When EurOrient announced in recent weeks that it was awarded a $1 billion contract to develop one of only a dozen or so Liquified Natural Gas (LNG) terminals planned in China, the deal sounded improbable at best. How could a company, little known even in its own country, go up against some of the largest energy firms in China and win a contract that goes right to the lifeblood of China? The contract, to build a terminal in Rizhao City in the Shandong Province of the People’s Republic of China that will receive LNG shipments, turn them back into their natural state and ship them out to feed China’s massive energy needs, could, when all is said and done, involve several different countries around the world and amount to tens of billions of dollars in international trade. China’s plan to fuel its future with LNG is so massive, there are even some who have wondered if there is enough gas in the world to supply the terminals it hopes to build. So how does a Woodland Hills company end up front and center in such a global scenario? If it has little name recognition in the U.S. it is because EurOrient has, for all intents and purposes, not done any business in the U.S. Founded in 1988 by Ron Nechemia, who serves as president, the company has focused singularly on developing countries, helping to broker deals for highways, energy and the production of the metals that are the basic building blocks of economic infrastructures from power stations to paint. EurOrient has helped to build power plants and manufacturing facilities in China and roads in Southeast Asia, providing advisory services on everything from risk management to financing. More recently, EurOrient has begun putting together investment funds for infrastructure, technology transportation and other projects in China and Cambodia. Nechemia spoke to the Business Journal about the trials and tribulations of pioneering development in these countries. Question: How were you able to establish the kinds of relationships you needed to make this deal in China happen? Answer: What made it happen is sticking to what you believe. I believe life is a circle. You cannot see everything. Many times I would want to quit because I could not see the whole circle. But I thought if I quit right now, maybe I am just around the gate and I will be very disappointed to see, ‘here’s the gate.’ So what makes EurOrient successful is being in hard places for a long time. And being a part of the learning curve. We are part of every wrinkle. In China the opening of reform. The peace accord in Cambodia. The rebel uprising in Nepal. Q: You still had to convince the government to give you this contract. How did you do that? A: Four companies control the (energy) market in China today. They said we can partner. I said I want my own deal. I needed to fight to get my own project going. And one of the key issues is where can you get $24 billion worth of gas. So only the very powerful individuals can get the project to begin with and only very powerful individuals will be able to get the gas. Unless you are one or the other you cannot make it work. Because I have relationships in emerging markets, I can reach the most powerful decision makers in most countries in the world. The former prime minister of Russia and deputy prime minister of Russia is my dear friend so it’s easier to get the gas commitment. Q: What was the negotiation like? A: The deal we are talking about, I did not negotiate the deal. In the last hours of negotiation they had a list of 10 questions that would either make or break the deal. At this level they had to bring the president in. I’m sitting with a high government official, and every one of the 10 questions was easy to solve because I knew the right answer, based on the law of the country, based on the process required by the country, based on life experience that took me 20 years to accumulate. A lot of people would say I’m the best thing since sliced bread. No. I’m successful on this deal because I suffered. Because I made mistakes. Q: How did you first become involved with China? A: I arrived in China in 1986 through another company called Eureka Infrastructure Consortium. I started as an employee and I slowly became a partner. I became a president of a multi-billion-dollar operation at a very young age. I signed a $1.7 billion contract when I was maybe 27, 29 years old. Later, I recognized that they had a story that was unbelievable, but I saw the possibility that they could be EurOrient’s main client. So I quit my job and I opened EurOrient with a unique vision to become the first private sector global development bank. Q: Why did this idea appeal to you? A: All development banks are government owned or owned by member countries. Those institutions are subject to political agendas. The EurOrient agenda is to become a global development financial institution not subject to political agenda. EurOrient took the position to invest in undeveloped countries, only where it’s needed the most. Q: How did you go from this idealistic vision to creating this company and generating revenues and earnings? A: First of all, it was the 1980s. At that time there was no emerging market in infrastructure. There was only trade financing. I was the guy to recognize that global economic reform will take place. I recognized there will be a structural change. The way governments gave assistance to emerging markets cannot go on. Emerging markets resented it and still resent it, so they looked for alternatives. The U.S. would say we will give you money, but all the work has to be given to U.S. companies. When they dealt with me, I had different values. I don’t need to make the maximum profit. I’m not a Fortune 500 company that will travel with Bill Clinton trying to get a deal. And I endorse social responsibility. Whatever we do is supposed to impact the poorest populations of society. So it was being in the right market at the right time and having the right social values. Q: Wasn’t part of the equation also that many others were not willing to take the risk in these countries, which are often very politically unstable? A: I was the first white man to step into a base camp of the Khmer Rouge regime. In the 1980s, after Cambodia signed the peace accord, I was called to meet the prime minister. The idea was to integrate all the small countries of Indonesia and put them on an intercontinental highway. My job was to structure highway one, which would start in Thailand and go to Vietnam. So I said, great. How do we do it? And they tell me you will be flying on the prime minister’s helicopter and you will be going to the jungle. I found out I’m going to the stronghold of the Khmer Rouge. I said no. I decided I cannot do business with people responsible for murdering one third of the population. And then I tried to go to sleep that night. I could not sleep. What is the right thing to do? And then I came up to reality. The decision was I should go. And I have to go. Why? Because if the different groups of Cambodia lay their hands for peace, they’re the ones whose brothers, sisters, fathers got killed. If they agree to put the war behind them and try to make peace, who am I, a foreigner to come into the country and say I will not help you? Q: You still have to get money to execute the project. How do you approach investors about a country with this kind of history and this potential for continued war and turmoil? A: It’s tough. The success stories are very few. But there are agencies that can get political risk insurance against civil war and many things we can do to mitigate the risk. That’s why those special insurance programs were created, to allow players to get into the market and to mitigate the risk. So the price of electricity in a country like Cambodia is significantly higher, maybe four times higher than California because of the risk factors. Q: What other risk factors exist in these countries? A: We know countries like Cambodia or China don’t have a legal system like the U.S. so you have to know how to avoid dealing with local law. And there are issues of sovereignty. (You have to know) what parts of the law you can take and what parts need to be kept out. And you will fail. You are doomed to fail because there is a learning curve. You might be successful on some and you might lose some but are you strong enough spiritually, intellectually, economically to survive the learning curve? In my job I had the honor of meeting many, many successful people from every corner of the world. and usually the story is in three parts. The first part is I was so successful money came out of the sky. And the second part is I lost everything. And the third part is I learned my lesson. I moved on. You will make some good investments and you will make some bad investments. Q: Where will the money for this project come from? A: Many people are very excited to put money on this project. This is a guaranteed income. In EurOrient we have a policy that we want to partner with the local people, individuals, hardworking individuals and give them the opportunity in a limited basis up to $20 million, employees, vendors, people we want to nurture relationships with, who, because of them, we are successful. The rest of it is coming in a fund. We are launching a fund for China, a $1 billion infrastructure fund. We have several funds ourselves, but you might know in the market there are 20 emerging market funds and 50 institutional funds that will be delighted to participate. Q: How do you plan to build the company in the future? A: We are bench-marking against the very best in the world, The European Bank for Reconstruction and Development, CalPers, Asian Development Bank. The progress we make business wise we get from making mistakes and benchmarking. I’m in the United Nations. I’m in the International Chamber of Commerce. I’m one of only five people in the world that sits at the highest business committee of the U.N. I was part of writing the policy of the U.N. for development. Making one more deal doesn’t mean anything to me. The money is just a byproduct. If you are doing the right thing, you make money eventually. SNAPSHOT Ron Nechemia Title: President/Founder EurOrient Age: 41 Birthplace: Israel, raised in Italy. Most Admired: My father: he managed his time like diamonds. Education: Bachelor’s degree in economics from UCLA; Master’s in economics and finance from Thunderbird, The Garvin School of International Management, Glendale, Ariz. Personal: Married, five children
