RISK MITIGATION: What are Updates & Proposals on Risk Mitigation Products?

Product Name Partial Risk Guarantee
Link to Product Website
Provider Name World Bank - IDA (International Development Association)
Product Definition Partial Risk Guarantees (PRGs) cover private lenders, or investors through shareholder loans, against the risk of a government (or government-owned entity) failing to perform its contractual obligations with respect to a private project.


International Development Association (IDA) PRGs are available for all countries eligible for IDA credits.

Eligible projects: Projects with private participation dependent on certain government contractual undertaking, such as: Build-Operate-Transfer (BOT) and concession projects; Public-Private Partnership (PPP) projects; privatizations. The projects can be both greenfield or existing projects.

Eligible debt: PRGs can be used for any commercial debt instruments (loans, bonds) provided by any private institution, including debt provided by sponsors in the form of shareholder loans. PRGs can cover both foreign currency and local currency debt.

Risk coverage: PRGs can cover a range of sovereign or parastatal risks, subject to specific obligations contractually agreed to by the government for a specific project. The types of risks covered may vary, including:

- currency inconvertibility / non transferability;

- political force majeure risks such as expropriation; war and civil disturbance; material adverse government action;

- government (or government entity) contractual payment obligations (e.g., periodic or termination payments; agreed subsidy payments; minimum revenue guarantees);

- regulatory risk; change of law and regulations; negation or cancellation of license and approval; non-allowance for agreed tariff adjustment formula or regime;

- contractual performance of public counterparties (e.g., state-owned entities under an off-take agreement, an input supply agreement);

- frustration of arbitration; and

- certain uninsurable force majeure events.

Coverage amount: PRGs typically cover outstanding principal and accrued interest of a debt tranche in full. Payment is made only if the debt service default is caused by risks specified under the guarantee.

Guarantee term: PRGs typically cover extended maturities necessary to make the project financially viable. IDA PRGs are “non-accelerable” in that IDA makes payments only according to the original debt service schedule under the guarantee even if such debt is accelerated upon default.

Product Type Partial Risk Guarantee
Defined Risks Covered n.a. More on Risks Covered
Eligible Form of Investments All
Eligible Currency of Underlying Investment Covered by this Product Both local and foreign currency
Eligible Countries & Regions n.a.
More on Eligible Countries
Eligible Applicants n.a. More on Eligible Applicants
Eligible Sector No Specific Sector
Maximum Tenor Over 20+ years
Max. Absolute Amount (USD) Over 350+ MM
Max. % of Project Costs Covered 100%
Max. % of Export Content Covered Over 85+%
Fees Fixed
Currently the following fees are payable by private project sponsors (or the project company) to the World Bank.

- Initiation fee: one-time fee of 0.15% on the amount of the guarantee or a minimum of US$100,000;

- Processing fee: one-time fee of up to 0.5% on the amount of the guarantee, to cover the cost of out-of-pocket expenses;

- Guarantee fee: 0.75% per annum on the disbursed and outstanding guarantee amount
More on Fees

Other Conditions Sovereign Counterguarantee: Yes
Anti-Corruption and Governance Standards: Yes
Environmental standards: Yes link
Social standards (incl. Human Rights Standards; Labor Rights Standards): Yes link
Others:
Source(s) n.a.
For more information, contact n.a.
Attachments n.a.
Additional Links web.worldbank.org/WBSITE/EXTERNAL/PRO ... piPK:60001558~theSitePK:84266,00.html
web.worldbank.org/external/default/ma ... 0262285&menuPK=64143514&piPK=64143448
Deals Vietnam - Phu My 2-2 Power Project (2002)

Provider Name World Bank - IDA (International Development Association)
Institution Type PUBLIC: Multilateral Development Bank
Ownership IBRD is owned by 184 member countries; IDA has 165 member countries.
Head Office 1818 H Street, NW, Washington DC, 20433
Provider Home Country United States
Rating n.a.
Main Risk Mitigation Products IBRD Enclave Partial Risk Guarantee
IBRD Partial Credit Guarantees
IBRD Partial Risk Guarantee
IBRD Policy-Based Guarantees
IDA Partial Risk Guarantee
IDA Output-Based Aid
Attachments n.a.
Additional Links
Entered On: 06/29/2007 at 01:06 PM
Updated On: 05/07/2013 at 06:06 PM