World Bank Insurer Posts Third Record Year On Power Projects

Friday 13 September 2013

Political risk insurance provided by a World Bank Group agency in developing nations rose for a third straight year to a record, led by guarantees on power projects from Angola to Bangladesh.

The Multilateral Investment Guarantee Agency in Washington issued $2.78 billion in coverage in the 12 months ended June 30, compared with $2.66 billion a year earlier, according to financial results e-mailed to Bloomberg News. That includes $511.8 million for a hydro project in Angola that has funding arranged by HSBC Holdings Plc.

Projects including efforts tied to power, manufacturing and agriculture were funded by banks from JPMorgan Chase & Co. to Industrial & Commercial Bank of China. New financial regulations are encouraging private lenders to seek more insurance for projects in developing nations to improve risk management, said Edith Quintrell, MIGA’s director of operations.

“We are contemplating another record year, it’s the strongest project pipeline we’ve ever seen at MIGA,” Quintrell said. “Power is where we see a lot of growth,” with ports and roads also contributing.

The coverage provided in March for the Cambambe Hydroelectric Project in conflict-affected Angola is MIGA’s second-biggest deal, Rebecca Post, a spokeswoman for the agency, said by e-mail Sept. 5. The coverage is for 13 years against the risk sovereign financial obligations aren’t honored, according to the agency’s website.

Developing countries “have to provide affordable electricity and infrastructure to deliver economic growth,” Quintrell said.

Renewable Energy
MIGA provided $1.01 billion of new insurance to electricity projects in the year through June, 63 percent more than the previous period, according to the results. Clean-energy financing by the world’s development banks increased 19 percent in 2012 to break through the $100 billion-a-year barrier for the first time, Bloomberg New Energy Finance in London said yesterday. The top three banks were Germany’s KfW, China Development Bank and the Brazilian Development Bank.

MIGA follows World Bank directions on largely avoiding support for coal projects to help protect the climate from heat-trapping emissions, Quintrell said.

“Renewables can be an affordable option for many countries,” she said. “We are careful not to support projects that in the end will not be sustainable.”

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