Anil Bhandari
Anil Bhandari
Anil Bhandari
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IBTTA and ASECAP present the International Transportation Finance Summit<br />
April 17 – 19, 2005, Nice, FRANCE<br />
International Transportation Financing:<br />
Role of the World Bank Group<br />
<strong>Anil</strong> S. <strong>Bhandari</strong><br />
Lead Transport Specialist, World Bank
International Transportation Financing – Role of the World Bank Group<br />
TOPICS<br />
I<br />
Transportation<br />
Infrastructure<br />
Financing<br />
• overview of<br />
World Bank<br />
Group lending<br />
• role of private<br />
sector<br />
II<br />
World Bank<br />
Group Financing<br />
Instruments<br />
• loans/credits<br />
• equity<br />
• guarantees<br />
III<br />
Going Forward
Between fiscal years 2002 & 2005 (ytd.), 16% of World Bank’s<br />
total lending accounted for transport<br />
Share of WB Lending by Sector (FY 2002 - 2005)<br />
1%<br />
9%<br />
11%<br />
14%<br />
7%<br />
Regional Distribution of Transport Lending<br />
(FY 2002 - 2005)<br />
MNA<br />
6%<br />
ECA<br />
6%<br />
LCR<br />
13%<br />
AFR<br />
22%<br />
24%<br />
7%<br />
5%<br />
6%<br />
16%<br />
SAR<br />
30%<br />
EAP<br />
23%<br />
Agriculture<br />
Education<br />
Law & public admin<br />
Finance<br />
Info & communication<br />
Health & social service<br />
Energy & mining<br />
Industry and trade<br />
Transportation Water/sanit/fld protection<br />
• average World Bank Lending FY02 to FY04 = US$ 19.4 billion<br />
• average Number of Projects FY02 to FY04 = 238<br />
Source: World Bank (Business Warehouse)
The bulk of all transport lending stems from roads & highways<br />
Transport Lending by mode (2002-2005 $ bn)<br />
70% Aviation<br />
Gen transport sector<br />
Ports/water/shipping<br />
9%<br />
2%<br />
15%<br />
4%<br />
Railways<br />
Roads & highways<br />
Source: World Bank (Business Warehouse)
Funds from the World Bank Group are often used to leverage Private Sector capital, but<br />
investments in transport have always been much lower than in energy and telecom.<br />
60.0<br />
Infrastructure investments in developing countries with private<br />
participation ($ bn)<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0.0<br />
Source: World Bank, PPI Project Database<br />
1990<br />
1991<br />
1992<br />
1993<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
Energy<br />
Telecom<br />
Transport<br />
Water and<br />
sewerage
Between 1990 and 2003 some $ 124b have been invested in transport projects<br />
with private participation with a dominance in toll road investments<br />
Transport investments with private participation by<br />
mode (1990-2003 $bn)<br />
17%<br />
20.9<br />
10%<br />
12.5<br />
22%<br />
27.0<br />
64.6<br />
52%<br />
Airports Railroads Toll Roads Seaports<br />
Source: World Bank, PPI Project Database
Out of that $ 124b, development agencies provided financial support 1 worth $ 6b,<br />
which shows their importance for catalyzing private sector participation<br />
Financial support by Donor Agencies (1990-2003 $ million)<br />
914 54<br />
441<br />
577<br />
79<br />
30<br />
644<br />
3303<br />
WBG ADB<br />
AFDB CAF<br />
EBRD EIB<br />
IADB Other<br />
The World Bank Group's financial support by<br />
transport mode (1990-2003)<br />
2<br />
Seaports<br />
15%<br />
Railroads<br />
19%<br />
Airports<br />
9%<br />
Toll Roads<br />
57%<br />
1) Financial support can comprise: equity, quasi-equity, loans, syndication, guarantees, risk mitigation instruments<br />
nts<br />
2) World Bank Group comprises IBRD, IDA, IFC and MIGA<br />
Source: World Bank, PPI Project Database
Concessioning of existing transport infrastructure has by far<br />
outweighed Greenfield projects as type of private participation<br />
Transport investment with private participation by type of PPP<br />
(1990-2003 $bn)<br />
7.0<br />
Concession<br />
70.7<br />
47.0<br />
Divestiture<br />
Greenfield Project<br />
Management/Lease<br />
0.4<br />
ROT<br />
34%<br />
Concessions<br />
by PPP subtype<br />
RLT<br />
14%<br />
BROT<br />
52%<br />
BLO:<br />
Build, Lease, Own<br />
BOO: Build, Operate, Own<br />
BOT:<br />
Build, Operate, Transfer<br />
BROT: Build/Rehabilitate, Operate, Transfer<br />
RLT:<br />
Rehabilitate, Lease, Transfer<br />
ROT:<br />
Rehabilitate, Operate, Transfer<br />
Source: World Bank, PPI Project Database<br />
Greenfield projects<br />
by PPP subtype<br />
BOT<br />
83%<br />
BLO<br />
5% BOO<br />
12%
Most of the World Bank Group funding in infrastructure has been used for<br />
maintenance & rehabilitation of existing infrastructure<br />
Use of World Bank Group funds:<br />
• Rehabilitation<br />
• Maintenance<br />
• New infrastructure<br />
• Technical Assistance, funding for<br />
• policy & sector reform<br />
• implementation support<br />
• training & capacity building<br />
(examples: establishment of Road Fund/Road Agency,<br />
funding transaction advisors)
The World Bank Group financing instruments comprise equity,<br />
loans, credits & grants as well as various guarantees<br />
e Equity & quasi-equity<br />
l Loans<br />
c/g Credits/<br />
g<br />
Grants<br />
Guarantees<br />
Institution<br />
IBRD<br />
IDA<br />
Recipient<br />
Government/<br />
Public entity<br />
Public / private<br />
entity within PPP<br />
l l g l<br />
c/g<br />
c/g<br />
Private entity<br />
*<br />
g<br />
IFC<br />
e **<br />
e<br />
l<br />
g<br />
e<br />
l<br />
g<br />
MIGA<br />
g<br />
g<br />
* e.g. loans to government for on-lending to Small & medium transport operators ** Pre-privatization equity
IBRD loans<br />
• loans to middle-income income countries<br />
• maturity 10-20, grace period 3-53<br />
5 years<br />
• resources raised in financial markets<br />
• currencies: USD, EUR, JPY 1<br />
• base rate 6-month Libor, reset semiannually<br />
• spread fixed or variable (if fixed, 0.75% of loan amount)<br />
• front-end fee 1% of loan amount<br />
• commitment fee 0.75 - 0.85 % on undisbursed amount<br />
• FY04 commitments: $ 11b total; $ 2.5b transport<br />
1) And any other currency which IBRD can efficiently intermediate.<br />
te.
IDA credits<br />
• interest-free credits to low-income countries<br />
• maturity 35-40, grace period 10 years<br />
• regular replenishments (3 years)<br />
• currencies: Special Drawing Rights (SDR)<br />
• service charge 0.75% on disbursed amount, commitment charge<br />
not exceeding 0.5% on undisbursed amount<br />
• allocation criteria for resources: poverty level; quality of borrower<br />
rrower’s<br />
policy and institutional performance captured in the CPIA 1 ;<br />
performance of country’s s active WB project portfolio<br />
• FY04 commitments: $ 9b total; $ 1.2b transport<br />
Lending instruments are the same for IBRD & IDA borrowers !<br />
1) Country Policy and Institutional Assessment
Specific Investment and Sector Investment & Maintenance loans<br />
are the most important loan/credit instruments<br />
IBRD/IDA Investment Loans<br />
Instruments (% of WBG commitment 1 ) :<br />
• SIL = Specific Investment Loan (80%)<br />
• supports creation, rehab & maintenance of economic, social and<br />
institutional infrastructure<br />
• also finance consultant services and management & training<br />
programs<br />
• SIM = Sector Investment and Maintenance Loan (14%)<br />
• focus on public expenditure programs in particular sectors (mainly<br />
infrastructure, education, law & public administration)<br />
• aim to bring sector expenditure, policies and performance in line e with<br />
country’s s development priorities by helping to appropriately<br />
balance new capital investments, rehabilitation, reconstruction and<br />
maintenance<br />
• help to develop borrower’s s institutional capacity to plan, implement and<br />
monitor an investment program<br />
1) Lending instrument’s s share of WBG’s commitments for transport projects during FYs 1990-2004.
There are five more IBRD/IDA loan/credit instruments playing only<br />
a minor role in transport lending<br />
IBRD/IDA Investment Loans<br />
Instruments (% of WBG commitment) 1 :<br />
• APL = Adaptable Program Loan (3%)<br />
• ERL = Emergency Recovery Loan (3%)<br />
• FIL = Financial Intermediary Loan (less than 1%)<br />
• LIL = Learning and Innovation Loan (less than 1%)<br />
• TAL = Technical Assistance Loan (less than 1%)<br />
1) Lending instrument’s s share of WBG’s commitments for transport projects during FYs 1990-2004.
IBRD/IDA examples of investment loans/credits by recipient<br />
IBRD/IDA Investment Loans<br />
Government/public entity<br />
• Kenya, Northern Corridor<br />
Improvement Project (SIL)<br />
• India, National Highways (SIL)<br />
• Indonesia, Regional roads<br />
improvement (SIM)<br />
• Argentina, National Highway Asset<br />
management (APL)<br />
• Ethiopia, Road Sector Development<br />
Project (APL)<br />
• Mozambique, Roads & Bridge<br />
Management (APL)<br />
• Afghanistan, Rural roads rehab (ERL)<br />
• Congo, Infrastructure rehab (ERL)<br />
Public / private<br />
entity within PPP<br />
• Chad, Performance based<br />
Maintenance Project (SIL)<br />
• Ivory Coast/Burkina<br />
Faso, Sitarail Concession<br />
(SIL)<br />
• Madagascar, Madarail<br />
concession (APL)<br />
• China, Road asset<br />
securitization (SIL)<br />
• Mozambique, Beira<br />
Railway Concession (SIL)<br />
Private entity<br />
• Sri Lanka, Private<br />
Sector Infrastructure<br />
Development (FIL)
Typical PPP - IDA credit to Government of Mozambique with support to<br />
private sector for railway concession<br />
Beira Railway Project – structure<br />
CFM<br />
(GOM sole shareholder)<br />
CFM share will<br />
eventually diminish<br />
to 33% (IPO for<br />
remaining 16%<br />
envisaged)<br />
Joint Venture<br />
49% CCFB<br />
(Concession<br />
Company)<br />
51%<br />
on-lending,<br />
$ 104.5m of<br />
IDA credit<br />
Concession<br />
agreement<br />
RITES/IRCON<br />
WB<br />
IDA credit<br />
GOM
Examples of IDA/IBRD support for PPP projects in the Road Sector<br />
• China – Toll Road Securitization<br />
• Government pre-finances (with Bank support) toll roads, hence bears<br />
construction & start-up traffic risks<br />
• Subsequent securitization of the toll roads raises new private capital<br />
for new highway projects<br />
• Chad – Long Term Performance Based Road Management and Maintenance<br />
• Approx. $10 million performance based 4-year 4<br />
contract with private sector to<br />
maintain 440km of unpaved roads<br />
• Includes initial rehabilitation by contractor<br />
• Kenya – Nairobi Urban Toll Road Concession (under preparation)<br />
• Concessionaire will finance construction of multi-lane lane urban facility and<br />
operate it for a period of 30-years<br />
• IDA will finance adjoining road section which would be handed over to the<br />
concessionaire for tolling
International Finance Corporation (IFC) Portfolio<br />
IFC Portfolio FY 2004 in $ million<br />
74%<br />
13260<br />
Additionally $ 5.5b loans<br />
held & managed that<br />
were syndicated<br />
177<br />
1%<br />
3592<br />
908<br />
20%<br />
5%<br />
Loans<br />
Equity<br />
Structured finance products (inlc. Guarantees)<br />
Risk management products<br />
Source: IFC
IFC equity financing<br />
IFC Equity and Quasi-equity<br />
Description:<br />
Equity<br />
• long-term investments (8-15 years) in private sector companies, financial<br />
institutions & portfolio/investment funds in developing countries<br />
• exclusively in for-profit projects<br />
• usually “passive” investor, never largest shareholder (subscription generally to<br />
5%-15% of project’s s equity)<br />
• IPO in local stock markets preferred exit option<br />
• shareholdings treated as domestic capital/local shares to meet national<br />
ownership requirements<br />
Quasi-equity (C-loans)<br />
• blend of equity & senior loans (i.e. subordinated debt, preferred ed stock,<br />
convertible loans) to bridge gap in project’s s financing plan
IFC loan financing<br />
Description:<br />
A-loans (IFC(<br />
IFC’s own account)<br />
• fixed/variable market-rate rate loans to private sector ($ 1m-100m, 100m, in currency of choice)<br />
IFC Loans<br />
• also to intermediary banks as credit-lines for further on-lending and to publicly owned<br />
entities in context of pre-privatization privatization equity<br />
• maturity of 7-127<br />
years, grace period & repayment on case-by<br />
by-case basis (dependent<br />
on borrower’s s cash flow)<br />
• financing capped to 25% of project costs for Greenfield projects; ; for expansion projects, capped<br />
to 50%, provided loan does not exceed 25% of total capitalization n of project company<br />
B-loans (syndicated loans)<br />
• package consisting of IFC A-loan A<br />
& loans from other financiers under one loan agreement<br />
• participants benefit from IFC’s preferred creditor status<br />
• payments distributed pro-rata rata between IFC & participants (i.e. IFC not fully repaid until all<br />
participants fully repaid)
IFC – examples<br />
• Peru, Pan America Highway Concessioning (2003)<br />
• 25 year concession of Ancon-Huacho<br />
Huacho-Pativilca<br />
section (160km)<br />
• consortium of one engineering & two construction companies won international bidding in 2002<br />
• rehab & construction (2 bypasses, 2 bridges, 2 interchanges), total tal costs estimated at $ 71m<br />
• $ 18m A-loan A<br />
to concessionaire<br />
• Brazil, Anhanguera/Bandeirantes<br />
Toll Road (1999)<br />
• 20 year concession (317 km highway section in province of Sao Paulo)<br />
• concessionaire (AutoBan(<br />
AutoBan) ) consortium of five shareholders<br />
• rehab & construction (75 km extension, 3 more toll plazas), total l costs estimated at $ 514m<br />
• syndicated loan (IFC $ 35m as A-loan A<br />
and $ 38m as B-loan) B<br />
• Sri Lanka, South Asia Gateway Terminal (1999)<br />
• 30 year concession to rehab/expand/modernize Queen Elizabeth Quay, worth $ 192m<br />
• sponsors: P&O (also management), Evergreen, John Keells Holdings, Sri Lanka Ports Authority<br />
• $ 35m A-loan, A<br />
7.5% equity share in SAGT ($ 7.3m)
IBRD/IDA Partial Risk Guarantees<br />
Description:<br />
• generally private sector projects (Greenfield/privatization/concession/other ession/other PPP)<br />
• cover debt financing against specific sovereign contractual obligations committed to project<br />
(coverage of equity in context of privatization through limited recourse or L/C structure)<br />
• require counter-guarantee from government<br />
• coverage of risks related to government performance:<br />
IBRD/IDA Guarantees<br />
• convertibility & transferability foreign exchange<br />
• political/natural force majeure (incl. expropriation)<br />
• regulatory/tariff framework<br />
• changes in Licensing Arrangements<br />
• Frustration of Arbitration<br />
• Subsidies/ Minimum Revenue Guarantees<br />
• PSO payments/Shadow tolls.<br />
Project<br />
Company<br />
Government<br />
Undertakings<br />
Government<br />
Loans<br />
Indemnity<br />
Agreement<br />
Commercial<br />
Lenders<br />
PRG<br />
World Bank
In FY 2004 the IBRD/IDA guarantee amount was $ 2.6 b<br />
Guarantee Allocation by Type<br />
$921<br />
$409<br />
$1,294<br />
Partial Risk Guarantees<br />
Partial Credit<br />
Guarantees<br />
Policy Based<br />
Guarantees<br />
Allocation by Sector<br />
Other<br />
18%<br />
Finance<br />
16%<br />
Oil & Gas<br />
3%<br />
Telecom<br />
10%<br />
Power<br />
53%<br />
Power Telecom Oil & Gas Finance Other
MIGA political risk guarantees<br />
MIGA Guarantees<br />
Description:<br />
• private sector projects (Greenfield/privatization/concession/other er PPP)<br />
• cover debt & equity financing<br />
• no counter-guarantee from government required<br />
• risk coverage: transfer restriction, expropriation, breach of contract, war<br />
& civil disturbance<br />
• guarantees smaller in size, increasing combination of MIGA and<br />
IBRD/IDA guarantees (very successful for Southern Africa Regional<br />
Gas Project & West Africa Gas Pipeline)
38<br />
35<br />
11<br />
9<br />
7<br />
Infrastructure<br />
Financial<br />
Oil, Gas & Mining<br />
Agribusin. & Manufacturing<br />
Tourism & Services<br />
MIGA gross guarantee exposure<br />
$5.20<br />
$5.25<br />
$4.36<br />
$2.86<br />
$2.28<br />
$1.05<br />
$0.42<br />
$0.13<br />
FY90 FY92 FY94 FY96 FY98 FY00<br />
FY01 FY02<br />
Gross Exposure<br />
$5.19 billion FY 2004<br />
$5.08<br />
by Sector<br />
%<br />
FY03 FY04
Successful example of partial risk guarantee for toll road project<br />
• Philippines, Manila North Tollways Corporation Project (2001)<br />
• 30 year toll road BOT concession<br />
• rehab & construction (90km section), estimated costs $ 377m ($117m equity, $<br />
260m loans)<br />
• partial risk guarantee for equity investment (for EGIS, shareholder of<br />
concession company) and for debt-financing (WestLB(<br />
WestLB, , one of<br />
concessionaire’s s lenders)<br />
• risk coverage: transfer restriction, expropriation, war & civil disturbance<br />
and breach of contract (particularly, toll adjustment)<br />
• guarantee amount $ 87m<br />
• additionally provision of $ 45m A-loan A<br />
from IFC
Guarantee pricing<br />
Types of Fee IBRD IDA<br />
Stand-by 75 bp 25 bp<br />
Guarantee 100 bp 75 bp<br />
Initiation & Processing 0.15-0.65%<br />
0.15-0.65%<br />
Front-end 1% N/A<br />
Payment of<br />
Guarantee Fee Periodic Periodic<br />
MIGA<br />
• market-based<br />
fees<br />
• priced to risk,<br />
on per project<br />
basis<br />
• 30-100bp per<br />
risk (not per<br />
country)<br />
Periodic
Going Forward<br />
• Increasing share of lending in infrastructure<br />
• Greater role of private sector in the development of<br />
infrastructure and provision of services<br />
• Multi-institutional institutional approach (IBRD/IDA, MIGA and IFC)<br />
• Shift away from specific investment lending to programmatic<br />
lending and budget support<br />
• Focus on debt management and grant financing in low<br />
income countries under stress<br />
• Lowering of transaction costs for IBRD loans to middle<br />
income countries<br />
• More guarantee operations in transport sector
THANK YOU
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