Understanding the different Bank Group Guarantee Instruments

Bank Group Guarantees Framework IFC Partial Credit Guarantees Hedges for clients (interest rate, currency and commodity swaps) Commercial Risk All Risks Investors/ financial institutions Non- Commercial Risk IBRD Partial Risk Guarantees Partial Credit Guarantees Policy Based Guarantees IDA MIGA Transfer restriction and currency inconvertibility Expropriation War and civil disturbance Breach of contract

Comparison of World Bank Group Risk Mitigation Instruments IFC MIGA IBRD/IDA Products Partial Credit Guarantees Hedges for clients (interest rate, currency and commodity swaps) Non-commercial risk insurance PRG – IBRD & IDA PCG & PBG – IBRD Only Loans Yes Equity (Quasi-Equity) No Coverage (Risk) Full and timely payment of principal and/or interest up to a specified amount - IFC covers all risks that may result in non-payment of a client’s obligations. Currency convertibility and transferability Expropriation War and Civil Disturbance (incl. terrorism and sabotage) Breach of Contract Government contractual Obligations including: Political Violence Regulatory Subsidy payment (e.g. OBA) Guaranteed Percentage Determined on a case by case basis. Debt: up to 95% Equity: up to 90% Up to 100% of a tranche

IFC MIGA IBRD/IDA Guaranteed Percentage Determined on a case by case basis. Debt: up to 95% Equity: up to 90% Up to 100% of a tranche Eligibility Must be a member country Tenors Market based but IFC’s involvement can lengthen tenors Up to 15 years (20 years in some cases) Market based Limits Based on client’s needs Project: up to $110mm (net) Country: up to $420mm (net) Based on project and country needs and CAS allocation. Priority Areas of Focus All IFC recipient member countries. Providing long-term local currency financing and development of domestic capital markets.   Africa   IDA eligible countries   South-South investments   SMEs  Infrastructure IDA eligible countries Government Counter Guarantee No Yes Public Sector Projects Areas of Collaboration Joint project preparation, environmental analysis, Board processing, etc.

Guiding principles on deployment of instruments PRGs can be considered in the following situations: Sectors in early stages of reform Larger size/riskier operations Operations highly dependent on support/undertakings of governments Clout of the Bank needed Joint transactions Coordination

Bank Group Support to the Project World Bank Group Collaboration on Recent Large Infrastructure Transactions Country / Project Bank Group Support to the Project Senegal (May 2005) Kounoune Power (67.5 MW) IDA – US$ 7.2 m PRG (P only) IDA - US$ 15.7 m credit (P only) IFC – US$ 22 m “A” loan Lao PDR (March 2005) Nam Theun 2 Hydropower (1,070 MW) IDA – US$ 42 m PRG (P only) IDA - US$ 20 m grant MIGA – US$ 91 m guarantee (P&I) Romania (Dec. 2004) Power Dist. Privatization IBRD – EUR 60 m PRG (P only) IFC – Investment of about EUR 170 m West Africa (Nov. 2004) West African Gas Pipeline IDA - US$ 50 m PRG (P only) MIGA – US$ 75 m guarantee (P&I) Mozambique (Nov. 2003) S. African Regional Gas Project (SASOL) 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) Philippines (FY2002) Manila North Tollway Corporation MIGA - US$ 85 m guarantee (P&I), plus US$ 22 M Equity IFC – US$ 45 M “A” loan

Case Study: The West Africa Gas Pipeline Project (WAGP) Key Features Pipeline system (678km) that will transport natural gas from Nigeria to Ghana, Togo and Benin Total project cost $590m: Guarantees IDA guarantee for Republic of Ghana $50m MIGA guarantee for WAPco $75m Zurich guarantee for WAPco $125m (reinsured by OPIC) IDA Guarantee terms: Amount: US$ 50 million Term: 22 years Coverage: Government of Ghana’s default for offtake arrangements

WEST AFRICAN PIPELINE COMPANY (WAPco) Communauté Electrique du Benin Case Study: The West Africa Gas Pipeline Project (WAGP) Project Structure NNPC: Nigerian National Petroleum Corporation CNL: Chevron Nigeria Ltd SPDC: Shell Nigeria NCG: wholly owned sub of NNPC WAPCo: newly formed entity owned by: ChevronTexaco WAGP (38.2%), NNPC (26%), Shell (18.8%), Gov’t of Ghana (17%) NNPC/CNL Joint Venture NNPC/SPDC/ Agip/Elf Joint Venture NIGERIAN GAS COMPANY (NGC) WEST AFRICAN PIPELINE COMPANY (WAPco) Natural Gas Flow Transporters Communauté Electrique du Benin Volta River Authority Offtakers

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