Sovereign provides reinsurance and underwriting support to a number of Multilateral Agencies (MLAs) worldwide. MLAs generally work with private insurers such as Sovereign to share risk, help better balance their global portfolios and benefit from shared underwriting expertise and experience. Sovereign has concluded reinsurance and/or co-insurance transactions with the following MLAs: the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); the Inter-American Development Bank (IDB) and the Asian Development Bank (ADB).
Among Sovereign’s more significant transactions with these agencies over the past several years are:
- Sovereign was selected as the underwriter for the first “IFC B Loan” project finance transaction supported by private PRI. The policy covered a portion of the financing of Transierra S.A., the Bolivian concessionaire of the Gasoducto Yacuiba Río Grande (Gasyrg) pipeline. Transierra is indirectly owned by Repsol-YPF of Spain, Petrobras of Brazil, and TOTAL of France. All three shareholders (who are also sponsors of this project) have considerable investments in the oil and gas business in Bolivia. Total financing for the project exceeded $430 million of which $150 million was financed by the IFC under the A/B loan structure. The $100 million B loan was co-underwritten by BBVA and Hypo Vereinsbank (HVB) as joint lead arrangers. Sovereign provided HVB, plus a syndicate of four other commercial lenders with $68.3 million in PRI with a door-to-door tenor of 8.2 years. This was a significant transaction for both Sovereign and the IFC as it demonstrated how private PRI can further enhance the IFC’s considerable risk mitigation capabilities and lead to successful commercial bank syndications in difficult markets.
- Sovereign was mandated by the Asian Development Bank (ADB) to be the first private insurer to participate in the ADB’s “Guarantor of Record” program. Sovereign supported ADB’s Political Risk Guarantee (PRG) which covered a commercial financing tranche for the Phu My 2.2 power project in Vietnam. This transaction marked the first Political Risk Guarantee issued by ADB under its Co-guarantee Program. The $40 million, 11.5-year Political Risk Guarantee covered a syndicate of commercial lenders. ANZ Investment Bank, Société Générale and Sumitomo Mitsui Bank were co-lead arrangers for this ADB PRG facility. Phu My 2.2 is a 715 MW gas-fired power project located near Vung Tau in southern Vietnam. It is the first build-operate-transfer (BOT) power project in Vietnam and is the first large, international project financing in the country. The project’s sponsors are EDF International of France, Tokyo Electric Power Corporation and Sumitomo Corporation of Japan. The Phu My 2.2 project was named “Project Finance Deal of the Year” by Finance Asia and AsiaMoney and “Asian Power Deal of the Year” by Project Finance magazine.
- Sovereign underwrote a $50 million reinsurance policy supporting the Inter-American Development Bank’s (IDB) first private sector convertibility/non-transferability guarantee for Brazil, issued for a US$100 million loan to VBC Energy S.A. (VBC). The loan to VBC, provided by a syndicate of commercial banks, was made to finance the expansion and modernization of two of Brazil’s electricity distribution companies, Compendia Palest de For e Lug, S.A. and Rio Grande Energy, S.A. The $100 million IDB guarantee of that loan, and Sovereign’s reinsurance, covered risks associated with currency inconvertibility, transfer and expropriation of funds.
- Sovereign also reinsured the IDB’s second private sector guarantee, which was issued for the “Light” project in Brazil. Sovereign’s $50 million reinsurance policy supported the IDB’s Political Risk Guarantee issued to Citibank, N. A., as trustee for a bank syndicate, under an indenture between Citibank and the issuer, Light-Servicos de Eletricidade S.A. in Brazil. The proceeds of this financing were used to finance Light’s investment program to improve electric service and coverage in the state of Rio de Janeiro. The US$100 million IDB guarantee, and Sovereign’s reinsurance, covered risks associated with currency inconvertibility, non-transfer and expropriation of funds.