# Presentation: 311951

## 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: (202) 623-3184***
***lorik@iadb.org***

***Inter-American Development Bank***

## IDB’s Private Sector Department (PRI)

***Inter-American Development Bank***

- 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

**IDB’s Private Sector Department (PRI)**

## Support to the Private Sector

***Inter-American Development Bank***

**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 – US$20M available
- Trust Fund Programme – US$30M in approvals annually

## PRI’s Lending Activities

***Inter-American Development Bank***

**A-Loan (own account):**
- Long-term, direct lending (tenor up to 20 years)
- Maximum of US$200M (or US$400M in exceptional cases)
- 25-40% percent of total investment for greenfield projects
- 50% for expansions and refinancings
- Market-based terms, conditions, pricing

**PRI’s Lending Activities**

**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

## PRI’s Guarantee Programmes

***Inter-American Development Bank***

**Political Risk Guarantee:**
- Convertibility, transferability, funds expropriation
- Breach of contract, other political risks
- 50% of investment, to a maximum of US$200M (or US$400M in exceptional cases)

**PRI’s Guarantee Programmes**

**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 US$200M (or US$400M in exceptional cases)
- 25-40% percent of total investment for greenfield projects
- 50% for expansions and refinancings

## Private Sector Department’s Track Record

**Private Sector Department’s Track Record**

***Inter-American Development Bank***

**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
- US$24.3 billion in investment cost
- US$4.9 billion in direct financing/guarantees
- US$3.7 billion in syndicated/placed participations
- 90+ banks and institutional participants

## Case Study – A/B Loan

***Inter-American Development Bank***

**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 US$92M
- IDB A-Loan of US$23M complemented by B-Loan of US$41.5M
- IDB provided comfort relating to the recently restructured energy sector with untested regulatory framework
- Facilitated 12-year financing with commercial bank and institutional investor

**Case Study – A/B Loan**

## Case Study – Political Risk Guarantee

***Inter-American Development Bank***

**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 US$200M
- IDB PRG covered 	US$100M
- MITI covered US$77M and MIGA covered US$23M
- Standard PRG coverage facilitated international commercial bank notes purchase, as private insurance was unavailable
- “2000 Deal of the Year” by Trade Finance magazine

**Case Study – Political Risk Guarantee**

## Case Study – Political Risk Guarantee

***Inter-American Development Bank***

**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 US$318M
- IDB PRG covered 	up to US$140M of total debt US$238M
- Standard PRG coverage plus contract frustration coverage facilitated full debt placement with institutional investors and commercial banks

**Case Study – Political Risk Guarantee**

## Case Study – Partial Credit Guarantee

***Inter-American Development Bank***

**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 US$450M
- Local bond issuance of US$300M (USD equivalent)
- IDB PCG covered US$75M, 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

**Case Study – Partial Credit Guarantee**

## Consulting Opportunities

***Inter-American Development Bank***

**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

**Consulting Opportunities**

## Consulting Opportunities

***Inter-American Development Bank***

**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)
- E&S (semi-annual, annual reporting, site visit)
- Insurance (annual compliance report)

**Consulting Opportunities**

## Consulting Opportunities

***Inter-American Development Bank***

**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)
- E&S (semi-annual, annual reporting, site visit)
- Insurance (annual compliance report)

**Consulting Opportunities**

## Consulting Opportunities

***Inter-American Development Bank***

**Apply to PRI’s on-line Consultant Database at:**
**http://IADB.org/pri.**

**Consulting Opportunities**

## Inter-American Development Bank

***Lori Kerr ***
***Investment Officer, IDB Private Sector Department***
***Tel: (202) 623-3184     Fax: (202) 623-3837    lorik@iadb.org***

***Inter-American Development Bank***