BUDGET REQUEST

FISCAL YEAR 2010

An Agency of the U.S. Government

www.opic.gov

Overseas Private Investment Corporation

Congressional Budget Justification

May 2009
TABLE OF CONTENTS

BUDGET REQUEST OF THE OVERSEAS PRIVATE INVESTMENT CORPORATION

FISCAL YEAR 2010

INTRODUCTION .........................................................................................................................................I

FY 2010 REQUEST...................................................................................................................................... 1

ADMINISTRATIVE EXPENSES ...................................................................................................................... 1

Technology............................................................................................................................................ 1

Human Resources ................................................................................................................................. 2

CREDIT FUNDING REQUEST ........................................................................................................................ 3

GOALS, STRATEGIES, AND OUTCOMES ....................................................................................................... 3

Developmental Quality of Projects –Aligning Budget to Performance................................................ 3

Transparency ........................................................................................................................................ 4

Serving the Customer Efficiently........................................................................................................... 4

Climate Change and Greenhouse Gas Limits....................................................................................... 4

Assuring a Level Playing Field for Lawful Business Activities............................................................. 5

Strengthening Management Practices .................................................................................................. 7

Regional Foreign Policy Priorities: Broader Middle East and North Africa, Sub-Saharan Africa, and

Asia ....................................................................................................................................................... 7

SECTORAL PRIORITIES –RENEWABLE ENERGY AND CLEAN TECHNOLOGY, ACCESS TO CREDIT BY SMALL

AND MEDIUM ENTERPRISES, AND MICROFINANCE ................................................................................... 10

OPIC Support for Renewable Energy and Clean Technology ............................................................ 10

Channeling U.S. Private Sector Capital to Financial Institutions that Lend to Local Small and

Medium Enterprises (SMEs) in Developing Countries....................................................................... 11

OPIC Support for Microfinance.......................................................................................................... 12

OPIC Support for Housing.................................................................................................................. 14

STRATEGIC GOALS ................................................................................................................................... 15

OPIC Focus on U.S. Small Business Investors................................................................................... 15

Leveraging U.S. Government Resources............................................................................................. 16

Continued Importance of OPIC Insurance ......................................................................................... 16

Framework Agreements...................................................................................................................... 17

Enterprise Development Network ....................................................................................................... 17

OPIC-Supported Investment Funds .................................................................................................... 18

Upcoming Priorities and the Asset Allocation Plan............................................................................ 18

Capital Markets Development in Latin America................................................................................. 20

APPENDIX ................................................................................................................................................. 21

APPENDIX A: APPROPRIATIONS LANGUAGE ............................................................................................. 21

Non-Credit Account ............................................................................................................................ 21

Program Account................................................................................................................................ 21

OPIC Transfer Authority..................................................................................................................... 22

Export Financing Transfer Authorities............................................................................................... 22

APPENDIX B: BUDGET AND ANALYSIS TABLES ........................................................................................ 23

APPENDIX C: GPRA ANNUAL PERFORMANCE PLAN/REPORT AND PROGRAM ASSESSMENT RATING TOOL

(PART) METRICS ..................................................................................................................................... 25

APPENDIX D: DEVELOPMENT MATRIX ..................................................................................................... 26

APPENDIX E: PROGRAM ASSESSMENT RATING TOOL............................................................................... 28
i

INTRODUCTION

OPIC supports the foreign policy of the U.S. Government by facilitating U.S. private

investment in developing and transitioning economies. Investment spurs economic

development and leads to greater political stability and security. Private investment

is the most effective and efficient engine of economic growth, and as a result is one of the

most powerful and effective smart power tools available to the United States. Advancing

economic growth in emerging markets by mobilizing private investment is a vital tool in

this new era of international cooperation. It bolsters old partnerships and builds new ones

in confronting the major challenges of poverty which fuels terrorism, ethnic and religious

conflict, food and energy insecurity, and disease.

The global economy is currently in the midst of a broad and deepening slowdown.

The major economic powers, as well as emerging markets and newly transitioned

economies, are experiencing a sharp deceleration in growth. Global trade and

investment have declined significantly, and credit markets and private sources of capital

have dried up. Led by the U.S., the international community is working aggressively to

restart the flow of credit and to increase capital flows. For its part, OPIC is working to

ensure that its finance and political risk insurance products continue to be a source of

capital and financing for the U.S. private sector, whose skills, equipment and technical

expertise are essential to economic growth and prosperity at home and abroad.

For nearly forty years, OPIC’scommitmentanditsmissionhaveweathered both

financial and political crises. This support for private investment-driven economic

development has been provided at no net cost to the taxpayer, since OPIC charges

market-based fees for its products and operates on a self-sustaining basis. OPIC has been

able to achieve this through prudent underwriting and judicious use of the leverage that

OPICcanexertasanarmoftheU.S.government.OPIC’sfavorabletrackrecordis

reflected in the $4.7 billion it has accumulated in its Noncredit Account over the years.

In recent years, OPIC has sharpened its focus on the developmental impact of its

projects by creating objective measures of the value added to economic development

by OPIC-supported projects. OPIC is taking a more proactive role in identifying

highly developmental, cutting edge investment opportunities and investors willing to

pursue such opportunities. OPIC has also strengthened its analytical methods for

assessing the developmental effects of the projects it supports.

By applying rigorous analytical methods to each project, OPIC seeks to ensure that

such projects have a significant developmental benefit in host countries and that

OPIC insurance and financing are additional to - and do not displace –marketdriven financing and insurance from the private sector. OPIC concentrates its

support on highly developmental projects in challenging economic environments and, in

many cases, politically insecure environments. Private investors may decide not to

pursue these types of projects, without OPIC support, because of the high risks involved.

OPIC support can help to make such projects viable by reducing political risk through

insurance or by addressing the commercial risk through guarantees or loans.
ii

OPIC’sprogramactivitiesarecloselyalignedwithU.S. foreign policy priorities, and

constitute one of the most effective means the United States has in projecting its

“smart”power. While OPIC is ready to support highly developmental investment

projects in any OPIC-eligible country, it proactively seeks out projects in both regions

and countries that constitute U.S. foreign policy priorities and in sectors where OPIC

support can make a real difference in catalyzing private sector investment.

OPIC’sregionalprioritiesaretheBroaderMiddleEast(includingAfghanistanand

Pakistan) and North Africa, Sub-Saharan Africa; and, increasingly, Asia.

 OPIC’sfocusontheBroader Middle East and North Africa is driven by a belief that

an improvement in economic conditions and opportunities is a predicate for greater

peace, stability, and democratic reform in the region.

 OPIC’sfocusonSub-Saharan Africa isdrivenbyAfrica’sneedtofurtherintegrate

with the global economy to overcome its comparative lack of economic progress and

underdeveloped economic infrastructure.

 OPIC’sincreasingfocusonAsia reflects the fact that U.S. partners and allies

throughout Asia and the Pacific are indispensable to our nation’ssecurityand

prosperity. They are also a partner in the solutions to the global challenges that the

world faces - climate change, the global financial crisis, pandemics and economic

disparities. These challenges require that we bolster historic partnerships and

alliances while developing deeper bonds with all nations.

OPIC has a country specific priority in the Republic of Georgia, where OPIC has

committed to provide $176 million in financing to several investment projects, which

helpsthatcountrytoweathertheeconomicshocksassociatedwithlastyear’sarmed

hostilities with Russia.

With respect to sector priorities, OPIC continues its active support for sectors

where it can make a real difference: (i) clean and renewable energy, (ii) access to

credit for small and medium enterprises; and, (iii) microfinance. OPIC continues to

support the housing sector, by carefully analyzing its pipeline and monitoring its portfolio

of housing construction and financing projects.

OPIC considers clean and renewable energy to be a key component of its

developmental activities both for the host country, and as a part of the

Administration’sglobaleffort. The sharply rising demand for cleaner and more

sustainable sourcesofenergycomplementsOPIC’scapabilityandmissiontomobilize

private investment to promote economic development. OPIC has been exploring the

most effective ways to establish the U.S. private sector’srolein this sector in the

developing world, where energy consumption has been quite low historically but now

sees higher demand as emerging markets need more and more energy for cars, plants, and

transportation. Now, climate change is not just an environmental or an energy issue, it

also has implications for health, economic stability, and food security. Now, more than

ever, OPIC can create partnerships that promote economic growth and environmental

protection through cleaner energy sources, greater energy efficiency, technology transfers

that can provide mutual benefits to developing countries and U.S. technology providers.
iii

OPIC’sfocusoncredittosmallandmediumenterprisesandonmicrofinanceis

driven by the lack of such credit in most developing countries, and by the important

role that small business formation has in generating growth in any economy. Banks

in developing countries generally do not lend to small businesses or microenterprises, and

when they do, it is only at very short terms and at exorbitant interest rates.

As indicated above, OPIC in recent years has focused on its core development by

developing and applying a comprehensive tool to measure the development impact

of projects. Using these tools, OPIC seeks to hold both itself and the projects it supports

accountable for the developmental impact of OPIC-supported projects. OPIC assesses

the anticipated development impact of projects as they go through the approval process

and monitors the actual impact after the project has been in operation for a period of time.

OPIC faced a challenging environment in FY 2008 due to the delay in Congressional

passage of its authorizing legislation. This delay prevented OPIC from making any new

commitments to projects during much of the fiscal year. Accordingly, while OPIC has

continued to work on new projects and now has a sizeable backlog of projects in its

pipeline, reported project completions for the year are somewhat skewed for FY 2008,

when compared with recent fiscal year figures.

OPIC has experienced challenges in recent months as a result of the credit crisis. As

a result of the global economic downturn, private sponsors of OPIC-supported investment

projects have found it more difficult to obtain private equity and debt financing for

projects in the pipeline. Businesses financed and/or insured by OPIC (directly or through

framework agreements, investment funds, or reinsurance) have been adversely affected

by the broad decline in demand. Accordingly, the risks associated with OPIC supported

projects have increased, and OPIC has taken appropriate steps to monitor existing

projects and to scrutinize current and potential projects in this economic climate.

At the same time, the challenges posed by the financial crisis on investment flows

have significantly increased the need and the demand for OPIC support. As a key

U.S. bilateral development finance agency, OPIC is uniquely equipped to help address

these challenges. Thus, despite the decrease in project activity in FY 2008 and because

of the negative impact of the financial crisis on private investment, the need for

appropriatedresourcesoutofOPIC’sbalanceswillremainhighovertheperiodcovered

by this budget. Moreover, the increased risks may well create the need for a larger OPIC

subsidy expenditure in FY 2010.

For example, OPIC is participating intheStateDepartment’sGlobal Financial

Crisis supplemental. The administration has proposed $20 million in permissive

transfer authority to enable OPIC to develop projects in the targeted countries.

OPIC’sneed for additional administrative resources is focused as last year on

necessary initiatives to address technology and internal controls. OPIC is requesting

a small increase of 3.3% to its administrative expenses budget inlinewithOPIC’sneed

to continue its investments in systems, and integrated processes. These initiatives will be

described in the following section.
1

FY 2010 REQUEST

OPIC requests the following FY 2010 appropriations to be self-funded from its offsetting

collections:

 $52.31 million to support program administration

 $29.00 million in credit subsidy funding

Administrative Expenses

This level will enable OPIC to continue its ongoing effort to upgrade its information technology

and to meet evolving internal control and transparency requirements.

This request comes in the context of a shifting workload both in the number and character of

projects. Projects today are more highly developmental, varied, and they are increasingly

sponsored by small and medium U.S. enterprises. These shifts respond to Administration and

Congressional mandates and they require OPIC to devote more effort to in depth analysis.

On the governmental side, new imperatives to monitor, evaluate, and report transactions have

evolved out of a desire for good and transparent governance. These requirements, along with

cross cutting internal controls and government integration efforts require additional

administrative effort and infrastructure.

The small projected increase in the administrative expenses budget will allow OPIC to continue

these initiatives into FY 2010.

Technology

OPIC recognizes that effective Information Technology (IT) management and operations

requires good integration of information resources, processes, and people. The Office of the

Chief Information Officer (OCIO) has developed an IT Strategic Plan that focuses on an

effectiveintegrationofthesecomponentstosupportOPIC’sstrategicbusinessobjectives.1

OPIC’sITstrategyisalignedwiththeOPICStrategicPlanand is designed to meet the agency

goals by assuring effective access to integrated project-related information by management, by

ensuring clear accountability through the establishment of a comprehensive audit trail, and by

serving customers better through streamlining application procedures, enhancing the value of

information provided to customers, and improving the overall experience of working with

OPIC.

OPIC’stechnologyrequestforFY2010consistsoftwoelements:1)follow-on efforts with

respect to OPIC’scoreApplicationIntegrationandMigration(AIM)programand2)the

implementation of several supporting projects.

1

See http://www.opic.gov/about/reports/ocio_strategic_plan_2007_2011.pdf.pdf forOPIC’scurrentITstrategic

plan.
2

These projects include several IT projects essential to meeting audit and industry best practices

and standards:

 Improvements to software to enable OPIC to meet evolving standards for transparency,

records management, safeguards for personal information, and information security.

 DevelopmentofnewreportingtoolstostrengthenOPIC’scapabilityto analyze risks and

program performance by integrating information from isolated databases.

 Development of software to support foreign currency transactions in both direct and

guaranteedloans.ThesecapabilitieswillbecriticalinsupportingOPIC’seffortsto

support lending commitments for housing, microfinance and SME credit.

While OPIC is pursuing these improvements, OPIC is also strengthening its institutional

capability to develop, manage, and maintain its technology projects. This will help ensure that

resources provided to OPIC will be used efficiently.

Human Resources

OPIC does not at this time request an increase to its authorized level of 225 full time equivalents

(FTE). Current resources are sufficient to support a staffing level within the authorized level.

OPIC works continuously to maintain an effective organizational structure and to ensure that its

human resources are effectively utilized in support of its mission and the achievement of its

operational goals.UsingOPM’sHumanCapitalAssessmentandAccountability Framework,

OPIC is developing a Human Capital Accountability Plan that will guide and transform how it

assesses, plans, and responds to human capital challenges and needs.

Our most human capital strategy focuses on:

 Protecting and responsibly managing the financial risks of the portfolio.

 Delivering more transparency to the public and to the interagency community.

 Expanding the capacity to originate projects in policy priority countries and sectors.

As OPIC continues to grow its portfolio, both in size and scope, it is realizing a greater return on

its investments in human capital.
3

Credit Funding Request

ThePresident’sFY2010Budgetrequestsacreditreformfundinglevelof$29million to meet

normal subsidy requirements and policy priority initiatives, such as the Broader Middle East and

North Africa. OPIC requests three-year availability, as was provided in the FY 2008

appropriation.

OPIC’srequestforFY2010reflectstheexpectedsubsidycostsof:

 supporting foreign policy priorities in a challenging global economic and financial

environment; and

 supporting small business lending, which generally draws relatively high levels of

subsidy, even though individual transactions are small.

OPIC is also requesting continuation of the existing $20 million in transfer authority, which was

first enacted in FY 2006 and has been enacted in each year since. This authority provides OPIC

and the State Department with shared flexibility to fluidly respond to U.S. foreign policy

priorities.

OPIC forecasts that the requested budget will support estimated lending levels of $2.35 billion

dollars in direct and guaranteed loans.

Goals, Strategies, and Outcomes

Developmental Quality of Projects –Aligning Budget to Performance

OPIC management places a high priority on the developmental quality of the projects it

supports. OPIC’sDevelopmentMatrixis a comprehensive analytical tool for measuring the

developmental impact of individual projects that OPIC supports.

The Development Matrix provides objective benchmarks for quantifying the developmental

impact of projects with respect to job creation, technology transfer, human resource

development, social benefits, private sector development, infrastructure development, and

national benefits. OPIC calculates an anticipated (ex ante) development score to assist top

management in its consideration of a project, and it calculates an actual (ex post) development

score after a project has been implemented.

A development matrix score between 50 and 100 is considered developmental and a score above

100 is considered highly developmental. OPIC evaluates both its overall performance and the

performance of the individual line departments on the basis of the average development scores of

all projects.
4

The table below summarizes the anticipated developmental impact scores for projects through

Fiscal Year 2008, as well as the targets set by OPIC for projects through 2010.

2007 2008 2009 2010

Actual Target Actual Target Target

Number of Projects270 NA 28 NA NA

Un-weighted Average 97 95 91 98 100

Weighted by Dollar Investment 94 95 83 98 100

Transparency

To increase transparency, OPIC has decided to publicly identify potential environmental

issues at a much earlier stage in the project development process than in the past. Going

forward, OPIC will require enhanced consultation with locally affected communities on what the

agencycalls‘CategoryA’projects–i.e., those with the potential for significant environmental

impact.

OPIC has redesigned its web site to increase and better organize the information available

to the public. The site will now include summaries of major OPIC-sponsored projects

consideredbyOPIC’sBoard,andallprojectswhichare‘CategoryA’forenvironmentalimpact.3

OPIC has committed to provide a brief project summary on its website for at least 60 days prior

to Board review, and a detailed summary for 40 days prior to Board review.

Serving the Customer Efficiently

OPIC management has made efficient customer service one of its key priorities. In

FY 2007, for example, OPIC supported $1.6 billion in total project investments with an

administrativeexpensesbudgetof$42.1million.Onthisbasis,OPIC’s“overhead”is2%,which

compares very favorably with other economic assistance programs. By meeting customer needs,

OPIC can better achieve its core mission of supporting private investment with a highly

developmental payoff.

Climate Change and Greenhouse Gas Limits

OPIC recognizes that it is important to address broader climate goals by expanding its

support for projects in the renewable energy sector and by the same token, continuing to reduce

2 The number of projects as reported in this table does not include subprojects under framework agreements and

investment funds. If sub-projects were included the total number of projects would be 72. See Appendix C for

further detail.

3

See <https://www2.opic.gov/environasp/environtable.asp> and

<http://www.opic.gov/news/project_profiles/index.asp>
5

greenhouse gas emissions in projects it supports. OPIC has committed to several initiatives,

including:

 Establishing a transparent methodology for greenhouse gas accounting

 A 30 percent reduction of portfolio-based emissions of greenhouse gases over a ten year

period starting from the a baseline set on June 30, 2008; and,

 Establishing an annual emissions cap of 3 million metric tonnes CO2eq/year for all new

OPIC-supported projects with significant emissions, over 10,000 U.S. short tons, within a

given year.4

OPIC is actively implementing these initiatives and others. Additionally, OPIC is expanding

these initiatives to establish a new standard for best practice in addressing climate change in

OPIC-supported international investments. To ensure a reliable and transparent process for

reporting greenhouse gases, OPIC recently completed a comprehensive greenhouse gas

inventory of the portfolio and has established an accounting methodology that will enable

anyone to track OPIC's progress toward achieving reductions. This baseline accounting includes

significant emitters in all sectors -- not just the limited number of sectors identified in the

original announcement. OPIC will conduct the inventory on an annual basis based on the

projects that are in the portfolio at the end of each fiscal year. This information has been

reported to Congress in the FY 2008 Annual Policy Report, and posted on OPIC's web site.5

These policies have had a significant and continuing effect.OPIC’semissions cap, in place

since June 2007, has served to significantly constrain new carbon additions to OPIC's portfolio.

The first year the cap was in effect, from June 2007 through June 2008, OPIC utilized only 18

percent of the annual cap for that year. In the second year of operation which began in June 2008

and ends in June 2009, OPIC has to date only utilized 9 percent of the available annual cap.

Assuring a Level Playing Field for Lawful Business Activities

FightingcorruptionandassuringtransparencyisdeeplytiedtoOPIC’sdevelopmental

mission. Research shows that foreign investment is lower in countries perceived to be corrupt,

whilecountriesthatimprovegovernanceandreducecorruptionreapa“developmentdividend.”

For OPIC, this means its developmental mission –and the U.S. foreign economic policy

objectives the agency supports –can only be achieved when the benefits of OPIC-supported

projectsareopenlychanneledtopromotehostcountries’economic growth, and are not corruptly

diverted to personal enrichment.

4 Carbon dioxide equivalents (CO2eq) is a metric measure used to compare the emissions from various greenhouse

gases based upon their global warming potential (GWP). The carbon dioxide equivalent for a gas is derived by

multiplying the tonnes of the gas by the associated GWP. For example, the GWP for methane is 21 and for nitrous

oxide 310. This means that the emissions of 1 million metric tonnes of methane and nitrous oxide respectively is

equivalent to emissions of 21 and 310 million metric tonnes of carbon dioxide.

5

See OPIC’sFY 2008 Policy Report, page 50, at

http://www.opic.gov/about/reports/documents/fy08_annual_policy_report_040809.pdf#page=50.
6

OPIC’sAnti-Corruption and Transparency Initiative is designed to support a level playing

field for lawful business activities, promote evolving best practices and corporate social

responsibility, and improve the transparency of OPIC operations –all while preserving the

confidential business information and commercial efficiency of project sponsors.6 OPIC

launched the initiative on the basis of extensive consultations with stakeholders in Congress and

the nongovernmental community. Transparency International-USA, part of the global civil

societyorganizationleadingtheworldwidefightagainstcorruption,haswelcomedOPIC’sAntiCorruption and Transparency Initiative as an important contribution to the global anticorruption

effort.

Chief among the reforms of the initiativeisOPIC’sendorsementoftheExtractive

Industries Transparency Initiative (EITI) and its insistence that its sponsors disclose

amounts they paid to governments. In this and other ways, EITI supports better governance

through improved accountability. Full publication and verification of company payments and

government revenues from oil, gas, mining, and chemical ventures will counter bribery,

extortion, and coercion. EITI will help to ensure that project benefits flow to host countries

and their populations. Participation in EITI can reduce project risks, improve the likelihood of

project success, and reduce costs.

OPIC has worked to ensure that OPIC-supported projects are in full compliance with the

Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws. In September 2007,

for example, OPIC worked with the Department of Commerce Commercial Law Development

Program to provide a training seminar on anti-corruption efforts. As another element of the new

initiative, OPIC has published an Anti-Corruption Handbook describing the FCPA and how it

applies to OPIC-supported projects and sponsors.7The Handbook clearly notifies sponsors of

their obligation to certify their compliance with anti-corruption laws at various stages of the

OPIC-supported project application, review, and approval process.

The Handbook provides project sponsors with an easy-to-follow guide for developing an

effective compliance program and a comprehensive approach to fighting corruption. Sponsors

are cautioned that OPIC will evaluate every allegation of fraud or corruption and will make

appropriate referrals to the Department of Justice. OPIC has also established a corruption hotline

monitoredbyOPIC’sLegalAffairsdepartmentthat anyone may call either to report potential

irregularities in OPIC-sponsored projects or to ask compliance questions.

6

See <http://www.opic.gov/about/Transparency/index.asp>

7

See <http://www.opic.gov/about/Transparency/documents/opicanticorruptionhandbook0906.pdf>
7

Strengthening Management Practices

OPIC has also taken steps to strengthen its management practices. For example, OPIC has

establishedaSeniorManagementCouncil(SMC)ofOPIC’sleadership,andaSenior

Assessment Team (SAT) at the working level. Additionally, OPIC has established an Audit

Committee under the Board of Directors. The purpose of the committee is to:

 Provide assistance to the Board of Directors in fulfilling its accounting and financial

oversight responsibilities.

 Demonstrate that OPIC has in place adequate and effective administrative and

financial controls.

 Review the financial statements.

 ProvideoversightregardingtheCorporation’sinternalauditfunctionsandits

independent public accountants.

Regional Foreign Policy Priorities: Broader Middle East and North Africa, Sub-Saharan

Africa, and Asia

OPIC’seconomic development mission is guided by U.S. foreign policy objectives. Within

those objectives, OPIC is focusing on three regions of the world where its programs are likely to

most effectively complement U.S. foreign policy objectives - the Broader Middle East and North

Africa, Sub-Saharan Africa, and Asia, while continuing to be active in other emerging markets in

Latin America and Eurasia.

OPIC-supported private investment in these regions is [uniquely] positioned to advance

U.S. foreign policy objectives. OPIC continues to focus on supporting projects in countries and

regions that are either torn by current conflict (e.g., Afghanistan, Iraq, and the West Bank), or are

seeking to recover from recent conflict (e.g., Lebanon, Liberia and Georgia). The suffering from

violence in such countries is compounded by a loss of jobs, income, and basic infrastructure

services, which in turn fuels further instability. OPIC focuses on supporting private investment

and activities by U.S. NGOs that can rapidly create jobs, raise incomes, and increase the local

population’sstake and confidence in peace and stability. In doing so, OPIC proactively seeks

out and works with investors and partner organizations to launch projects that together will help

the country to jumpstart economic growth.

In the Broader Middle East and North Africa –OPIC-supported private investments can create

hope through increased employment and demonstrate economic benefits of reduced conflict,

greater democracy and increased openness. The steps OPIC has taken in support of its regional

priority in the Broader Middle East and North Africa are largely outlined in the discussion of the

how OPIC can support countries affected, currently or historically, by conflict and political

violence.

In Afghanistan and Pakistan, OPIC continues to work with private investors, other U.S.

agencies, host governments, and the international community to address the instability caused

where a lack of economic opportunity has weakened the host governments, made the missions of
8

U.S., multinational and local troops more difficult and dangerous, and created conditions that can

spread the risk of terrorism. In Afghanistan, OPIC has commitments to more than $164M in

investments in more than 25 projects.

OPIC has launched projects in Lebanon and the West Bank. In Lebanon, OPIC and Citibank

worked together to speed up thecountry’srecoverybychannelingprivatecapitaltoLebanese

banks. Immediately after the conflict in 2007, $158 million was quickly disbursed in order to

help small and medium sized businesses rebuild, reopen and become productive again. In 2008,

another framework agreement was established with Citibank to further support the continued

need for financing by entrepreneurs. To date, an additional $85 million has been injected into the

economy. TheCooperativeHousingFoundation’s(CHF)AMEENFinanceCompanyin

Lebanon had virtually shut down until OPIC provided a $23 million loan. This loan enabled

CHF to immediately support small businesses and homeowners who needed to rebuild in the

aftermath of the conflict. OPIC was able to mobilize this facility and get investment flowing

within six months of the conclusion of hostilities in 2007. Through December 31, 2008, a total

of 6,950 loans had already been made.

In the West Bank, OPIC is seeing the fruits of the efforts begun in 2005 when it first teamed up

with the Aspen Institute and the Palestinian Investment Fund to create a $228 million small

business lending facility.8The facility has engaged financial institutions which lend to

downstream Palestinian borrowers on affordable terms based on cash flow-based lending criteria.

As of December 31, 2008, the facility resulted in just under $5 million through 5 major

Palestinian banks. Each one of the individual loans represents an entrepreneur building a

business that makes a difference in the local community. OPIC also is working with the

Palestinian Investment Fund and the Aspen Institute on a $325 million mortgage facility which

will develop affordable housing opportunities for Palestinians.

In Jordan, OPIC is finalizing transactions to support lending to small businesses,

microenterprises, and mortgages for low income households. OPIC will provide long-term

funding to three banks in Jordan, the proceeds of which will be used by the banks to extend 25

year mortgage loans to low income households in the country. This project will support the

government’saffordablehousinginitiativetoincreasethesupplyofaffordablehousingforlower

income households. OPIC is also finalizing a transaction to provide support to a local institution

that extends loans to small- and medium-sized enterprises and microfinance borrowers. This

support will provide long-term financing to this SME and microfinance lending group to expand

its loan portfolio over the five to ten years

In Sub-Saharan Africa, OPIC continues its focus on supporting private sector growth, capital

market and infrastructure development and helping to address conflict-ridden countries. As

discussedbelow,OPIC’sBoardhasapprovednewinvestmentfundsthatnowtargetinvestingin

pan-African companies with exceptional growth prospects and in strengthening African capital

markets by investing in innovative financial instruments such as mezzanine and convertible debt.

8

See <http://www.opic.gov/news/pressreleases/2007/pr072507.asp>
9

OPIC’sapproach to help conflict-ridden countries may be best illustrated by its support in

Liberia. Liberia is a young, developing democracy with historic ties to America. Its emergence

from decades of civil war and mismanagement in a strife-torn, resource-rich region of Africa

makes its stability and growth a high priority to the United States. Its recent history has left the

country with few meaningful infrastructure services and very little private business investment.

For example, Liberia’sentirepowerinfrastructure,includingitstransmissionlines,distribution

grid, and generation facilities were completely destroyed during the civil war. So, OPIC has

provided Political Risk Insurance coverage to the International Rescue Committee (humanitarian

assistance) and to Lachamco (leasing of construction equipment and tools), and is supporting

private investors who will use wood-chips from fallow rubber trees to generate renewable power.

Beyond these initiatives, OPIC is discussing potential projects with a number of U.S.

corporations and U.S. NGOs, which OPIC could support through guarantees or direct loans.

These include a microfinance project, a heavy equipment leasing project, and several low and

moderate-income housing deals.

In Asia, OPIC is actively supporting innovative investments, e.g., in the clean and renewable

energy sectors through several new Global Renewable Funds that can invest in the region, and by

providing financing and political insurance to support new hydro and wind projects in Sri Lanka

and India. As discussed in more detail below, the OPIC-supported South Asia Clean Energy

Fund will invest in companies and projects that support the need for cleaner forms of energy in

the region—including those utilizing solar, wind, hydropower, biofuel and natural gas. The fund

will also invest in technologies that promote: energy efficiency; improved batteries and storage,

clean transportation, clean water systems, and environmental and energy efficient building. And

it will focus on companies that service the renewable energy value chain, and on building South

Asian regional and global growth companies.

And, in the Republic of Georgia, which is struggling from the economic impacts of its conflict

with Russia, OPIC committed to provide $176 million in financing to support investment

projects in Georgia, including a $6.3 million direct loan for the construction of an apartment

building for moderate income residents, a $40 million SME lending facility with a U.S.-owned

local Georgian bank, and up to $44 million to eligible local financial institutions under a

framework agreement. OPIC also expects to commit $30 million for microfinance in Georgia

this year.
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Sectoral Priorities –Renewable Energy and Clean Technology, Access to

Credit by Small and Medium Enterprises, and Microfinance

OPIC focuses on renewable energy and clean technology, and on increasing access to credit

for micro and small and medium enterprises as priority sectors. While OPIC is prepared to

support developmental projects in almost any sector, provided they do not create adverse

economic effects in the U.S. and meet other statutory requirements with respect to the

environment and recognized labor rights standards, OPIC’ssupportforU.S.privateinvestment

in these sectors can have a proportionally large economic development impact by:

 Applying U.S. renewable energy, clean technology, and efficiency expertise to provide

developing countries with cleaner options to power their development; and

 Enabling U.S. private capital to support well-run micro and SME financial institutions to

provide access to credit for entrepreneurship at the grass roots level and to start and grow

small businesses.

OPIC Support for Renewable Energy and Clean Technology

OPIC fully supports environmental improvement and the development of clean and

renewable forms of energy in the developing world. OPIC’sportfolioincludesenergy

projects generating a cumulative total of more than 2,200 MW of clean power, including hydro

and wind. Many of these projects involve U.S. small businesses. In addition, OPIC supports

projects that incorporate highly efficient energy technology.

Looking ahead, OPIC expects to support more clean energy projects including solar, wind,

biomass and biofuels, as well as waste-to-energy projects. In early 2008, OPIC established a

group dedicated to identifying and underwriting renewable energy transactions and other projects

aimed at sustaining the environment. The group has contacted key stakeholders in the sector and

identified projects most suited to OPIC financing. Commitments to a number of these projects

have already been made in FY2009 (including an efficient lighting manufacturer in India and a

renewable fuel project in Liberia), with others currently advancing to the approval stage.

The group has also sought to develop certain innovative financing structures that will make

investmentsinthissectorsuccessfulwithOPICassistance.WithOPIC’sexperience in difficult

regulatorymarkets,andexpertiseintheenergysectoringeneral,OPIChastakena“hands-on

approach”toprojectdevelopmentalongsideU.S.investors.Therenewableenergygrouphas

begun tracking projects in its pipeline for assisting sponsors over important hurdles, maintaining

aviewofOPIC’spotentialfinancingcommitments,andrecognizingOPICworkforceallocation

needs. At this time, OPIC has approximately $900 million of potential financing for SME

environmental projects, representing approximately 35 projects. A significant number of these

projects are being developed in Africa and Central America. OPIC expects to increase the

number of projects in its outstanding finance portfolio by 15% each year in each of the next three

years.

At the Washington International Renewable Energy Conference (WIREC) held in Washington,

DC, in March 2008, OPIC announced the Global Renewable Energy Call for Proposals. The
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purpose of the Call was to finance private equity funds that facilitated the investment of risk

capital to companies or projects within the renewable energy sector and other related sectors in

the field of energy and environmental sustainability. Through the Call, OPIC addressed an

important policy objective of the U.S. Government: to promote private sector investment in the

global renewable energy industry. The funds that OPIC has elected to support under this Call are

describedbelowunder“InvestmentFunds–GlobalRenewableEnergyFunds.”

Channeling U.S. Private Sector Capital to Financial Institutions that Lend to Local Small and

Medium Enterprises (SMEs) in Developing Countries

The economic development community has come to recognize that making medium- and longterm credit available to creditworthy SMEs is one of the most effective tools available to ignite

economic growth and productive job creation. In many, if not most, developing countries bank

loans for more than 12 months are simply not available to small businesses, and the credit that is

available requires extensive collateral and often on unaffordable terms. SMEs are vital to

energizing private sector driven economic growth, but all too often, SMEs are unable to grow in

a sustainable manner because they lack access to capital needed for business operations and

planned expansions.

On one hand, the financial institutions have neither staff trained to assess the viability of a small

business nor the tools to establish and assess credit underwriting standards, in part because local

banks continue to question the profitability of small enterprise finance. Moreover, SMEs in

developing countries often operate in the informal sector, and as a result, lack the business

relationships and management knowledge necessary to package and present a business plan that

meets a bank’scredit underwriting criteria. As a result, SMEs generally lack sufficient access to

capital, particularly long-term capital to grow the business.

In response, OPIC has taken a lead role by developing different business models to support SME

lending in developing countries on reasonable terms and attractive maturities. Moreover, OPIC

has also partnered with the Treasury Department, USAID and multilateral development banks in

effectively providing technical assistance to help small enterprises acquire the skills needed to

put together an effective business plan and loan application. The business models OPIC has

pioneered include:

 OPIC loans to U.S. owned local financial institutions that, in turn, provide financing to

the SME sector

 OPIC guarantees of loans made by U.S. banks to local financial institution in the host

countries for the purpose of funding SME loans

 OPIC guarantees of bonds issued by U.S.-owned local financial institutions in the host

countries to fund SME loans

 OPIC commitments to share the risk of specified SME loan portfolios of U.S.-owned

local financial institution in the host countries, and,

 Insurance products at discounted rates in support of small business entrepreneurs.

OPIC has also used special purpose lending facilities in countries with difficult economic

environments to support lending to SMEs. In the Trade Bank of Iraq project, OPIC worked with
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private sponsors to develop a special facility for guaranteeing letters of credit issued by the Trade

Bank of Iraq to Iraqi enterprises importing goods or services. This facility substantially

enhances the ability of small Iraqi enterprises to import essential capital equipment and other

inputs, including those from U.S. exporters and suppliers.

OPIC has used its relationships with American banking institutions to expand and target lending

to such important sectors as SME, microfinance and housing. Under a framework agreement,

OPIC commits itself to support loans up to a certain value and pursuant to conditions spelled out

in the agreement. OPIC has established a number of global and regional facilities under this

model.

OPIC also launched a major and innovative new collaborative initiative in Latin America

to address the significant obstacles to increased lending to SMEs. At the Summit of the

Americas in April, President Obama announced a new $100 million Microfinance Growth Fund

for the Western Hemisphere, an innovative initiative involving OPIC, the Treasury Department

and the Inter-AmericanDevelopmentBank’sMultilateralInvestment Fund to increase lending to

SMEs in Latin America. This initiative tackles a number of related problems that currently block

lending to Latin American SMEs. The Treasury Department provides technical assistance to

governments on legal and regulatory reforms that facilitate small business lending. The IDB

provides technical assistance to several local financial institutions to enhance their ability to

evaluate the credit quality of small business loans and to strengthen their institutional capacity to

make SME loans. And OPIC encourages its U.S. banking partners to make over $176 million in

new loans available for the specific purpose of SME lending. In particular, OPIC was able to

verify that a total of $17.8 million was made available for 363 SME borrowers (i.e., seeking

loans of less than $100,000).

OPIC Support for Microfinance

Microfinance institutions (MFIs) provide a broad range of financial services, including

access to credit by the un-banked and under-banked populations in developing countries.

By offering high quality, financial services to grassroots entrepreneurs that do not have normal

access to credit, MFIs enable individuals with little capital to start and expand a business. Many

MFIs also assist their clients to finance home improvements, health care and education for

family members, thereby providing a holistic approach to poverty alleviation. Women represent

the majority of MFI clients, which is particularly important since women in emerging markets

must overcome many barriers to participate in the formal economy.

The turmoil in the financial markets has prevented many MFIs from raising sufficient capital to

finance the growth of their lending activity. Not only does this pose a problem for MFIs that

seek to benefit from the efficiencies inherent in growing their business, it also results in a

reductionincapitalthatcanbeprovidedtotheMFIs’underlyingmicrobusinesscustomers.
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In this difficult environment, OPIC has increased its efforts to provide financing to the

microfinance sector by participating in a number of microfinance transactions that are

essential for the MFIs and their borrowers to maintain and continue to grow their business

activity. To that end, OPIC has established a number of global and regional facilities. To date

OPIC has provided financing of approximately $410 million to 27 microfinance projects that

support a total of $790 million in lending.

Examples of some innovative transactions include:

BRAC Africa Loan Fund (the‘Fund’)involves BRAC, a leading international development

organization founded in Bangladesh which successfully raised $62.6 million of debt capital to

provide microfinance loans to poor borrowers in Tanzania, Uganda and Southern Sudan. The

Fund plans a second close to reach total capital of $74 million. The Fund provides long-term,

local-currency funding that will enable BRAC to scale up its microfinance operations to reach

over 700,000 borrowers through over 200 branches across the three countries. This transaction

was the largest single financing to date of a southern hemisphere development organization

expanding into Africa. OPIC was an anchor investor in the transaction providing $28 million to

the Fund.

Blue Financial is a South African-based financial institution that provides micro-, small, and

medium enterprise (SME) financing in South Africa and eleven other countries in Africa. The

company operates with a double bottom line objective aimed at maximizing profit while

contributing to the alleviation of poverty by making capital accessible to low-income households

andsmallbusinesses.OPICisprovidinga$70millionloantosupporttheexpansionofBlue’s

lending to SMEs in South Africa. Although South Africa has a well-developed financial sector,

most small companies and individuals cannot access traditional debt markets. Approximately

40%ofBlue’sborrowersareexpectedtobelocatedinruralareasand55%areexpectedtobe

female. Blue also offers training programs to assist entrepreneurs with the successful start-up of

their business.

Citibank Microfinance Facility, which has demonstrated the world wide demand for financing

in this market. Through December 31, 2008, the facility has supported over 20 institutions with

over $50 million of loans to microfinance borrowers in every continent, including such countries

as India, Jordan, Romania, as well as those mentioned last year (El Salvador, Philippines,

Honduras, Mexico, Kenya, Kazakhstan and Uganda).

With the state of the global credit markets today, microfinance institutions are having a more

difficult time in raising capital, and OPIC is poised to continue its support of these dynamic

grassroots organizations.
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OPIC is working on new and innovative projects to address microfinance needs in global

emerging markets and is considering the following business models to expand its support of

microfinance institutions:

 Addressing liquidity needs of microfinance sector by filling the financing gap resulting

from the reduction in private sector investment.

 Participating in transactions that will encourage greater participation by capital market

investors through a strong demonstration effect - showing investors that it is a safe and

potentially profitable investment opportunity.

 Where appropriate, taking subordinated debt in transactions that will encourage greater

capital flows from the private sector.

 Partnering with financial institutions that can lend in local currency or provide local

currency hedging products.

 Attracting private capital through securitizations –which give investors a more liquid and

standardized product for their portfolios.

 Supporting funds and microfinance network organizations that finance smaller MFIs with

more limited access to capital.

 Providing political risk insurance to microfinance institutions and their investments

abroad.

 Creating multi-project master insurance programs that provide comprehensive political

risk coverage at rates that recognize the mitigating effects of spreading the risk.

OPIC Support for Housing

OPIC continues to see housing finance as a critical sector needing support from bilateral and

multilateral development finance agencies. OPIC’sfocusonthissectorinrecentyearshas

resulted in a successful and rapidly expanding portfolio.

Given the continuing concern in the world’smortgagemarkets,OPIC'sBoardofDirectorstook

the decision in late 2008 to cap committed housing-sectorexposuretoonethirdofOPIC’s

portfolio, until further review or by specific waivers.

OPIC still sees strong interest in this sector throughout many regions of operations, with projects

under consideration in countries such as India, Turkey, Liberia, Ghana, Romania, and Latin

America. Also, the highly developmental, emerging area of housing microfinance and of

“green”housingandbuildingcontinue to seek support.

Given the continued demand for housing finance products, OPIC is able to utilize conservative

credit standards and has a continuous process of adjustment to factor in lessons learned that

serves to strengthen its prudent underwriting methodology.
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Strategic Goals

OPIC Focus on U.S. Small Business Investors

OPIC continues to place a special emphasis on helping American small businesses become

investors in the developing world. Helping small businesses to invest overseas is an important

way to distribute the benefits of international commerce more broadly throughout the U.S.

economy. Small business is a part of nearly every U.S. community: the SBA reports that small

businesses employ about 50 percent of all private sector workers and create 75 percent of the net

new jobs in the American economy.

As a vital source of innovation and economic growth, U.S. small businesses are increasingly

looking for opportunities in the global marketplace. But for a U.S. small business looking to

engage globally, the obstacles can be formidable: limited access to capital, perceived investment

risk, and lack of knowledge about opportunities in international markets.

OneofOPIC’songoinggoalsistoincreasesmallbusinessparticipationinglobalmarkets

by reducing the obstacles to investment and by cultivating better small business projects.

For example, Insurance has increasingly focused on supporting U.S. small businesses that want

protection against political risks as well as the support and advocacy of the U.S. government in

the event that the rules change. Insurance provides a streamlined application and administrative

process for eligible Small Business companies.

The ideal OPIC-supported small business project is not any different than the largest

projects the agency supports. A good OPIC project addresses an important developmental need

in the host community, transfers technology and skills from a successful American company to a

nascent industry in an emerging market, and supports industry here in the United States. It

delivers lasting economic effects because it is funded not by grant, but by investment with the

expectation of long-term profitability and job creation.

In 2007, OPIC supported 111 new projects that involved small- and mediumsized enterprises, which accounted for 79% of the 139 projects supported in that year.

In 2008, OPIC supported 49 new projects that involved small- and mediumsized enterprises, which accounted for 68% of the 72 projects supported in that year

OPIC’sExpanding Horizons workshop series helped hundreds of U.S. minority and women

small business owners to learn how OPIC can help them to invest in emerging markets

successfully. In FY 2008, OPIC continued its successful series of Expanding Horizons

workshops, holding events in Newark, New Jersey; Houston, Texas; and San Francisco,

California. Designed for minority and women-owned businesses, these workshops informed

participants about the support available from OPIC and other U.S. government agencies to

help their companies to access business opportunities internationally.
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To date, OPIC has held seven Expanding Horizons workshops across the country,

attracting over 750 participants and involving the support of 70 supporting organizations.

OPIC plans to continue the Expanding Horizons series with two more regional workshops

in 2009. The invaluable partnerships created from the workshop series has allowed OPIC

to further outreach to the minority and women-owned business community, participating and

speaking at events coordinated by organizations such as the Jamaica Business Resource

Center of New York, the Continental-Africa Chamber of Commerce, and the California Centers

for International Trade and Development. In 2008, OPIC was also pleased to welcome to its

strategic "Partners Program" the National Association of Business Owners (NAWBO).

Leveraging U.S. Government Resources

OPIC recognizes that it can better achieve its developmental mandates by working in

tandem with other agencies. Policy reforms and social investments supported by grant-funded

technical assistance provided by the Millennium Challenge Corporation (MCC), the U.S. Agency

for International Development (USAID), the Department of the Treasury, the Department of

State, or the Trade and Development Agency complement OPIC-supported private investments.

For example, grant-funded technical assistance for the reform of laws underpinning property

titles, title insurance, and consumer mortgages help reinforce OPIC-supported private investment

in the housing sector.

Private investment supported by OPIC is similarly enhanced through the services provided by

the CommerceDepartment’sForeign Commercial Service. Similarly, trade agreements

negotiated by the U.S. Trade Representative remove obstacles to such investments. By the same

token, OPIC-supported investments that build trade capacity reinforce MCC compacts and

complement USAID grants.

OPIC has made and will continue to make every effort to seek out opportunities for

interagency collaboration and to establish channels of communication betweenOPIC’stop

managers and their counterparts in other agencies. OPIC believes that interagency

collaboration could have particular value in smoothing the path from grant-funded economic

assistance to private investment-led economic growth. In one example, OPIC, through its

Enterprise Development Network (EDN) isadministeringUSAID’sAfrican Entrepreneurs'

Facility to grant technical assistance to small and medium businesses in sub-Saharan Africa. In

addition, OPIC is working closely with MCC on how the two agencies can help MCC countries

graduate from government-financed development assistance grants to government-enhanced

private investment.

Continued Importance of OPIC Insurance

OPIC’sPoliticalRiskInsurance is animportantelementofOPIC’scapabilitytomobilize

capital in developing countries. OPIC’sfinancingcapabilitieshelpputinvestorsinbusiness.

OPIC Insurance programs mitigate the risks, protect the investor and allow the continuation of an

investment in the event of a loss. Coverage is provided for the full range of investors, large and

small, against a wide variety of risk including inconvertibility, expropriation, loss of business

income, breach of contract or guarantee, and political violence.
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OPIC Insurance works with the private insurance industry to find ways to provide

complementary forms of coverage that will encourage them to support U.S. businesses

interested in making investments with a high developmental impact in countries judged too risky

on a purely commercial basis. As a government agency, OPIC can take risks that the private

political risk insurance industry on its own would be otherwise unwilling to take.

OPIC Insurance is actively working with the private insurance market to use reinsurance

to expand coverage both for projects and to catalyze private political risk insurers in emerging

markets where OPIC operates. ThisisanexampleofhowOPIC’shistoricalroleofaninnovator

continues in ways where OPIC can shape the policy framework in developing innovative

political risk insurance products.

Framework Agreements

While OPIC has worked with American banks through framework agreements to promote U.S.

Government priorities in the past, the recent global financial crises may impact that relationship

in 2009. OPIC’skeypartnershavebeenCitibank,WachoviaandNationalCityBankbecause of

their international branch networks and extensive correspondent bank relationships in countries

where OPIC can do business. In the past, these banks had been willing to make loans that meet

OPIC priorities. OPIC has monitored many of these loans and found that, indeed, a significant

portion of framework capital is targeted to more highly developmental segments of the specific

markets. We hope to be able to continue the relationships that have made the framework program

so successful.

Enterprise Development Network

In June 2007 OPIC launched the Enterprise Development Network (EDN), a strategic alliance

between OPIC and the private sector. EDNsignificantlyextendsOPIC’sabilitytoprovide

financing and political risk insurance to more SMEs doing business in developing

countries. Through the support of participating financial institutions, business consultants,

associations, law firms, state/regional promotion and sister agencies, EDN increases the access

of small businesses to OPIC products and services. By empowering such service providers, the

network results in more efficient, cost-effective delivery of services to American and local

businesses. EDN will include the following participants:

 EDN Originators: comprised of business consultants and not-for-profit organizations

worldwide, will be trained by OPIC to advise SMEs in drafting business plans, enhancing

marketstrategiesandpreparingapplicationsthatmeetOPIC’sstandardsandpolicy

conditions for both OPIC Finance and Political Risk Insurance programs.

 EDN Network Investors: debtandequityprovidersthatmayormaynothaveOPIC’s

financial support, but invest in SMEs or their affiliates for projects in OPIC-eligible

countries.

 EDN Advisers: specialists in particular business sectors and geographic areas, which will

assist OPIC in credit underwriting and due diligence on OPIC-funded loans (Eighteen

advisors have been appointed, to date.)
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Over thirty-five organizations collectively covering a broad range of industry sectors now serve

as EDN Loan/Insurance Originators. They are located in the U.S. as well as in Africa and Asia,

with several organizations having their own global presence. Approximately 80 people from

these organizations have received classroom or web-based EDN training, designed to provide a

meaningful exposure to the EDN program and the specific requirements of OPIC financing and

insurance.

This year OPIC anticipates expansion of its base of network investors to include private equity

fundsandfinancialinstitutionsthatparticipateinUSAID’sDevelopmentCreditAuthority

(DCA) program and credit facilities supported by the Millennium Challenge Corporation (MCC).

In addition, OPIC and USAID have agreed to utilize EDN to provide at least $2 million in

technical assistance to small- and medium-sized enterprises (SMEs) in sub-Saharan Africa. The

mission of this African Technical Assistance initiative, or EDN/ATA, is to spur the development

of SMEs in sub-Saharan Africa. SMEs seeking financing can use the technical assistance grants

to fund improved financial management, installation of a sound accounting system, business plan

drafting, and market assessments. This initiative is expected to be introduced to the marketplace

in mid-April 2009.

OPIC-Supported Investment Funds

Upcoming Priorities and the Asset Allocation Plan

While there are no current Calls for Proposals in the pipeline, OPIC continues to assess the

Emerging Market Private Equity landscape in light of the current economic environment.

OPIC’sroletocontinuecatalyzingprivatesectorcapitaltoinvestinemergingmarketsinthe

current environment is paramount, particularly as foreign direct investment into the developing

world has fallen so precipitously. Through its initial research and meetings with other

International Financial Institutions, OPIC sees an opportunity to expand its Call program to meet

the present market needs of emerging market fund managers. For example, as part of a forward

looking asset allocation plan, OPIC may consider supporting new funds focused on investing in

agriculture, infrastructure, and renewable energy.

Global Renewable Energy Funds

InSeptember2008,OPIC’sboardapprovedupto$505milliontofinancesixfundsdesigned to

invest in clean and renewable energy projects and companies in emerging market countries

worldwide, and the funds are expected to mobilize a total of $1.6 billion in capital for the sector.

ThefollowingrenewableenergyfundshavebeenapprovedbyOPIC’sboard:

Middle East & Asia Capital Partners Clean Energy Fund II

OPIC is providing up to $50 million in financing to the fund, which will invest in a wide

spectrum of renewable energy projects throughout Asia, with an emphasis on South and

Southeast Asia. It will invest in equity, convertible debt and mezzanine debt in projects –wind

farms and geothermal production, for example –as well as in manufacturing and service

companies that serve the renewable and biofuels sectors. OPIC selected as fund manager Middle

East & Asia Capital Partners Pte., Ltd (MEACP), a private equity platform connecting the
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Middle East and Asia. The fund has a target capitalization of $150 million. The fund will be

raised in parallel with the targeted $250 million MEACP Clean Energy Fund, which will invest

in parallel with the fund in investments eligible for OPIC support.

South Asia Clean Energy Fund

OPIC is providing up to $100 million in financing to the fund, which will invest in companies

and projects that support the need for cleaner forms of energy in the region—including those

utilizing solar, wind, hydropower, biofuel and natural gas. The fund will also invest in

technologies that promote: energy efficiency; improved batteries and storage, clean

transportation, clean water systems, and environmental and energy efficient building. It will

focus on companies that service the renewable energy value chain, and on building South Asian

regionalandglobalgrowthcompanies.Approximately75percentofthefund’sinvestmentsare

expected to be made in India. OPIC selected as fund manager GEF Management Corporation,

which has previously managed two successful OPIC Funds, Global Environment Emerging

Markets Fund, L.P. and Global Environment Emerging Markets Fund II, L.P. The fund has a

target capitalization of $300 million.

FE Global Clean Energy Services Fund IV

OPIC is providing up to $55 million in financing to the fund, which will invest in renewable

energy and energy-efficient emission reduction projects in Asia, Central and Eastern Europe, and

LatinAmerica.Atleast50percentofthefund’scapitalisplannedtobeinvestedinAsia,

primarily in India, Malaysia, Philippines and Thailand. The Fund will also make clean energy

investments in select countries in Latin America and Eastern Europe. OPIC selected as fund

manager GEM Management IV Corp., an affiliate of FE Clean Energy Group, Inc., a leading

private equity fund management firm focused on renewable energy and energy efficiency

investments in emerging markets. These investments are expected to generate tradable carbon

credits for Greenhouse Gas emission reductions. The fund has had an initial closing of

approximately $150 million.

US Renewables Group

OPIC is providing up to $100 million of capital to be co-invested in renewable power generation,

clean fuels and renewable energy value-chain investments in emerging markets worldwide. US

Renewables Group is the fund manager, and OPIC capital will be managed in connection with

the USRG Power and Biofuels Fund III. The fund will target investments in asset-focused,

renewable energy projects, or platform companies that are projected to have strong cash flows

within two years and have low technology risk.

Good Energies –Wolfensohn Renewable Energy Fund

OPIC will provide up to $100 million in financing to the Fund, which will invest in expanding

businesses that manufacture, develop, supply, or support renewable energy products or services

in emerging markets worldwide. The Fund intends to invest in renewable energy projects, energy

efficiency and clean energy technology. The Fund will target both emerging-market companies

that target their domestic markets and OECD-based renewable energy companies that are

expanding into emerging markets. OPIC selected as fund manager a joint venture between Good
20

Energies II L.P. and Wolfensohn Low Carbon Energy Fund, L.P. The fund has a target

capitalization of $300 million.

Virgin Green Emerging Markets Fund, LP

OPIC is providing up to $100 million in financing to the Fund, which plans to invest in

companies involved in the renewable energy and resource efficiency sectors in emerging market

countries. The Fund is targeting $200 million to invest in renewable energy and resource

efficiency sectors and will target 30% gross IRR, and 3x gross returns with a hold period of three

to five years. Transactions will range from $20 million -$50 million. The Fund will focus on

investing growth and expansion capital in companies across the renewable energy sector. The

Fund is a follow-ontotheexistingVirginGreenFundI,L.P.(“FundI”),presentlyan

approximate $250 million fund formed in June 2007 to invest primarily in the U.S. and Europe.

The Fund will apply to the emerging markets a strategy similar to that employed in Fund I.

Capital Markets Development in Latin America

In 2008 OPIC announced an effort to bridge the capital access gap for growing businesses in

Latin America by providing finance to selected funds to facilitate the investment of risk capital

that will expand the breadth and/or depth of capital markets in Latin America (including Mexico,

Central America, Caribbean and South America). OPIC was primarily interested in supporting

funds that provided private debt or equity, expansion capital or addressed specific market gaps in

forms of capital and investment product in Latin America. OPIC has Board approved $350

million in commitments to three funds which hope to raise at least $1.05 billion in aggregate

from the private sector. The following is a short description of each approved fund:

Altra IV, L.P

The Fund will seek to invest in established companies with proven business models operating

mainly in countries in the Andean Region, with at-least 70% invested in Colombia and Peru.

TheFundistargetinga$200millionfinalcloseinclusiveofOPIC’s$50millionBoardapproval.

Greylock Latin America Opportunity Fund

The Fund will invest primarily in Latin American corporate debt with a focus on Colombia,

Peru, the Dominican Republic and the CAFTA region. The portfolio will target a handful of

specific sectors, including telecommunications, finance and banking, agribusiness, tourism, real

estate, natural resources, and energy, though companies in other sectors may be considered. The

Fundistargetinga$450millionfinalcloseinclusiveofOPIC’s$150millionBoardapproval.

Latin Power IV, L.P

The Fund will provide private capital to energy and infrastructure projects in Latin America and

the Caribbean. The Fund will primarily seek to make control investments in power and

infrastructure projects being developed by private entities. In addition, the Fund may also act as

the principal sponsor, owner or developer of a project, and may invest as a minority owner in

selectsituations.TheFundistargetinga$750millionfinalcloseinclusiveofOPIC’s$150

million Board approval.
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APPENDIX

Appendix A: Appropriations Language

Non-Credit Account

The Overseas Private Investment Corporation is authorized to make, without regard to fiscal year

limitations, as provided by 31 U.S.C. 9104, such expenditures and commitments within the limits

of funds available to it and in accordance with law as may be necessary: Provided, That the

amount available for administrative expenses to carry out the credit and insurance programs

(including an amount for official reception and representation expenses which shall not exceed

$35,000) shall not exceed [$50,600,000] $52,310,000: Provided further, That project-specific

transaction costs, including direct and indirect costs incurred in claims settlements, and other

direct costs associated with services provided to specific investors or potential investors pursuant

to section 234 of the Foreign Assistance Act of 1961, shall not be considered administrative

expenses for the purposes of this heading. (Department of State, Foreign Operations and Related

Programs Appropriations Act, 2009.)

Program Account

For the cost of direct and guaranteed loans, $29,000,000, as authorized by section 234 of the

Foreign Assistance Act of 1961, to be derived by transfer from the Overseas Private Investment

Corporation Noncredit Account: Provided, That such costs, including the cost of modifying such

loans, shall be as defined in section 502 of the Congressional Budget Act of 1974: Provided

further, That such sums shall be available for direct loan obligations and loan guaranty

commitments incurred or made during fiscal years [2009, 2010, and 2011] 2010, 2011, and

2012: Provided further, That funds so obligated in [fiscal year 2009 remain available for

disbursement through 2017; funds obligated in] fiscal year 2010 remain available for

disbursement through 2018; [and] funds obligated in fiscal year 2011 remain available for

disbursement through 2019; and funds obligated in fiscal year 2012 remain available for

disbursement through 2020: Provided further, That notwithstanding any other provision of law,

the Overseas Private Investment Corporation is authorized to undertake any program authorized

by title IV of the Foreign Assistance Act of 1961 in Iraq: Provided further, That funds made

available pursuant to the authority of the previous proviso shall be subject to the regular

notification procedures of the Committees on Appropriations. In addition, such sums as may be

necessary for administrative expenses to carry out the credit program may be derived from

amounts available for administrative expenses to carry out the credit and insurance programs in

the Overseas Private Investment Corporation Noncredit Account and merged with said account.

(Department of State, Foreign Operations and Related Programs Appropriations Act, 2009.)
22

OPIC Transfer Authority

(Including Transfer of Funds)

Whenever the President determines that it is in furtherance of the purposes of the Foreign

Assistance Act of 1961, up to a total of $20,000,000 of the funds appropriated under title III of

this Act may be transferred to, and merged with, funds appropriated by this Act for the Overseas

Private Investment Corporation Program Account, to be subject to the terms and conditions of

that account: Provided, That such funds shall not be available for administrative expenses of the

Overseas Private Investment Corporation: Provided further, That designated funding levels in

this Act shall not be transferred pursuant to this section: Provided further, That the exercise of

such authority shall be subject to the regular notification procedures of the Committees on

Appropriations. (Department of State, Foreign Operations and Related Programs

Appropriations Act, 2009.)

Export Financing Transfer Authorities

(Including Transfer of Funds)

Not to exceed 5 percent of any appropriation other than for administrative expenses made

available for fiscal year [2009] 2010, for programs under title VI of this Act may be transferred

between such appropriations for use for any of the purposes, programs, and activities for which

the funds in such receiving account may be used, but no such appropriation, except as otherwise

specifically provided, shall be increased by more than 25 percent by any such transfer: Provided,

That the exercise of such authority shall be subject to the regular notification procedures of the

Committees on Appropriations. (Department of State, Foreign Operations and Related

Programs Appropriations Act, 2009.)
23

Appendix B: Budget and Analysis Tables

Table B-1 FY 2010 Request

Appropriated Resources FY 2008 FY 2009 FY 2010

(Dollars, Millions) Enacted Enacted Request

Gross Budget Authority

Administrative Expenses $ 47.5 $ 50.6 $ 52.3

Credit Subsidy 23.0 29.0 29.0

TOTAL, Gross Appropriations $ 70.5 $ 79.6 $ 81.3

Net Offsetting Collections (235.0) (249.6) (237.8)

Net (Negative) Budget Authority $ (164.5) $ (170.0) $ (156.5)

Memo: Transfer Authority $ 20.0 $ 20.0 $ 20.0

Table B-2 Summary of Credit Funding Request

(Dollars, Millions) 2008

Actual

2009

Enacted

2010

Request

Credit Subsidy Appropriation $ 20.0 $ 29.0 $ 29.0

Carry-forward from Prior Year * 12.4 14.5 21.0

Transfers 5.0 - -

Total Resources $ 37.4 $ 43.5 $ 50.0

Projected Activity

Finance 1,446 1,350 1,750

Investment Funds 180 500 600

New Commitments $ 1,626 $ 1,850 $ 2,350

Subsidy obligations are projections based on current pipeline and indicative cash flows. Subsidy is

obligated on an individual transaction basis; therefore, individual transactions may vary widely from

ratespublishedinthePresident’sCreditSupplement.

See <http://www.whitehouse.gov/omb/budget/fy2010/assets/cr_supp.pdf>

* Carry-forward amounts are related to: base appropriations resources still within the appropriated

availability to obligate, recoveries of prior year obligations and also no-year appropriations related to

Assistance for New Independent States of the Former Soviet Union. This amount is partly due to the

fact that for six months of FY 2008, OPIC was unable to issue any new loans or guarantees since

OPIC’sAuthorizationhadexpired.
24

Table B-3 Insurance Program Activities

(Millions of dollars) 2007

Actual

2008

Actual

2009

Projected

2010

Projected

Aggregate Maximum Insured

Amount

Start of year $ 6,585 $ 6,268 $ 5,169 $ 4,619

Issuance during the year 613 625 650 850

Reductions/Cancellations (930) (1,200) (1,200) (800)

Outstanding end of year $ 6,268 $ 5,410 $ 4,619 $ 4,669

Maximum Contingent Liability

Statutory limitation** $ 29,000 $ 29,000 $ 29,000 $ 29,000

End of year 3,391 2,922 2,819 2,790

Current exposure to Claims

(CEC), end of year

2,410 2,245 1,895 1,800

Insurance Premium Revenue $ 22 $ 20 $ 20 $ 20

Notes and Definitions

**This is a combined insurance and finance limitation; OPIC monitors issuance and runoff to stay within

this limitation on an aggregate basis.

AggregateMaximumInsuredAmounts(MIA):AggregateMIAisOPIC’sprimarymeasurementof

issuance. It reflects the face value of all coverage issued. Premiums are generally computed based on

this amount.

Maximum Contingent Liability (MCL): MCL is the basis used to measure the maximum amount of

compensation for which OPIC would be liable, which is limited statute in the Foreign Assistance Act.

Under most active OPIC contracts, investors may obtain all three coverages –inconvertibility,

expropriation, and political violence –but aggregate claim payments may not exceed the single highest

maximum insured amount for each contract.

Current Exposure to Claims (CEC): Actual exposure to claim payments is less than total outstanding

insurance as measured by MCL, because insured investors elect "current" coverage levels that reflect the

current value of their investment, which may be significantly below their maximum insured amount.

Current exposure to claims is based on the assumption that the coverage under which a claim would be

brought would be the coverage with the highest amount of current insurance in force.
25

Appendix C: GPRA Annual Performance Plan/Report and Program Assessment Rating

Tool (PART) Metrics

GPRA PART PERFORMANCE GOALS

Outputs & Outcomes

FY 2008

Target Actual

FY 2009

Target

FY 2010

Target

Projects Finance Projects 95 93 98 100

Insurance Projects 95 92 98 100

Sub-Projects9Investment Fund Sub-Projects n/a 80 100 100

Finance Sub-Projects n/a 83 100 100

Development

Effects

Development

Matrix score

(Unweighted

Average)

Average Projects & Sub-Projects

n/a 84 100 100

SBC Cycle Time Insurance 70 54 70 70

Finance 70 51 70 70

Efficiency

Operate in a businesslike manner.

Improvement Action: Application Integration Migration

(AIM Phases I and II) will improve support of

integrated business processes and internal controls

by replacing legacy systems / technology.

Internal

Controls

COOP

Phase I AIM Phase I AIM

Phase II AIM

Maintain or improve monitoring tempo of existing

dealsforissueswhichwouldaffectOPIC’s

development mission and risk of repayment.

Mitigate risk through sound portfolio management,

project development practices, and incentives to

encourage good corporate citizenship.

Ensure self-monitoring on all active projects.

Site monitor sensitive projects no later than 3rd year of

operation.

Risk Mitigation

and Corporate

Citizenship

% of on-going OPIC Projects monitored for

compliancewithOPIC’sU.S.effects,environmental,

and worker rights standards.

100% 93% 100% 100%

Additionality Ensure additionality and private sector participation to

ensure that OPIC leverages, but does not compete

with, the private sector.

n/a 92 92 93

Policy priority

sectors

(See FY Budget narratives for FY 2009, FY 2010) West-Bank Gaza Housing

Cen. America

Microfinance

Renewable

Energy

Trade Capacity

Small Business Ensure that OPIC support is provided to small U.S.

businesses. Increase Outreach to SMEs; Especially

those owned by women and minorities.

Implementation of EDN

concept

Expand

Outreach

9

Sub-Projects are investments or loans made under an OPIC facility and evaluated by OPIC. FY 2007 is the first year of data

collection and reporting for sub-projects. As a result, the depth of available information is still maturing. Scores are indicative of

developmentimpact,butOPICexpectsthatthispopulationwill,intime,progresstoalevelonparwithOPIC’sother projects.
26

Appendix D: Development Matrix

EXPANDED DEVELOPMENT IMPACT MATRIX (XDIP)

OPIC’scoremissionistopromoteprivateU.S.investmentthatwillcontribute to the

economicdevelopmentoftheworld’slessdevelopedcountries.OPIC selects projects that

are likely to serve as foundations for long-term economic growth, especially those that

improveuponthehostcountry’sinfrastructureandprovidethebasichuman necessities of

shelter, food, water and health care. To support its developmental mission, OPIC evaluates

and scores every proposed project in 26 key areas across three broad categories that

objectively quantify its expected contribution to host-country development.

o Category I covers job creation, training, local procurement, corporate social

responsibility, and equal employment opportunity –five highly-weighted impacts

that should be demonstrated by any project, regardless of sector or the level of

economic development within the host country.

o Category II covers 20 additional development indicators within such broad areas as

human capacity building (degree of training), private sector development, resource

leveraging, social effects, infrastructure improvements, macroeconomic and

institutional effects, and technology/knowledge transfer. The degree to which

projects demonstrate these additional developmental benefits depends significantly

on the features of a given project.

o Category III adjusts forthehostcountry’spercapitaGNP,reflectingbothOPIC’s

priority to steer investment into the poorest countries and the reality that nations

most in need often lack the capacity to support more developmentally sophisticated

investments.

A project must score at least 50 on the matrix to be considered developmental and clearly

eligible for OPIC support. A score of 100 or more qualifies a project as highly

developmental. OPIC’slong-term goal is to achieve an average development rating of 100

across all business lines.
27

FINANCIAL SERVICES DEVELOPMENT IMPACT MATRIX (finDIP)

Over the past several years, OPIC support of financial sector projects has increased

steadily. In order to capture accurately the developmental impact of these projects, OPIC

developed the financial services development impact matrix (finDIP), using the XDIP

framework and information gathered from other U.S. and multilateral agencies. The

finDIP matrix consists of four Core Development Indicators, six Supplemental

Development Indicators, and a GNP Per Capita Indicator:

o The four Core Development Indicators are financial instrument

innovation/augmentation, capital mobilization, multiplier effects, and corporate

governance.

o The six Supplemental Development Indicators are sustainability, economic

diversification, macroeconomic and institutional impacts, corporate social

responsibility, human capital improvements, and transfer of technology and

knowledge.

o TheGNPperCapitaIndicatortakesintoaccountthehostcountry’slevelof

developmentandreflectsOPIC’sprioritytosteerinvestmentintothepoorest

countries.

For the sake of consistency and uniformity, the finDIP and XDIP score ranges are the

same. Scores range from 0 to 160 and are divided into three possible ratings. A score of 1

to 49 is Minimally Developmental, 50 to 99 is Developmental, and 100 to 160 is Highly

Developmental. Projects with a score of 0 are Not Rated. In general, OPIC refrains from

supporting projects in which the development score falls below 50, unless the project

serves a foreign policy priority or another priority of the Agency as determined by the

President’soffice.ThetoolwasimplementedinFiscalYear2007,anddatafromthe

financial services development matrix will be reported in the 2008 Policy Report.
28

Appendix E: Program Assessment Rating Tool

OPIChasbeenevaluatedas“moderatelyeffective”,andmarkedimprovementacrosstheboard

on a range of issues. Links to the assessment are available below.

OPIC Insurance Program

See <http://www.whitehouse.gov/omb/expectmore/summary/10001169.2006.html>

OPIC Finance Program

See <http://www.whitehouse.gov/omb/expectmore/summary/10000388.2006.html>