  • Cambodia’s mobile phone penetration rose 15% yoy in the first 11 months of 2008.
  • Prime Minister Hun Sen mentioned in a speech that the opening of the Cambodia Stock Exchange may be delayed because of the global financial crisis. Most industry analysts already expect a 2010 opening is now more likely than 2009.



And Finally…..


The team at Leopard Cambodia Fund wishes you all a Very Happy Christmas and a Prosperous New Year!



In this Issue

Investment News

The Gloom Boom & Doom Report

Return of Excess Contribution to the Fund LPs

LP Advisory Committee

Tired of looking at Red on Bloomberg?

In the News



Quick Links 


Leopard in the News  

Articles containing information and comments on both Cambodia and on the Leopard Cambodia Fund appear regularly in various publications and news outlets. To view the page in our website displaying links to these, click here.



The NAV of Leopard Cambodia Investments (BVI) Ltd as of 28 Nov 2008 is USD1005-42 (31 Oct 2008 USD1004-35)



Investing in LCF via a Self Invested Personal Pension Plan (SIPP)

UK taxpayers can invest in LCF via a SIPP and enjoy all the tremendous tax advantages which come with SIPPs. Hornbuckle Mitchell are our SIPP provider and more information on the company can be found here: www.hornbucklemitchell.co.uk

Initial contact should be made with Hornbuckle Mitchell through their Asia SIPP expert Stephen Davis at: [email protected]




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Leopard Cambodia Investments (BVI) Ltd. 

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