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    IIC - Peru Capital Projects & Infrastructure Summit

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    mgparedes
    The document discusses the Inter-American Investment Corporation (IIC), which is part of the Inter-American Development Bank Group and provides financing for infrastructure, SMEs, and corporations in Latin America and the Caribbean. It outlines IIC's competitive advantages including local presence, project finance expertise, and financial soundness. The document also examines risks in infrastructure projects and potential risk mitigation strategies.

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    IIC - Peru Capital Projects & Infrastructure Summit

    Uploaded by

    mgparedes
    60 views11 pages
    The document discusses the Inter-American Investment Corporation (IIC), which is part of the Inter-American Development Bank Group and provides financing for infrastructure, SMEs, and corporations in Latin America and the Caribbean. It outlines IIC's competitive advantages including local presence, project finance expertise, and financial soundness. The document also examines risks in infrastructure projects and potential risk mitigation strategies.

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    Description of Project Finance Risks from the perception of a Lender

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    The document discusses the Inter-American Investment Corporation (IIC), which is part of the Inter-American Development Bank Group and provides financing for infrastructure, SMEs, and corporations in Latin America and the Caribbean. It outlines IIC's competitive advantages including local presence, project finance expertise, and financial soundness. The document also examines risks in infrastructure projects and potential risk mitigation strategies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    60 views11 pages

    IIC - Peru Capital Projects & Infrastructure Summit

    Uploaded by

    mgparedes
    The document discusses the Inter-American Investment Corporation (IIC), which is part of the Inter-American Development Bank Group and provides financing for infrastructure, SMEs, and corporations in Latin America and the Caribbean. It outlines IIC's competitive advantages including local presence, project finance expertise, and financial soundness. The document also examines risks in infrastructure projects and potential risk mitigation strategies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    Inter-American Investment Corporation

    Transferring Risk in Infrastructure Projects A Lenders Perspective


    August 2013

    www.iic.org

    IIC Over 20 years of Lending and Investment Experience in LAC


    Who We Are:
    Part of the IDB Group 44 member countries and a presence in 11 countries in the region. Total assets of US$1.8 billion

    What We Offer:
    Financing for SMEs, Corporates and Greenfield Infrastructure and Power Projects:
    Direct loans and equity investments Project finance for small infrastructure Technical assistance

    Regional Presence in 11 Countries

    Mexico and Central America: Costa Rica El Salvador Guatemala Nicaragua Panama Caribbean: Haiti Andean Region: Colombia Peru Southern Cone Region: Argentina Chile Paraguay Uruguay

    Our Competitive Advantage Local Presence Project Finance Expertise


    Extensive local presence and local markets knowledge Multiple financial solutions Loan products / equity / partial credit guarantees Specialized technical advisory services Technical assistance (pre/post investment) Proven financial soundness Low debt to net worth ratio and high liquidity Prudent loan portfolio management / adequate coverage Strong commitment from 44 member countries

    Financial Soundness

    AAA/Stable Risk Rating

    Agency ratings:
    Fitch: AAA, Outlook Stable S&P: Raised long-term rating to AA (07/2010), Outlook Stable Moodys: Aa2, Outlook Stable

    Project Construction Completion Risk


    Delays / Costs Overruns
    EPC Contract EPC Contractor Social Risks Currency Exchange

    Possible Risk Mitigations


    EPC Contract
    Fixed completion date / price DLDs to cover all loss or damage suffered due to delays Securities: Performance Bonds Advance PMT guarantee Wrap-around guarantee (in case of Split EPC Contract) Look closely: Change order provisions Definition of force majeure Include contingency and escalation amounts in original cost estimates

    Insurable Risks
    Construction and Erection All Risk
    Acts of God Strikes, civil commotion Terrorism, sabotage Marine Cargo

    Advance Loss of Profit ALOP Third party Liability


    Workers compensation Employers liability Commercial general liability Pollution Liability

    EPC Contractor
    Social Risks

    Parent company guarantee Involve community early in the process Hedge mechanisms

    Currency Exchange

    Risks and Mitigation Arrangements during Operating Phase


    Project Performance
    Technology Assurance
    Prefer tried and tested technologies PLD payable by contractor if it fails to meet performance guarantee Securities: Performance Bonds O&M Agreement linked to performance Supply contracts specifying quantity, quality and pricing Match term of supply contract to term of project life. Experienced management team Performance Incentives and Penalties Training provided by equipment supplier

    Market Risk
    Demand Potential
    Independent market assessment Offtake contract with minimum quantity and prices

    Equipment Performance

    Payment Risk
    Sell output to creditworthy buyers Consider credit enhancements if not: Government guarantees Direct assignment of part of buyers revenue stream SBLC

    Input Availability

    Management Performance

    Skilled Labor - Operator Performance

    Risks and Mitigation Arrangements during Operating Phase (cont.)


    Economic and Political Risks
    Interest Rates
    Fixed-rate financing Interest rate swaps Offtake agreement indexed Match currency of project loan to project revenues Swaps Long-term supply contract Output price indexed to inflation / commodity price Political risk insurance Involve multilateral development bank or other official agency in financing.

    Insurable Risks
    Operational property damage and machinery breakdown
    Acts of God Strike Civil commotion, terrorism

    Exchange Rates

    Loss of Income during Business Interruption

    Inflation

    Political Risk

    IIC Examples of Recent Projects Latin America


    In 2010, Coriport built a new international passenger terminal at Province Guanacaste in Costa Rica. Coriport is headed up by Houston Airport System, the worlds sixth-largest airport operator. The IIC provided US$795 million in project financing, out of a total cost of US$43.5 million. The IIC has long-standing ties to the tourism industry in Costa Rica. Ten years ago, it financed construction of the first 5-star hotel in Guanacaste.

    In 2011, the IIC approved a structured loan Carifresh for up to S.A. $10.5 million to finance the construction and operation of the Hidroelctrica San Lorenzo power plant, designed to generate 42.3 GWh of power a year from a renewable energy source beginning in 2013 - enough to power a town of 45,000 inhabitants. Hidroelctrica San Lorenzo's two generators will reduce current carbon emissions by approximately 20,000 tons per year.
    Hidroelctrica San Lorenzo

    Empresa de Generacin Elctrica Canchayllo S.A.C


    In 2012, the IIC approved a loan of up to US$7.2 million to finance the development, construction, and operation an hydroelectric plant along the Pachacayo River, in the department of Junn, located in central Peru. The project itself is a 5.3 MW run of river power plant awarded with a Subasta Renewable Energy Resources ("RER") power purchase agreement at US $47.4 per MWh Canchayllo is owned by Cascade Hydro Limited ("Cascade"), Rurelec's 70% owned Peruvian power generation company..

    Mountain Lodges of Peru S.A.C


    In 2013, the IIC and Mountain Lodges of Peru, S.A.C (MLP) signed a loan agreement for US$3.0 million. The loan proceeds will be used to build mountain lodges for adventure tourism, benefiting communities of the Sacred Valley of the Incas, located in Perus Cusco Region. With this loan the IIC is helping establish a new cultural route to Machu Picchu, along which a series of small mountain lodges will be built. The project will benefit rural communities located along the route and help them form joint ventures to share in the profits of the lodges. Considering the projects need for services and labor, it will no doubt be a significant driver of local economic activity

    Margarita Garca de Paredes (margaritag@iadb.org) Tel: + (202) 623-3932

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