Transcript The Municipal Fund

Municipal Fund
Global Finance for Local Needs
Table of Contents
I.
The World Bank Group and Municipal
Finance
II.
The Municipal Fund
III. The Tlalnepantla Water Conservation
Project
The World Bank Group and
Municipal Finance
• The World Bank has provided billions of
dollars over the years to municipalities around
the world - however, always with sovereign
guarantees, as required by the Bank’s charter.
• The World Bank has also provided advice and
knowledge support in the area of
decentralization
• The International Finance Corporation (IFC)
has traditionally invested in projects with
majority private sector sponsorship.
Thus, a gap exists for investment in well run sub-sovereign
operations without sovereign guarantees
The Municipal Fund
The Municipal Fund
The Municipal Fund, a joint World Bank/IFC initiative seeks
to help fill this gap by structuring and investing in subsovereign projects in emerging markets
Municipal Fund Background
• Established in May 2003, The Municipal Fund
is a joint World Bank/IFC initiative to invest in
projects at the state and municipal level -
without taking sovereign guarantees.
• Brings together IFC’s credit assessment and
market expertise and the World Bank’s public
policy and capacity building experience to
address the needs of the municipal finance
market.
Municipal Fund Background
• We support investments made by states,
municipalities and municipally controlled
entities in numerous sectors including: water,
wastewater, electricity, district heating
companies, solid waste and urban transport.
• We can also support public-private projects
such as leases, management contracts and
concessions, either through investments on the
municipal side or in private
concessions/Special Purpose Vehicles where
control is municipal or sub-sovereign.
Municipal Fund Operations
• The Municipal Fund invests from IFC’s balance
sheet which is AAA and has full access to IFC’s
strong credit assessment, financial product line
(including local currency financing) and risk
management capabilities (swaps, options,
forward contracts).
• Full array of financial products - can provide
debt, guarantees and equity/quasi
equity/subordinated debt.
Our First Project (Tlalnepantla,
Mexico)
• Bonds were sold successfully (US$9MM)
• First bond issue without intercept of federal transfers
Partial Credit Guarantees (PCG)
• Direct municipal risk covered
• A PCG is the guarantee of
full, timely debt service
Transaction Structure
payment up to a
Municipality/OPDM
3
predetermined amount (<
2) Trustee issues loan to
2
Municipality and water
Company and then transferred
initial principal.)
3) Pledges proceeds from
the net funds to water company
Water fees for the payment
of the loan granted by the Trust. •The guarantee can be used
for either a loan or bond.
•The guarantee is structured
DEXIA/IFC
Trustee
4
2 order
to reduce probability of
Beneficiary of the
trust
default and increase recovery
4) Issue guarantee to
cover P + I
The Trustee issues
5
1
given default.
certificates to investors.
•IFC’s objective is to offer the
5) Domestic investors buy Certificates;
CERTIFICATE HOLDERS
debt service funded from water fees.
1 order
Certificates are enhanced by cash reserves
minimum amount of
Beneficiary
and Dexia/IFC guarantee
Of the trust
guarantee necessary in order
to facilitate a successful
transaction.
nd
st
Municipal Fund Website
Contacts:
– Declan Duff, Director
– Anita George
– Sumeet Thakur
– Gaetan Tiberghien
– Alejandro Perez
– Carlos Clemente
• Tel: (202) 473 9779
• Fax: (202) 974 4310
Website: www.ifc.org/municipalfund
Email: [email protected]