Third Annual Banking on Development Conference

1
Inter-American Development Bank
Third Annual Banking on Development
Conference March 16, 2007 New Orleans, LA
Lori Kerr Investment Officer Private Sector
Department, IDB Tel [phone] lorik_at_iadb.org

2
IDBs Private Sector Department (PRI)

• IDB is oldest and largest regional development
  bank
• PRI created in 1995 to support private sector in
  LAC with long-term financing options
• Began operations as a basic infrastructure lender
• Evolved to include broad variety of products and
  sectors

Inter-American Development Bank
3
Support to the Private Sector

• Lending Activities
• Corporate and Project Finance
• A/B Loan Programme
• Co-Financing
• Guarantee Programme
• Political Risk Guarantees
• Partial Credit Guarantees

• Technical Assistance
• Pre-feasibility, feasibility studies,
  environmental studies, market studies
• Infrastructure Project Preparation Fund US20M
  available
• Trust Fund Programme US30M in approvals
  annually

Inter-American Development Bank
4
PRIs Lending Activities

• A-Loan (own account)
• Long-term, direct lending (tenor up to 20 years)
• Maximum of US200M (or US400M in exceptional
  cases)
• 25-40 percent of total investment for greenfield
  projects
• 50 for expansions and refinancings
• Market-based terms, conditions, pricing

• B-Loan (market participation)
• IDB is lead lender and Lender of Record
• Syndicated loan participations with commercial
  banks and institutional investors
• Work with Arranger or Placement Agent
• Same terms and conditions under A/B Loan
  structure
• Advantages for commercial banks

Inter-American Development Bank
5
PRIs Guarantee Programmes

• Political Risk Guarantee
• Convertibility, transferability, funds
  expropriation
• Breach of contract, other political risks
• 50 of investment, to a maximum of US200M (or
  US400M in exceptional cases)

• Partial Credit Guarantee
• Enhancements for bond placements,
  securitizations, other structured securities
• Flexible in structure (e.g. comprehensive wrap,
  rolling, selected risk, selected tenor, local
  currency, USD)
• Tailored on a case-by-case basis to provide most
  effective enhancement
• Maximum of US200M (or US400M in exceptional
  cases)
• 25-40 percent of total investment for greenfield
  projects
• 50 for expansions and refinancings

Inter-American Development Bank
6
Private Sector Departments Track Record

• Market Coverage
• Infrastructure Sectors
• Agribusiness, Chemicals Petrochemicals,
  Manufacturing, Mining, Oil Gas, Pulp Paper,
  Tourism
• Capital Markets Trade Finance

• Portfolio in the Marketplace
• Operations in 17 countries and two regional funds
• 87 transactions closed in the markets
• US24.3 billion in investment cost
• US4.9 billion in direct financing/guarantees
• US3.7 billion in syndicated/placed
  participations
• 90 banks and institutional participants

Inter-American Development Bank
7
Case Study A/B Loan

• PanAm Thermal Generating Ltd., Panama
• 96MW thermal facility resulting from an
  international bid conducted in 1998 by local
  distribution company for the supply of power
  under a 5-year PPA
• Total Project Cost of US92M
• IDB A-Loan of US23M complemented by B-Loan of
  US41.5M
• IDB provided comfort relating to the recently
  restructured energy sector with untested
  regulatory framework
• Facilitated 12-year financing with commercial
  bank and institutional investor

Inter-American Development Bank
8
Case Study Political Risk Guarantee

• Light Serviços de Eletricidade, Brazil
• Bond issuance of electricity distribution company
  serving Rio de Janeiro for the expansion and
  upgrade of network (2000-2005)
• Total 5-year investment programme of US200M
• IDB PRG covered US100M
• MITI covered US77M and MIGA covered US23M
• Standard PRG coverage facilitated international
  commercial bank notes purchase, as private
  insurance was unavailable
• 2000 Deal of the Year by Trade Finance magazine

Inter-American Development Bank
9
Case Study Political Risk Guarantee

• San Pedro de Macoris, Dominican Republic
• Development, construction and operation of a
  300MW combined cycle thermal generating facility
  under a 20-year PPA with public offtaker
• Total project costs of US318M
• IDB PRG covered up to US140M of total debt
  US238M
• Standard PRG coverage plus contract frustration
  coverage facilitated full debt placement with
  institutional investors and commercial banks

Inter-American Development Bank
10
Case Study Partial Credit Guarantee

• Santiago-Valparaíso-Viña del Mar, Chile
• 30-yr BOT concession awarded in 1998 to a
  consortium lead by ACS and Sacyr (Spain) for
  upgrade, expansion and operation of 109-km
  inter-urban toll road
• Total Project Cost of US450M
• Local bond issuance of US300M (USD equivalent)
• IDB PCG covered US75M, balance covered by
  monolines (full wrap)
• PCG improved credit rating of issuance to AAA
  from BBB-
• Bond investors included Chilean pension funds and
  insurance companies
• Facilitated largest placement and 23-year
  maturity, longest to-date at the time
• 2002 LatAm Deal of the Year by Project Finance
  International
• Transportation Deal of the Year 2002 by Project
  Finance Magazine

Inter-American Development Bank
11
Consulting Opportunities

• Two phases in transaction cycle
• Detailed due diligence
• Ongoing administration and monitoring
• Areas of expertise
• Technical Economic
• Market Environmental and Social
• Financial Insurance
• Process of engagement
• Request for Proposals
• Proposal evaluation
• Consultant selection
• Consultant Services Agreement

Inter-American Development Bank
12
Consulting Opportunities

• PanAm Thermal Generating Ltd., Panama
• Due Diligence
• Power market study (expansion plan, simulations),
  environmental and social, economic (cost-benefit
  analysis), independent engineer, insurance
• Monitoring
• Engineering (semi-annual, annual reporting, site
  visit)
• ES (semi-annual, annual reporting, site visit)
• Insurance (annual compliance report)

Inter-American Development Bank
13
Consulting Opportunities

• Santiago-Valparaíso y Viña del Mar, Chile
• Due Diligence
• Traffic study (growth, composition, ramp-up,
  etc.), environmental and social, economic
  (cost-benefit analysis), independent engineer,
  insurance
• Monitoring
• Engineering (semi-annual, annual reporting, site
  visit)
• ES (semi-annual, annual reporting, site visit)
• Insurance (annual compliance report)

Inter-American Development Bank
14
Consulting Opportunities
Apply to PRIs on-line Consultant Database
at http//IADB.org/pri.
Inter-American Development Bank
15
Inter-American Development Bank
Lori Kerr Investment Officer, IDB Private
Sector Department Tel [phone] Fax
[phone] lorik_at_iadb.org