MIGA – Catalyzing Private Sector Investments in Mozambique May 2007

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 2 Our Mission To promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives.

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 3 MIGA helps investors by providing:  Non-commercial risk insurance (guarantees) for investors and lenders  Dispute mediation services, to remove possible obstacles to future investment  Online information on investment opportunities and operating conditions in developing countries

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 4 Our Development Priorities:  Focusing on sustainable development  Opening up difficult or frontier markets, especially in countries affected by conflict  Supporting investments in Africa and the world’s poorest countries  Supporting infrastructure projects (including sub- sovereign risk)  Promoting cross-border investments between developing countries

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 5 … political risks still exist  Increased geopolitical instability  Recent investor experience: –repossession of privatized assets –defaults on government obligations –concession revocation –financing difficulty –contract frustration due to poor legal frameworks –war and civil disturbance events  Risks increase as sub-sovereign partners involved Russia issues a moratorium on private foreign capital payments (projects insured by MIGA exempted) Argentina restricts exchange and transfer (loans insured by multilateral and bilateral organizations not subject to this) Venezuela and Bolivia impose restriction on transfer of interest payments and announce expropriation of assets in the extractive industries and infrastructure sectors

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 6 Value Added to Private Sector Investors  Credit enhancements –Improved access to financing –Extended tenors of capital; and –Often reduced capital and financing costs  Greater Confidence. The World Bank Group “umbrella” has a deterrent effect against government actions that could disrupt investments. MIGA can influence the resolution of potential disputes between investors and host governments, thereby preventing claims  Extensive Knowledge –Unparalleled knowledge of emerging economies through extensive resources of the World Bank Group –Ensure environmental and social safeguard standards are met

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 7 MIGA attracts and retains private sector investments  Attracts private sector funding into the country  Ensures best practice environmental and social safeguards for projects  Guarantee does not create additional liability to government than it would otherwise have –Host Country Approval does not contradict this –Subrogation to MIGA in the event of a claim  Honest mediator in the event of dispute Value Added to Government

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 8 Guarantees: Four Coverages 1.Currency transfer and inconvertibility –Protects against losses arising from: Inability to convert local currency into foreign exchange Inability to transfer 2.Expropriation: government action(s) which deprives the guarantee holder of ownership or control of the guaranteed investment or deprives the guarantee holder of a substantial benefit of the investment –Protects against losses arising from: Nationalization and confiscation Creeping expropriation Partial expropriation (expropriation of funds)

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 9 Guarantees: Four Coverages (cont.) 3.War and civil disturbance –Protects against losses arising from: Damage/disappearance of tangible assets (including revolution, insurrection, coups d'état, sabotage, and terrorism) Prolonged business interruption 4.Breach of contract: failure of the host government to honor an arbitral award following a breach of contract –Protects against losses arising from: Breach or repudiation of a contract between the investor and the Host Country authorities (Non-enforcement of an arbitration award is a prerequisite) –Applied to breach of supply/take-off contract, a license agreement, etc., and breach of a sub-sovereign guarantee obligation

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 10 Eligibility 1.Must be cross border between member countries (Cannot participate in purely local deals) 2.Must be “new” investment, but there is considerable flexibility here –Expansion or modernization of old plant –Acquisition of existing project if there is a financial restructuring etc. 3.Minimum term of 3 years; coverage up to 15 years, on occasion – 20 years

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 11 Eligibility (cont.) 4.Investment Types: –Equity, including shareholder loans and various profit sharing agreements –Loans, but only if there is an equity cover –Loan guarantees (could be used to cover sponsor support agreements) –Non-shareholder loans –Non-equity direct investment 5.Coverage – Equity covered up to 90%, Debt up to 95% 6.Amounts: MIGA typically can arrange cover for all amounts, either on its own books or through co/reinsurance

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 12 Outstanding Portfolio Distribution $5.4 billion by Sector Infrastructure Financial Oil, Gas and Mining Agribusiness & Manufacturing Tourism and Services % by Host Region Europe & Central Asia Latin American & Caribbean Sub-Saharan Africa Asia & the Pacific Middle East & North Africa % Gross Exposure, as of June 30, 2006

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 13 Outstanding Portfolio Distribution Top Investor and Host Countries, as at June 30, 2006 Gross Investor CountryExposure (%) Austria 19.1 France17.7 United States8.4 Czech Republic 5.9 Cayman Islands5.2 Netherlands4.2 Spain4.1 South Africa3.9 Japan3.6 Egypt, Arab Rep. of2.9 Total75 Gross Host Country Exposure (%) $M Russian Federation Bulgaria Serbia and Montenegro Mozambique Romania Bosnia and Herzegovina Brazil Ghana Ukraine Croatia Total52.8 2, 833

MIGA In Africa

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 15 MIGA’s strategy in Africa  Provide access to investors in countries perceived to be high risk, particularly in infrastructure –Support to frontier markets and conflict-affected countries through guarantees –Focus on strategic collaboration with existing facilities and trade agreements such as NEPAD, BOAD, AGOA –Help attract investments through implementation of outreach programs and technical assistance –Increase knowledge of investment opportunities through sector/country benchmarking, online information services

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 16 FY04 Coverage Issued, $1.1 B Africa 12% LAC 5% Asia 9% MENA 7% ECA 67% Africa 14% LAC 19% Asia 12% MENA 10% ECA 46% FY06 Coverage Issued, $1.3 B Africa portfolio FY06 Africa Exposure, % Infrastructure 40% Financial 2% Oil, Gas & Mining 23% Tourism & Services 12% Agribusiness & Mfg. 23% Last fiscal year, Africa was MIGA’s top destination for projects in terms of guarantees issued (21 contracts supporting 13 projects)

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 17 Africa portfolio Guarantees Issued in Africa by Country, Since Inception

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 18 Selected projects in the Africa region Guarantee HolderProject NameHost County Investor Country Description* Proparco Barclays Bank of Ghana, Ltd. GhanaFrance Loan to Barclays Ghana to support manufacturing enterprise (Polytank Ghana) Ltd. Barloworld Equipment (UK) Barloworld Equipamentos Angola Limitada Angola United Kingdom Earthmoving equipment dealership DAGRIS Société Cotonnière du Gourma Burkina Faso France Cotton ginning IntertekSL IntertekSierra Leone United Kingdom Scanning equipment for port IDC of South AfricaAgriflora Ltd.ZambiaSouth AfricaAgriculture company Mr. Chatthe, IDC Kibos Sugar and Allied Industries Limited KenyaUK, S. AfricaSugar factory EricssonVee Networks Ltd.NigeriaSwedenEquipment supply for GSM mobile telephone network Note: Full descriptions available on miga.org and MIGA annual reports.

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 19 Projects in Mozambique Projects supported by MIGA in Mozambique Issued, % since inception Over the years, MIGA has catalyzed more than $1.5bn of private sector investments in Mozambique in a number of sectors Agribusiness & Mfg 29% Financial 1% Infrastructure 20% Mining 7% Oil and Gas 42% Tourism & Services 1%

Case Studies

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP Delay in obtaining an electrical connection (days) Number of electrical outages (days) Government begins sector reforms -Privatization and IPP models developed Bujagali delay yields supply strain -Tarriffs and outages rise Drought exacerbates problems -Foreign investors threaten to leave -Government agrees to new concession -Power sector publicly owned & managed -Severe generation and distribution problems 1990 Strategic Plan (1997) Electricity Act (1999) Eskom generation concession (2002) MIGA/IDA guarantees provide comfort needed to retain investors In 2003, 40% of Ugandan firms listed electricity as a severe constraint to investment Umeme Power Project

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 22 Project Profile Client Concerns West African Gas Pipeline US$590 million, 678 km pipeline to transport natural gas from Nigeria to Ghana, Benin and Togo, and to convert existing units to gas Part of NEPAD’s action plan. Upstream production and delivery risks Completion and operational risks Downstream/offtake risks Co-completion risks

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 23 Nigeria Gas Company NNPC/CNL Joint Venture NNPC/SPBC Joint Venture PRODUCERS TRANSPORTER NATURAL GAS FLARE West Africa Gas Pipeline Co. Communauté Électrique du Bénin Volta River Authority OFFTAKERS GAS SALES AGREEMENTS Key customers: CEB (8%) and VRA (92%) NNPC: Nigerian National Petroleum Corporation CNL: ChevronTexaco N-Gas Limited SPBC: Shell Overseas Holdings Limited IDA, $50 M $200 M total PRI TERMINATION EVENTS MIGA $83 M Private insurers, $83 M West African Gas Pipeline Togo Electricité

Other Services

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 25 ATF: Africa Trust Fund  A new MIGA facility  Supports technical advice on environmental and social issues to investors  Works on a case by case basis with MIGA clients and prospective clients in Africa  Examples: –assistance in preparing an environmental management plan for expanded operations –advice on developing a local supply chain –help in planning land acquisition and resettlement

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 26 Mediation Services  MIGA can mediate investment disputes – whether or not a MIGA guarantee is involved  Especially appropriate where 1 or more disputes are harming investment climate  MIGA as neutral party – confidence of host countries and investors  Collaborative, informal process (less costly, time- consuming than formal arbitration)

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 27 Online Services – FDI.net  A portal on foreign direct investment with comprehensive information for investors consolidating MIGA’s existing services  Includes: customized alerts, newsletter, database of sources of finance  Spotlights on privatization, infrastructure  Country information, investment opportunities - “greenfield”, joint ventures and privatizations

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 28 Online Services – PRI-Center  A risk management information service for investors and practitioners  Includes country analyses, research and tools, news and events and directories  Quick access to country research from home page

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 29 For more information Jason Lu Senior Underwriter