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Understanding the different Bank Group Guarantee Instruments

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Presentation on theme: "Understanding the different Bank Group Guarantee Instruments"— Presentation transcript:

1 Understanding the different Bank Group Guarantee Instruments

2 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

3 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

4 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.

5 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

6 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

7 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

8 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

9 Thank you

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