miga. business oportunities emerging countries. spri-bilbao octubre 2013

MIGA in Bilbao, Spain

September 30-October 1, 2013

maintaining FDI flows

in a risk-averse world

Olivier J. L. Lambert, MIGA Europe Office (Paris)

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 2

MIGA and the Basque Country

MIGA has guaranteed 48 projects of Spanish-based investors into developing

countries

Existing preliminary discussions with Basque Country investors:

� Applications received

� Iberdrola Ingenieria y Consultoria S.A.U for power project in Syria, 2005

� Idatrade for agribusiness and manufacturing projects in Ghana, 2004 and 2008

� Ikusi (Angel Iglesias S.A.) for services projects in Albania and Sudan, 2002 and 2003

MIGA explores business opportunities to:

� Increase support for the Basque Country’s private sector investments into

emerging countries

The International Finance

Corporation (IFC)

� Investment services for the

private sector

� Advisory Services for

companies and private

investors for questions

related to the private sector

� IFC Asset Management

Company

The World Bank Group

The Multilateral Investment

Guarantee Agency (MIGA)

� Guarantees against non-

commercial risks

� Dispute resolution services

for guaranteed investments

� The International Bank for

Reconstruction and

Development (IBRD)

� The International

Development Association

(IDA)

IBRD:

� Loans to middle-income

countries

� Advisory services

� Guarantees and risk

management

IDA:

� Donations and zero-interest

loans to least developed

countries

The International Center for

Settlement of Investment

Disputes

(ICSID)

� Specialized dispute

resolution institution

� Facilities for independent

conciliation and

arbitration of investor-

State disputes

� Enables individuals or

companies to bring up

claims against foreign

governments


1. Currency Transfer Restriction & Inconvertibility Cover� Protects against losses arising from inability to convert local currency into forex for transfer

outside the host country or transfer/excessive delays in acquiring forex

2. Expropriation Cover� Protects against losses arising from nationalization and confiscation; Creeping expropriation (e.g.

gradual changes in tax regime); Expropriation of funds (e.g. "account freeze” )

3. War and Civil Disturbance Cover� Protects against: Loss of Assets; Temporary or Permanent Loss of Use

� Loss has to be a direct and immediate result of acts of war, revolution, rebellion, insurrection,

coup d’état, civil war, civil commotion, riots ; acts of sabotage or terrorism can also be covered

4. Breach of Contract Cover� Protects against losses arising from the government’s breach or repudiation of a contract with the

investor (e.g., a concession or a power purchase agreement)

� Coverage extends to sub-sovereign risks, interest rate hedging instruments and capital market

transactions

5. Non-Honoring of Financial Obligations (NHFO) Cover� Protects against losses resulting from a government’s failure to make a payment when due under

an unconditional financial payment obligation or guarantee related to an eligible investment

� Since June 2013, a new cover: NHFO for SOEs that are: a) controlled by the State; b) performing a

public service or governmental function; c) creditworthy and financially viable.

MIGA Political Risk Insurance covers non commercial risks


Eligibility Criteria

Financial instruments covered

� Equity

� Shareholder loans

� Loan guaranties

� Non-shareholder loans (e.g. stand-alone debt) as long as they relate to a

investment/project with some form of direct investment

� Non-equity direct investment (e.g. management and turnkey contracts)

� Capital market transactions (no equity required)

Investments characteristics

� Cross-border from one member country (developed or developing) into a developing

member country

� Primarily “greenfield” investments but also existing investments since November 2010

Clients or Guarantee holders

� Investors

� Banks

� DFIs and other government agencies


Terms of Coverage

Amount of coverage

� MIGA can typically arrange cover for all amounts, either on its own books or through

co/reinsurance

� No minimum amount for guarantee or size of investment

� Amounts can include interest principal for debt and future retained earnings for equity

� Equity covered up to 90% (plus up to an additional 50% of the investment contribution to cover

earnings attributable to, and retained in, the project)

� Loans and Loans guaranties covered up to 95% of the principal (and up to 99% on a case-by-case

basis) plus up to an additional 150 percent of the principal to cover interest that accrues over the

term of the loan

Tenor

� Minimum 3 year (1 year for loans), up to 15 years (and possibly 20 years if justified by the nature

of the project); investor decides on the duration of a guarantee

Pricing

� Premium rates are decided on a per project basis and vary by country, sector, transaction and the

type of risk insured

� Premiums are paid annually or semi-annually and are calculated as a percentage rate applied to

the amount of coverage


MIGA’s Tailored Program for SMEs

MIGA’s Small Investment Program (SIP): Designed to facilitate investments into small

and medium-size enterprises with simple projects and involved in the finance, agribusiness,

manufacturing and services sectors

Eligibility: Fulfill two of the following three criteria:

� No more than 300 employees

� total assets not more than $15 million

� total annual sales not more than $15 million

Standardized package of risk coverage: Currency inconvertibility and transfer

restriction; expropriation; war, terrorism and civil disturbance

53 outstanding contracts for SIP projects (October 2012)


MIGA Value Proposition for Investors

KNOWLEDGE AND EXPERTISE

• Largest multilateral PRI provider

• 25 years in emerging markets

• Expert staff

• Access to World Bank Group

resources

• Best practice environmental and

social standards

UNIQUE PRI SOLUTIONS

� Support investments in difficult

markets

� Longer tenors (up to 20 years)

� May result in lower borrowing costs

� Reduce risk weighting and capital

provisioning

CLAIM DETERRENCE

� World Bank Group’s umbrella

� 177 member countries

� Claims track record

� Assistance in dispute resolution

FINANCIAL STRENGTH

� Recognized industry leader

� Strong balance sheet

� Diversified portfolio

� Implied AAA rating

� Reinsurance capacity


MIGA’s Claims Track Record

Highlights

� MIGA has supported more than 700 projects since inception

� MIGA has assisted clients in resolving more than 100 disputes

� MIGA has successfully facilitated the settlement of disputes in all currency transfer/

inconvertibility issues

Claims history

� MIGA has paid claims in six cases:

� Afghanistan, Nepal, Kenya and Madagascar (War and civil disturbance)

� Indonesia and Argentina (Expropriation)

� All other cases have been resolved or the claim withdrawn

� MIGA has never had a dispute with a client with regard to a claim

� In all these cases, MIGA has maintained good relationships with the Host Government

Deterrence effect & early involvement to resolve difficult / complex situations will ensure the

largest number of projects are successful


Investor� Marketing and origination

� Preliminary Application

MIGA

(3-6 months)

� Definitive Application

� Early Screening Project Review Meeting

(“ESM”)-chaired by the Director of Operations Group

� Underwriting and host country approval � Developmental impact

� Environmental, Social review

� Pricing and reinsurance

� Economic financial viability, country risk

� World Bank Group policy

� Project Review Committee (“PRC”)-Track “A”

projects (complex/high risk)

� Final Approval Meeting (“FAM”)-Track “B” projects

(simpler/low risk)

Investor

and MIGA

� Sign contract of guarantee

� Monitoring, evaluation, contract maintenance 3

2

Process and Structure: How Does it Work?

1• Available online

• Free, confidential

• 2 pages

• Determines eligibility

• More detailed analysis of a

project

• Fees due ($5k up,

depending on the type of

project)

• Starts underwriting

process


Bank

(Parent/Subsidiary)

Government or

Relevant HC Authority

Project

Enterprise/JV

Concession

Loan

Host Country

Home Country

Contractor

Foreign

Investor

Equity/

Shareholder

Loan

Infrastructure

Works

“Home Country” can be

holding company based

offshore in a MIGA member

country

Certain types of management

contracts, whose remuneration

depends on revenues or profits

of project, are eligible as

“equity”

Non-honoring of Sovereign

Guarantee possible if Project

Enterprise is PPP or JV w/ SOE and

Government provides unconditional

guarantee on loan

Standard Project Structure


SG-CBSG-CB

MoE/VRA/

Takoradi Power

Project

Contractors (CCC,

Magellan, HPI,

Orenda)

Contractors (CCC,

Magellan, HPI,

Orenda)

Ministry of

Finance

EPC

Contract

Subsidiary Loan

Agreement

Loan Agreement

Contract Payment Obligation

Canada

Ghana

Project examples:Coverage of a Sovereign Financial Obligation:

Takoradi 3 Power Plant in Ghana, 2012

� In February 2012 MIGA issued a guarantee of

$88.4 million to Société Générale Canada Branch

(SGCB) covering its loan to the government of

Ghana to finance the completion of the Takoradi

3 Power Plant

� The coverage is for a period of up to 15 years

against the risk of non-honoring of sovereign

financial obligations

� The project, located within the existing Takoradi

T1/T2 power plant complex in the Ghanaian

district of Sharma Ahanta East, will expand the

existing combined-cycle gas turbine power-

generation facility. The proposed expansion will

furnish power to the national grid during peak

demand and provide base load capacity in times

of low water levels when hydroelectric generation

is affected

NHSFO cover

risk


WestLB

Astaldi-Gulermak-

Makyol JV

Loan

Turkey

Municipality of

Istanbul

Funding

Kadikoy-Kartal-Kaynarca

Metro Project Construction

Ulasim

Ownership

Operator

NHSFO

cover

Ownership

Contract

Société

Générale

Société

Générale

Credit

Agricole

Credit

Agricole

BNP

Paribas

BNP

Paribas

UnicreditUnicredit INGING

Facility

Agent

� In April 2011 MIGA issued a guarantee of

$409.2 million for an investment by WestLB

AG London Branch, for itself and as agent

for a consortium of lenders, in the Kadikoy-

Kartal-Kaynarca Metro Project in Istanbul

� MIGA’s guarantee covers principal and

interest for a period of up to 9.5 years

against the risk of non-honoring of

sovereign financial obligations

� The project will be the first underground

metro system on the Asian side of Istanbul

and connect with the European side of city

Coverage of a Sub-sovereign Financial Obligation:

Kadikoy-Kartal-Kaynarca Metro in Istanbul, 2011

risk


� In June 2012 MIGA issued $145 million in

guarantees covering equity and loans from

Bouygues Travaux Publics (France) and Pan

African Infrastructure Development Fund

(South Africa), and loans from AFC (Nigeria),

BMCE Bank International (UK) and FMO

(Netherlands)

� MIGA’s coverage is for a period of 15 years

against the risks of transfer restriction,

expropriation, war and civil disturbance, and

breach of contract

� Investments support the design,

construction, and operation of the Henri

Konan Bédié Toll Bridge over the Ebrié

lagoon in Abidjan

Breach of Contract with a Sovereign:

Konan Bédié Bridge in Côte d’Ivoire, 2012

SOCOPRIM S.A.

Govt of

Cote

d’Ivoire

Bouygues, PAIDF,

AFC

Banque Nationale

d’Investissement

Total CI

AfDB, BOAD,

ECOWAS

Bouygues,

AFC PAIDF

FMO, BMCE,

AFC

Senior Multilateral

LendersSenior Lenders Junior LendersEquity Providers

Minimum

Revenue

Guarantee

Note: PAIDF = Pan African Infrastructure Development Fund; AFC = Africa Finance Corporation,

FMO = Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V.; BMCE = BMCE

Bank International Plc

Cote d’Ivoire

BoC cover

risk

Concession


Small Investment Program

Bitaka S.A.,2011

� In December 2011, MIGA issued guarantees of €3.8m

($5.1m equivalent) to Fons Mediterrània Capital,

F.C.R. de Régimen Simplificado of Spain (FMC)

covering its equity investment and shareholder loan

in Bitaka S.A. (Bitaka) in Tunisia

� The coverage is for a period of up to 5 years against

the risks of transfer restriction, expropriation, and

war and civil disturbance

� Bitaka provides low-cost, innovative solutions to

mobile operators in Tunisia. The mobile sector is

mainly pre-paid and relies on payment solutions to

connect the majority of the population

� Indirectly the project contributes to the continued

growth of the mobile sector in Tunisia, which has an

impact on GDP growth (a 10 percentage point

increase in mobile penetration generates a 0.81

percentage-point increase in economic growth for

low and middle-income economies)

FMCFMC

Bitaka S.A.

Equity

investment

Shareholder

Loan

Spain

Tunisia

riskrisk


MIGA Highlights

Sector breakdown – FY13

Key Figures

� Supported more than 750 projects for a total of

$27.2 billion during FY90-12

� Portfolio: $10.76 billion in June 2013

� Issued record $2.8 billion guarantees in FY13

MIGA’s Strengths

� Subscribed capital and retained earnings: $ 2.5Bn

� Strong capital base and ability to pay

compensation in the event of large-scale losses

� Highly rated multilateral acknowledged by Basel II

5.15.4 5.3

7.37.7

FY05 FY06 FY07 FY08 FY09 FY10

6.5

9.1

FY11 FY12

10.3

FY13

10.8MIGA’s Gross Exposure (US$ billion)

1.46

1.89

2.562.78

Total new issuances by region – FY13

Thank You!

www.miga.org/emea


Contact Information

Europe Regional Office

Multilateral Investment Guarantee Agency

66 Avenue d'Iéna

75116 Paris France

www.miga.org/emea

Olivier J. L. Lambert, Manager

t. 33-1-4069-3158

[email protected]

I N S U R I N G I N V E S T M E N T S �� E N S U R I N G O P P O R T U N I T I E S

miga. business oportunities emerging countries. spri-bilbao octubre 2013

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