World Bank Guarantee Program

Transcription

1 World Bank Guarantee Program for the Consultation of Modernizing the World Bank s Operational Policy on Guarantees January 2012

2 Why World Bank Guarantees? Guarantees are viewed as a key financial instrument to support the flow of private investments for development The leveraging power of the guarantee instrument is particularly relevant in attracting private capital where investors and lenders are seeking to mitigate risk Greater use of guarantees is called for, in particular, to support developing countries infrastructure investment plans help countries access to the markets during the ongoing financial crisis Guarantees could be useful in addressing local currency financing and in developing local currency markets 2

3 World Bank Guarantee Products and Requirements World Bank Guarantee Products: Partial Risk Guarantees (PRG) support private sector investment projects, including Public-Private Partnership (PPP) projects, green-field and rehabilitation/expansion projects, concession and privatization transactions. PRG can be structured to protect lenders of limited-recourse project finance debt, or to protect the project company ( Letter of Credit or Deemed Loan PRGs) Partial Credit Guarantees (PCG) support commercial borrowing of either the government or non-government borrower (e.g. state-owned utilities, banks) chiefly in support of public investment projects Policy-Based Guarantees (PBG) is a version of a PCG in support of commercial borrowing of the government for budget financing and to support a reform program Country eligibility: PRGs are available to all IBRD and IDA countries, PCGs and PBGs only to IBRD-eligible countries. IBRD may provide PRGs for enclave projects in IDA-only countries Indemnity: All guarantees require a counter-guarantee from the member country Coverage: The World Bank provides guarantees only to the extent necessary to mobilize the private financing 3

4 World Bank Partial Risk Guarantees PRG covers lenders against the risk of Government nonperformance of its contractual obligations to a specific project, such as the risk of non-payment by Government/SOE, change in law/regulatory risk, expropriation risk, etc. Typical PRG Structure RRG reduces project risk for private financiers, and thus improve bankability of the project to enable/facilitate financing, reduce cost of capital and extend debt tenor to better meet project needs World Bank PRGs are often provided to Public-Private Partnership projects along with MIGA political risk insurance and IFC loan/equity investments

5 World Bank Partial Credit Guarantees & Policy-Based Guarantees PCG/PBG guarantees part of debt services to lenders or bond holders regardless the cause of default Typical PCG Structure Can be offered for Government (PCG/PBG); or SOE and other borrower, so long as there is a sovereign counter-guarantee (PCG) By covering part of debt services, PCG/PBG improves terms of commercial debt by extending maturity, lowering interest rate costs, increasing issue amount and/or enabling access to new markets (loans & bonds), making commercial debt more suitable for development support (e.g. infrastructure projects, budgetary financing) 5

6 World Bank Guarantee Operations to date (Cumulative results) 37 guarantee operations have been approved to date for cumulative amount of $4.5 billion in 30 countries across Regions $27 billion project financing has been helped mobilized by $3 billion financially closed guarantees Many of the guarantee operations are PRGs in support of private sector projects: 25 PRGs, 8 PCGs and 4 PBGs Given the full line up of guarantee products (i.e. PRG/PCG/PBG), IBRD has provided more guarantee support vs. IDA: 24 IBRD guarantees and 13 IDA guarantees Recent transactions include: Botswana PCG approved in FY10; Serbia PBG approved in FY11; Cameroon PRG and Macedonia PBG approved in FY12 so far; for a total of $860 million for FY

7 IDA and IBRD guarantee volumes FY IBRD IBRD/IDA Guarantees in Recent Years FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 No. of Projects/Operations Guarantee Amount (in US$ million) IDA No. of Projects/Operations Guarantee Amount (in US$ million) Note: All the above guarantee operations except 2 PBGs have been for infrastructure power, oil & gas and transport 7

8 Guarantee Breakdown by Sector and Region (Cumulative Results) Guarantee Allocation by Sector (in US$ million) Guarantee Allocation by Region (in US$ million) Fiscal Support, $944 Multi-Infra, $270 OTHER, $200 AFR, $1, ECA, $1, OIL & GAS, $660 TRANSPORT, $55 FINANCE, $120 TELECOM, $250 POWER, $2,051 SAR, $ LAC, $ MNA, $ EAP, $

9 Benefits of World Bank Guarantees for client governments Leverage IBRD/IDA resources by mobilizing additional capital resources Improve commercial borrowing terms to meet the requirements of infrastructure and other development operations and Public and Private Partnership (PPP) projects Mobilize private investments/greater amount of capital, enabling governments to share risks of project development and financing with the private sector Bank guarantees can be structured flexibly to meet clients financing needs e.g. local currency guarantee Provide opportunity for the Bank to help government build capacity e.g. PPP project development and implementation Procurement flexibility ( economy and efficiency ) World Bank guarantees backed by its sector dialogue with and indemnity from governments anchor and facilitate the participation of IFC/MIGA; collaboration with IFC/MIGA leverage World Bank s limited resources 9

10 Annex: Details on World Bank Group Guarantee 10

11 World Bank Guarantee Operations to date by Sector (Board approval basis) Power Gas & Pipeline Transport Others Fiscal Support PCG China (3) Philippines Lebanon Thailand Botswana PCG Jordan (telecom) PBG Argentina Colombia Serbia Macedonia Pakistan (2) Bangladesh Vietnam Lao PDR Morocco Jordan Romania Code d Ivoire Uganda (2) Senegal Sierra Leone Albania Cameroon Mozambique (2 Enclave PRG) Ghana Nigeria Uganda Kenya Russia (telecom) Ukraine (telecom) Russia (coal/forestry) West Africa (multiinfra) Peru (multi-infra PRG) 11

12 World Bank Guarantee Operations to date by Region (Board approval basis) AFR EAP ECA LAC MNA SA PCG Botswana Code d Ivoire Mozambique Uganda (2) Ghana West Africa Senegal Sierra Leone Kenya Nigeria Cameroon PCG China (3) Philippines Thailand Vietnam Lao PDR PBG Serbia Macedonia Russia (2) Ukraine (2) Romania Albania PCG Brazil PBG Argentina Colombia Peru PCG Jordan Lebanon Morocco Jordan Pakistan (2) Bangladesh 12

13 World Bank (IBRD) Partial Credit Guarantee help government & utility s access to the loan market Botswana: Morupule B Power Generation Project (PCG for international loan) World Bank PCG helped mobilize $825 million commercial loan with 20- year maturity World Bank exposure under the PCG is $120m (present value of the PCG) Only $30m (25% of $120m) to be charged to country exposure limit (new ruling after CY10) World Bank Guarantees $243 m (29% of $825m) principal payments (plus one accrued interest payment ) callable on and after year day partly covered by ECA (Sinosure ) World Bank guaranteed Transaction summary is available at 13

14 World Bank Group Main Guarantee/Insurance Products MIGA Political Risk Insurance Transfer restriction Expropriation War and civil disturbance Breach of contract Non-honoring of sovereign financial obligations IFC Direct Debt Substitute Partial and Full Credit Guarantee covers non payment by private borrowers Commercial Operation credit enhancement guarantees such as guarantees of bid and performance bonds Global Trade Finance Program covers non payment by L/C issuing banks Global Offshore Liquidity Facility covers transfer and convertibility risk B-loan program Implicitly offers risk mitigation similar to MIGA s transfer restriction Local currency guarantees IBRD/IDA Partial Risk Guarantee covers lenders against risk of default by governments (or government entities) contractual obligations in a private sector project Partial Credit Guarantee (IBRD only) covers credit risk in public sector projects of governments/public borrowers Policy-Based Guarantees (IBRD only) covers credit risk of the government 14

15 World Bank Guarantees and WBG Collaboration Key Product Positioning Risk Coverage Type of Eligible Investment Instruments for cover World Bank MIGA IFC Credit Risk (PCG/PBG) & Political Risk (PRG) Debt (& Equity through PRG structuring) Political Risk (PRI) Equity & Debt Credit Risk (PCG) Debt Product Characteristics Flexibly defined product Narrowly defined products (PRI) Widely defined product Eligible Projects Narrowly targeted (Government s priority projects only with indemnity) Widely targeted Widely targeted Major Clients Host Government Private Sector Private Sector Origination Mainly with client countries Mainly with private sector investors & lenders Mainly with private sector investors & lenders 15

16 WBG Joint Operations Examples Country/ Project Cameroon November 2011 Kribi Power Project Albania May 2009 Power Distribution Privatization Uganda April 2007 Bujagali Hydropower Uganda December 2006 Umeme Power Project Kenya & Uganda January 2006 Kenya Uganda Joint Railway Concession Lao PDR March 2005 Nam Theun 2 Hydropower Romania - December 2004 Power Dist. Privatization Mozambique - November 2003 S. African Regional Gas Project (SASOL) IBRD/IDA and IFC/ MIGA Support IDA US$ 82 million equiv. PRG IFC US$86 million A Loan IBRD US$ 78 million equiv. PRG IFC advisory IDA US$ 115 million PRG IFC US$ 100 million A loan; US$ 30 million C loan MIGA US$ 115 million PRI IDA US$ 6 million credit used as PRG MIGA US$ 40 million PRI IDA US$ 45 million PRG (Kenya) IDA US$ 10 million PRG (Uganda) IFC US$ 40 million A and C loans IDA US$ 42 million PRG; US$20 million credit MIGA US$ 91 million PRI IBRD EUR 60 m PRG (P only) IFC Investment of about EUR 170 m IBRD US$20 m & US$10 m enclave PRGs (P only) MIGA US$ 72 m guarantee (P&I) IFC Investment of US$ 18.5 m (approx) Note: Typical joint operations are for complex infrastructure projects, with Bank PRG, MIGA insurance and/or IFC equity/loan 16

17 Example of WBG Collaboration UGANDA-BUJAGALI HYDRPOWER: ROLES OF IDA, IFC AND MIGA IDA PRG + IFC A&C Loans + MIGA PRI GOU (Equity in kind) IPS (K) controlled SPV SG Bujagali Holdings Ltd. PRI Shareholders Financing Indemnity Agreement IDA PRG Commercial Lenders Project Agreement Bujagali Energy Ltd. Implementation Agreement Government of Uganda Guarantee Agreement UETCL other DFIs Loans EPC Contract EPC Contractor: Salini/Alstom O&M Contract O&M contractor: Sithe Affiliate Power Purchase Agreement Transaction summary is available at 17