1 understanding the different bank group guarantee instruments

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Understanding the Understanding the different Bank Group different Bank Group Guarantee InstrumentsGuarantee Instruments

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Bank Group Guarantees FrameworkBank Group Guarantees Framework

CommercialRisk

Investors/ financialinstitutions

MIGA• Transfer

restriction and currency inconvertibility

• Expropriation• War and civil

disturbance• Breach of

contract

Non-Commercia

l Risk

IBRD• Partial Risk Guarantees• Partial Credit Guarantees• Policy Based GuaranteesIDA• Partial Risk Guarantees

IFC• Partial Credit

Guarantees• Hedges for clients

(interest rate, currency and commodity swaps)A

ll

Ris

ks

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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 Yes Yes

Equity

(Quasi-Equity)

Yes Yes 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:

Currency convertibility and transferability

Expropriation

Political Violence

Breach of Contract

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

Comparison of World Bank Group Risk Mitigation Instruments

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IFC MIGA IBRD/IDAGuaranteed 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

Must be a member country

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 No Yes

Public Sector Projects No No Yes

Areas of Collaboration Joint project preparation, environmental analysis, Board processing, etc.

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Guiding principles on deployment of instruments 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

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World Bank Group Collaboration on Recent Large Infrastructure Transactions 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)


Mozambique (Nov. 2003)

S. African Regional Gas Project (SASOL)

IBRD – US$20 m & US$10 m “enclave” PRGs (P only)


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

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Case Study: The West Africa Gas Pipeline Project (WAGP)

Key Features


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

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Project Structure


Project Structure

NNPC/SPDC/Agip/Elf

Joint Venture

NNPC/CNLJoint

Venture

NIGERIAN GASCOMPANY (NGC)

Volta River Authority

Communauté Electrique du

Benin

Transporters

Natural Gas Flow

WEST AFRICAN PIPELINECOMPANY (WAPco)

Offtakers

NNPC: Nigerian National Petroleum CorporationCNL: Chevron Nigeria LtdSPDC: Shell Nigeria

NCG: wholly owned sub of NNPCWAPCo: newly formed entity owned by:

ChevronTexaco WAGP (38.2%), NNPC (26%), Shell (18.8%), Gov’t of Ghana (17%)

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Thank you

1 understanding the different bank group guarantee instruments

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