Transcript No Slide Title
I N S U R I N G I N V E S T M E N T S E N S U R I N G O P P O R T U N I T I E S
Coverage of Sovereign and Sub-sovereign Risks in Infrastructure
Multilateral Investment Guarantee Agency
Second International Conference on
The Role of Specialized Local Funds and Financial Intermediaries , Washington DC October 1, 2004
MIGA
Guarantees Program
Commercial Risk
Investors/ financial institutions
Non-commercial Risk
MIGA
Coverages
• Transfer restriction and currency inconvertibility • Expropriation • War and civil disturbance • Breach of contract
MIGA’S GUARANTEE PROGRAM
Expropriation
Protects against losses arising from Nationalization and confiscation Creeping expropriation Partial expropriation (limited coverage) Non-discriminatory measures not covered
MIGA’S GUARANTEE PROGRAM
Breach of Contract
Protects against losses arising from: Breach or repudiation by Host Government of a contract with the investor Non-payment of an arbitration award Wrongful call of Performance Bonds
MIGA’S GUARANTEE PROGRAM
Breach of Contract Mechanism
Amicable Resolution
Termination
Successful Resolution
Mediation International Arbitration
Unsuccessful Arbitration
Successful Arbitration MIGA Pays Claim Enforcement Local Court
Host Government Pays
MIGA Eligibility of Sub-Sovereigns
Article 3 of the Convention “Host Government means a member, its government, or any public authority of a member in whose territories . . . an investment . . . is to be located”
Expropriation
Probability that a sub-sovereign will exercise public authority
MIGA Risk
Breach of Contract
Probability of a non-enforcement of an arbitral award against a sub-sovereign
MIGA – Sub-Sovereign Risk Framework
Sub-sovereigns includes State Governments (under Federal system), Provincial Governments, Municipalities, Councils, Boroughs, Regulators and others with public authority Sub-sovereigns normally do not include State owned enterprises operating on a commercial basis
MIGA - Sub-Sovereign Risk
5 Existing Due Diligence Guidelines Legal: bankruptcy/insolvency of sub-sovereign Privatization of sub-sovereign Credit: Creditworthiness of sub-sovereign “Neutrality” towards Arbitral Forum (I.e. MIGA does not influence the choice of arbitral forum) Premium
Case Studies
PPP City of Light
MIGA’S GUARANTEE PROGRAM
PPP Structure
MIGA EPC Contractor Performance Bond EPC Contract B o C Lenders Public Works Guarantee Sovereign/sub sovereign
City of Light, Central Europe
PROJECT STRUCTURE Western Europe Border Parent Company Central Europe Know-How Transfer Sub contractor Delivery & Service Municipality Technical Services SOE Bank SPC Main Contract Build Operate Transfer
City of Light, Central Europe
PROJECT SUMMARY
Special Purpose Company (SPC) owned by West European Bank Project financed by the Bank through a shareholder loan Main BOT Contract (consisting of a lease contract and a lighting contract, both linked together) concluded between SPC and Technical Services SOE for the Constuction, Operation and Service of Public Lighting Service Contracts between SPC and subcontractor Payment by Technical Services SOE to SPC (20 years financing period) for SPC obligations Payment Guarantee by Municipality for payments to SPC MIGA’s coverage against the inability to enforce the final and binding award or judicial decision 20 years coverage Dispute Resolution – Local Courts
Thank you!
Please visit us at www.miga.org