Multidimensional Risk ManagementA Tool for Building Sustainable Projects?

Jan P. Mumenthaler

Head, Insurance Services Group

International Finance Corporation

IBRDInternational Bank for Reconstruction and Development

IDAInternational Development Association

IFCInternational Finance Corporation

MIGAMultilateral Investment and Guarantee Agency

To promote institutional, legal and regulatory reform

Governments of poorest countries with per capita income of less than $1,025

- Technical assistance- Interest Free Loans- Policy Advice

To promote private sector development

Private companies in 182 member countries

- Equity/Quasi-Equity- Long-term Loans- Risk Management- Advisory Services

To reduce political investment risk

Foreign investors in member countries

- Political Risk Insurance

Est. 1945 Est. 1960 Est. 1956 Est. 1988

Role:

Clients:

Products:

To promote institutional, legal and regulatory reform

Governments of member countries with per capita income between $1,025 and $6,055.

- Technical assistance- Loans- Policy Advice

IFC is a Member of the World Bank Group

Shared Mission: To Promote Economic Development and Reduce Poverty

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IFC FY10 Highlights

Over $90 billion Invested in Emerging Markets since 1956

S&P, Moody’s AAAPortfolio $48.8 billionCommitted $16.1 billionSyndicated $1.9 billion# of companies1,656# of countries103# of companies with equity 668

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Our Value Added

IFC’s Products

Industry knowledge

Relationship with / understanding of local authorities

Expertise inemerging markets

Capital Mobilization

• B loan program

• Credit enhancement (Partial Credit Guarantee)

• Pre-IPO stamp of approval

Capital Mobilization

• B loan program

• Credit enhancement (Partial Credit Guarantee)

• Pre-IPO stamp of approval

Long Term Financing

•Corporate / Project / Acquisition

• Foreign / Local currencies

• Equity / Quasi-equity

• Carbon Finance

Long Term Financing

•Corporate / Project / Acquisition

• Foreign / Local currencies

• Equity / Quasi-equity

• Carbon Finance

Advisory ServicesAdvisory Services

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Selected Power Transactions ……

$130,000,000Loan Financing

Uganda

LenderJune 2007

Bujagali Energy

$125,000,000Loan Project Financing

Pakistan

LenderMarch 2007

KESC

$450,000,000Equity and Loan Financing

India

Shareholder and LenderApril 2008

Tata Ultra Mega

$262,126,000Equity and Loan Financing

Philippines

Shareholder and LenderFebruary 2008

Masinloc Power

$62,500,000Loan Financing

Brazil

Mandated LeadArrangerFebruary 2006

TermoFortaleza

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… and in Oil & Gas

Cairn Energy

$171,000,000Revolving Credit Facility & Equity Investment

Equity Investor & Mandated Lead ArrangerJune 2006

India

Bankers Petroleum

$40,400,000Senior Loan & Quasi Equity

Lender and Investor2009

Albania

Tullow Oil

$115,000,000Senior Loan

Sole LenderMay 2009

Ghana

Pan American Energy

$550,000,000Syndicated Corporate Loan

Mandated Lead ArrangerJune 2007

Argentina

Peru LNG

$300,000,000Syndicated Project Financing

LenderJune 2007

Peru

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Multidimensional Risk Management

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CSR – How to Move Beyond …

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Transforming Responsibility into Opportunity

Challenges- Not well integrated in models (financial/operational)

- No assessment of financial value

- Difficult to communicate value

Solution through Tool

- Estimates expected net present values

- Evidence-based customization+ “plug-and-play” usability

- Framework for prioritizing, structuring, timing and resourcing investments

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Key Sustainability Risks

- Delays in planning phase- Delays in construction phase- Disruptions in operational phase- Project cancellation or expropriation- Added cost + litigation

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Tool Objectives

• Calculate sustainability investment value- Direct value creation- Indirect value protection

• Strategic framework for decisions

• Stronger Risk Management framework reduced cost of risk

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Understanding your Risk=making the right choices

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Environmental & Social Risk Management IFC’s Approach

• Sustainability Framework- Sustainability Policy- 8 Performance Standards

• PS1 Social and Environmental Assessment and Management System

• PS2 Labor and Working Conditions• PS3 Pollution Prevention and Abatement• PS4 Community Health, Safety and

Security• PS5 Land Acquisition and Involuntary

Resettlement• PS6 Biodiversity Conservation and

Sustainable Natural Resource Management

• PS7 Indigenous Peoples• PS8 Cultural Heritage

• Equator Principles (www.equator-principles.com)

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IFC’s Performance Standards:International Stamp of Approval

“Equator Principles” adopted by 60+ of the world’s leadingbanks and based on IFC’s Performance Standards

Apply to 85% of project financing worldwide

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What does this mean for the Insurer?

• Sustainable project

• Client with Risk Management understanding

• Improved performance- Monitored environmental performance- Fire & Life Safety focus- Social license to operate

• Operating in line with best practice

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Thank you for your Interest

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