MIGA, World Bank Group: Mitigating Political Risks

Transcription

1 PPPs in Infrastructure Day 3 Session 13.4 MIGA, World Bank Group: Mitigating Political Risks Elena Palei, MIGA, World Bank Group 1

2 Day 4 Implementation & Way Forward Session 16 Session 18 Way Forward (World Bank) IFC view of PPPs Financing Advisory Day 4 Session Session Transport Sector MIGA: Mitigating Risks MIGA in Infrastructure Ports and Power Ports Session 16 Sector Issues Session 17 Overview by Participants Water Energy 2

3 MIGA Our Role and Priorities 3

4 MIGA. A member of the World Bank Group 1944 IBRD International Bank for Reconstruction and Development 1960 IDA International Development Agency 1956 IFC International Finance Corporation 1966 ICSID International Center for the Settlement of Investment Disputes 1988 MIGA Multilateral Investment Guarantee Agency 4

5 What we do MIGA promotes foreign direct investment by providing: Noncommercial risk insurance (guarantees) for investors and lenders Online information on investment opportunities and operating conditions in developing countries (fdi.net, pri-center.com) 5

6 Our development priorities Focusing on sustainable development Opening up difficult or frontier markets, especially in conflict-affected countries Supporting investments in world s poorest countries Supporting infrastructure projects (including sub-sovereign risk) Promoting cross-border investments between developing countries 6

7 Guarantee Program 7

8 MIGA s political risk insurance coverage Currency transfer restriction and inconvertibility cover protects against losses arising from: inability to convert local currency into forex for transfer outside the host country inability to transfer/excessive delays in acquiring forex (currency depreciation not covered) War and civil disturbance cover protects against losses arising from: damage/disappearance of tangible assets due to war or civil disturbance (including revolution, insurrection, coups d'état, sabotage, and terrorism) prolonged business interruption Expropriation cover protects against losses arising from: nationalization and confiscation creeping expropriation, partial expropriation (limited coverage) non-discriminatory measures may not be covered Breach of contract cover protects against government (including subsovereign) actions resulting in: breach or repudiation of an agreement with the investor and nonenforcement of an arbitration award 8

9 Issues for PRI coverage Regulatory/policy risk Regulatory frameworks are in many cases not implemented or untested Independence of regulator Role of creeping expropriation relating to regulatory pronouncements Breach of contract Offtaker s status as sovereign, regulator or privatized company Sub-sovereign risk Growing trend to decentralize government control of services such as water delivery from national to local authorities Linkage between state, local or municipal authorities to central government 9

10 Eligibility requirements Eligible Investments Minimum 3 years, up to 15 years (on occasion 20 years) Cross-border from one member country (developed or developing) into another developing member country New, or, if an existing investment, must be associated with an expansion, modernization or a financial restructuring Investment types Equity Shareholder loans Loan guaranties Non-shareholder loans (i.e. loans from financial institutions) Non-equity direct investment Amounts and Coverage MIGA typically can arrange cover for all amounts, either on its own books or through co/reinsurance No minimum amount for guarantee or size of investment Equity covered up to 90% & debt up to 99% 10

11 Why investors choose MIGA Umbrella of deterrence MIGA is a member of the World Bank Group MIGA s shareholders are the countries who are also Host Countries of investments Only a small proportion of MIGA-supported projects encounter difficulties Facilitation of settlement of disputes Host Country tends to be motivated to find a solution, otherwise its reputation in the international investment community might be damaged Project sponsors and financiers have a vested interest in continuing success of project 3 claims paid out of 556 projects supported (Indonesia, Argentina, Nepal) Extensive resources and in-depth knowledge of emerging economies from all parts of the World Bank Group Environmental and social expertise, particularly for extractive industries where a company s reputation is at stake May facilitate financing Lower costs of borrowing Longer tenor of loans 11

12 Terms of the SIP guarantee Terms of up to 10 years (3 years minimum), with possibility of extension at end of term of up to 5 years Maximum amount guaranteed is US$5 million SIP covers up to 90% equity and 95% debt Guarantee Coverage: Currency Inconvertibility and Transfer Restriction, Expropriation, War and Civil Disturbance Breach of Contract is not covered 12

13 Portfolio 13

14 MIGA s Current Gross Exposure Gross Exposure, by Region %, at June 30, 2007 MIGA s gross portfolio FY03-06, US$ B Africa 18% Asia 14% ECA 36% LAC 27% MENA 5% Gross Exposure, by Sector %, at June 30, 2007 FY03 FY04 FY05 FY06 FY07 AMS 17% Financial 29% Infrastructure 41% Oil, Gas & Mining 13% 14

15 FY07 activities Guarantees issued, by Region $bn, at June 30, % Africa Asia ECA LAC Guarantees issued, by Sector $bn, at June 30, % 9% 31% 35% 36% 37% 4% $1.4bn of guarantees issued in FY07 Key transactions included: $75m issued to MTN for a project in Afghanistan $10.2m issued for a securitization of mortgages in Kazakhstan $39.6m issued for the Umeme electricity project in Uganda (modification) $115m for the Bujagali power project in Uganda $300m for a pulp mill in Uruguay $50m Sasol refinancing 12 deals under $10m, of which 5 SIP deals AMS Financial Infrastructure OGM 15

16 Infrastructure Portfolio Around $4.8bn of guarantees issued, since inception Guarantees Issued in Infrastructure, by Region FY00-07, US$m 2,000 1,800 1,600 41% of MIGA s current total gross outstanding portfolio is in the infrastructure sector representing over $2.2bn. in guarantees Current Gross Exposure, Infrastructure %, at June 30, ,400 1,200 1, Africa Asia ECA LAC MENA Africa 18% Asia 30% ECA 17% LAC 32% MENA 4% Top 10 Host Countries, Infrastructure Guarantees Issued from FY00-07, US$m Brazil Bulgaria Ecuador Dom. Rep. Nigeria Nicaragua Uganda China Vietnam Turkey 16

17 Selected Infrastructure Projects Project Guarantee Holder(s) Year Amount (million) Host Country Nam Theun II EDF International, Fortis Bank NV, Fortis Banque SA 2005 $91 Lao PDR, Thailand Phu My 3 BOT Power Company Crédit Lyonnais, S.A $58.2 Vietnam AES-3C Maritza East 1 EOOD Bujagali Energy Ltd. Calyon World Power Holdings Luxembourg S.à.r.l $115 Bulgaria Uganda Beijing Gaoantun Waste to Energy Co. Ltd Goden State Waste Management Corporation 2007 $25 China Shenzhen Water (Group) Company Ltd. and Shanghai Pudong Veolia Water Corporation, Ltd. Compagnie Générale des Eaux 2006, 2004 $110 China 2 nd Darco Water Project Darco Environmental Pte. Ltd $7.6 China 17

18 Case Study: Doraleh Terminal - Djibouti 18

19 The Proposal Djibouti Growing container demand in the region. Unique geographic location. Djibouty The existing container terminal is operating at full capacity Project USD400 million new 1.5 teus container port 19

20 Doraleh Container Terminal Project in Djibouti addressing the complex needs of a unique Islamic Project Financing Structure Development, construction and operation of 2000 meter quaylength Container Terminal w/annual handling capacity of 1.5 million twenty foot container equivalent units (TEUs). Highly strategic location on the vital east-west shipping lanes Huge potential as transshipment hub for COMESA region De-facto Port for Ethiopia, handling some 85% of all in / outbound trade traffic. Dubai Doraleh 20

21 Overcoming Obstacles ISSUES SOLUTION Government does not have experience or resources DPW does not want to sink significant capital Commercial risks are to high Sovereign crediworthiness is weak Political instability in the region Attraction strong and experience operator, DPW Islamic Project Finance from DIB, SCB and West LB Government takes additional responsibilities for some risks Political risk insurance from MIGA Political risk insurance from MIGA 21

22 Project Structure Equity guarantee Musharaka guarantee DP World Djibouti FZCO Commercial Banks Direct Agreement Equity (33% ownership) Forward Lease Agreement Financing Swaps Premium $422 M Djibouti PAID (State-owned port company) 67% ownership Doraleh Container Terminal S.A. Contribution Contribution DCT Musharaka Joint Venture Government of Djibouti Concession Doraleh Container Terminal Project WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 22

23 MIGA Value Added Mitigating the following risks Transfer Restrictions and Inconvertibility risks due to local currency revenues War and Civil Disturbance Damage risk and its impacts on trade Terrorism risk Risks of Non-payment of termination payment or other liabilities by the Government (small economy) Change in Law, regualtory risks Large amount of financing would not be available without PRI on such favorable terms and conditions 23

24 Case Study: Maritza 1 Lignite Power Plant- Bulgaria 24

25 The Proposal Bulgaria Growing demand for electricity. High dependency on costly imported fuels Bulgaria Project Coal-based and nuclear capacity is outdated and has to be decommissioned with the accessions into EU US$1 B lignite power plant to replace old decommissioned plant 25

26 Overcoming Obstacles ISSUES Future deregulation of Bulgarian Electricity market Uncertainty related to PPA counterparty risk Lignite is perceived to be dirty fuel High technology standards inflate capital costs. AES has to control its balance sheet exposure Commercial lenders would not assume political risks SOLUTION Long-Term PPA A Letter of Support from the GoB Technology based on highest standards for lignite Project Finance structure with high debt/equity ratio Political risk insurance from MIGA, Coface and Hermes 26

27 Project Structure AES MIGA ECAs ADB EBRD Banks Equity Loans SPV in Bulgaria 27

28 Main Risks to Lenders Sector restructuring could strand PPA if: wholesale prices fall below those in the PPA contract the off-taker s level of dispatch is lower than anticipated If contact is stranded, then potential for: cancellation of PPA by GoB after deregulation of market GoB to force alteration of PPA s economic formula Planned restructuring of state-owned NEK could: affect ability of NEK to meet its payment obligations under PPA War and Civil Disturbance related to the situation in the Balkans. 28

29 MIGA s Value-Added Assisted in syndication Provided customized solution to PPA risks Very long tenors would not be available without MIGA PRI 29

30 For more information on MIGA, please contact: Elena Palei 30

31 Contacts For comments or further details contact: Penny Williams Elena Palei Cledan Mandri Perrott Sabino Escobedo David Stiggers Elena Palei 31

32 PPPs in Infrastructure THANK YOU! Elena Palei, MIGA 32