(Global Trade Review, London, 28 September 2022) Saudi Electricity Company has signed a US$566.4mn export ECA backed facility agreement with Standard Chartered Bank and Sumitomo Mitsui Banking Corporation to support a Saudi Arabia-Egypt electricity interconnection project. The 14-year financing is guaranteed by the Swedish Export Credit Agency (EKN) and funded by the Swedish Export Credit Corporation (SEK). The landmark facility is structured on the concept of commodity murabaha – a cost-plus-profit arrangement which complies with Islamic finance standards. Coming after the two countries signed US$1.8bn worth of contracts in Cairo last year to build transmission plants and connect power grids, the electricity interconnection project is the first large-scale, high-voltage direct current interconnection between the Middle East and North Africa. Once completed, the project will allow Saudi Arabia and Egypt to exchange up to 3,000 MW of power.
Sweden
Italy pushes to weaken European fossil fuel financing pledge
(Reuters, Brussels, 2 November 2022) Italy is attempting to weaken a pledge 10 European governments intend to make to stop export credit support for fossil fuel projects. The pressure from Italy comes as delegates from nearly 200 countries prepare for a United Nations climate change summit next week in Egypt, where world leaders will attempt to agree tougher action to tackle global warming. A group of ministers planned to make a joint statement on November 3rd committing to end public trade and export finance support for overseas fossil fuel projects by the end of 2022. The countries, which together make up the “Export Finance for Future” group, are Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden and Britain. [Delays in the statement’s release point to controversial negotiations.] A draft of the governments’ statement, seen by Reuters, said they would agree to end new direct official trade and export finance support for “exploration, production, transportation, storage, refining, distribution of coal, crude oil, natural gas, and unabated power generation”. Three sources familiar with the discussions told Reuters Italy had asked to remove the list specifying which fossil fuel activities would lose such support. “Italy objects that there is no consistency between the objective of achieving strategic autonomy from Russia and the impossibility of financing the necessary infrastructure,” an official briefed on Rome’s position told Reuters. Italy’s export credit agency SACE declined to comment. As countries attempt to balance fighting climate change with their short-term response to the energy crisis, some – including Germany – have suggested new investments in gas fields are needed. Countries are still negotiating the draft statement, which could change before it is published. Italy was the biggest backer of fossil fuels within the group, committing 8.4 billion euros in the period – with downstream oil and gas projects and gas-fuelled power plants among the projects. Italy is also moving to keep a Lukoil-owned refinery in business despite new sanctions against Russia kicking in next month. On September 30 the European Commission approved, under EU State aid rules, a €2 billion Italian scheme for the reinsurance of natural gas and electricity trade credit risk in the context of Russia’s war against Ukraine. A hard right coalition that includes pro-Russian voices just took power in Italy after running a campaign focused on energy costs and inflation.
Sweden restricts ECA fossil fuel finance to deliver on climate commitment
(Oil Change International, Washington, 20 September 2022) At the COP26 United Nations Climate Conference in Glasgow, 39 countries and institutions signed up to the Glasgow Statement, committing themselves to ending “new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.” The initiative has the potential to shift $39 billion a year out of fossil fuel projects and into clean energy if countries keep their promises. As the deadline for implementing the Statement looms, the Swedish export credit agencies, SEK and EKN, have released an updated policy. A previously-released policy aligned Swedfund – the Swedish development finance institution – with the Glasgow Statement.
UK Treasury backs £3bn UKEF finance package for war-torn Ukraine
(Sky News, London, 3 August 2022) The UKEF credit facilities comprise up to £2.3bn for the financing of military contracts identified by the Ukrainian government, with the remaining £700m earmarked for reconstruction projects. Insiders speculated that companies such as BAE Systems and Babcock International were likely to be among those signing individual contracts with UKEF. Chancellor Nadhim Zahawi’s backing for the deal is contingent upon the resolution of legal questions relating to “the compatibility of these facilities with our international subsidy control obligations”. “Clearly Ukraine is a high-risk market in which to operate commercially, and we must acknowledge the risk of losses is significant,” he wrote. “UKEF must also therefore continue to mitigate against Exchequer losses as far as is reasonably possible.” The chancellor added that all individual contracts would also require Treasury approval. In March, International Trade Secretary Anne-Marie Trevelyan wrote to Louis Taylor, UKEF chief executive, instructing the agency to maintain its £3.5bn “market limit” for the country. Although the £3bn support is modest in the context of Ukraine’s military and reconstruction needs, it underlines Britain’s central role in providing internationally support to the country. A source close to UKEF said it had so far provided £23m in financial guarantees to Ukraine, including support for a commercial shipment of COVID-19 tests to the country’s Ministry of Health before the Russian invasion. The Treasury and UKEF both declined to comment on the new credit facilities. The Council of the European Union, which represents the bloc’s 27 individual member states, has agreed to send €1 billion ($1 billion) in financial aid to Ukraine as Russia’s invasion intensifies. On August 28, Josep Borrell, Vice-President of the European Commission, noted that the E.U. has financed the delivery of military support to Ukraine to enable Ukraine to fight back, providing humanitarian support and macro-financial assistance, to keep the Ukrainian state afloat. In total, € 9.5 billion have been mobilised by Team Europe so far, with up to €8 billion in additional macro-financial assistance in the pipeline. The Biden administration is set to announce it will give Ukraine an additional $3bn worth of arms on the country’s independence day. The US has so provided $10.6bn in military help for Ukraine since the Russian invasion. It is not known if the U.S. Exim has been involved in any of these arms deals. Reuters notes that, per Ukrinform, Sweden will provide another $46.75 million in military aid to Ukraine.
Swedish ECA studying new import guarantee fund
(Regeringen, Stockholm, 12 April 2022) Google translation. The Swedish Riksdag has proposed a budget amendment for 2022 that would authorize the government to issue guarantees of up to SEK 3 billion (US$305 million) for the purpose of insuring critical raw material imports for industry, to be administered by the Swedish Export Credit Agency (EKN). The new government guarantee is intended to support the green transition threatened by increased demand for critical raw materials and increases in raw material prices which have risen markedly since Russia’s invasion of Ukraine. The raw material guarantee would fall under EKN’s sustainability policy and hence EKN must take into account its guaranteeing of the environment, extraction of fossil fuels, human rights and working conditions, combating corruption and tax evasion and promoting sustainable lending to poor countries. As the credit guarantee is linked to the import of raw materials, unlike EKN’s other range of export credit guarantees, a new regulation is required and a Proposal for a new regulation went out for consultation on 25 March.
Swedish Export Credit Corporation recruits Head of Sustainability
(Market Screener, 14 January 2022) The Swedish Export Credit Corporation, SEK, establishes a new role in the executive management to accelerate work on sustainability, and has recruited Maria Simonson as Head of Sustainability. Maria has joined SEK from Danske Bank where she was Head of Group Sustainability. The Swedish Export Credit Corporation (SEK) is a state-owned company that finances Swedish exporters, their suppliers, and international buyers of Swedish products and services. SEK states that “Sustainability is central to SEK’s operations, and therefore it is a natural step to finance the industry’s transition to a fossil-free society; a development that also creates new export opportunities.”
EKF issues ‘biggest ever’ loan for Turkey railway project
(Global Trade Review, London, 8 December 2021) Danish export credit agency EKF has signed its largest ever export loan for the construction of a high-speed railway project in Turkey. The agency is lending €576mn to the Turkish finance ministry for the project. The loan is classified as green because the electric railway is categorised as sustainable under the EU’s sustainable financing taxonomy. The total value of the financing is €1.1bn, which includes contributions from Swedish public finance and export credit bodies EKN and SEK. Standard Chartered and several other commercial lenders are also involved in the deal, but their exact roles have not yet been disclosed.
Norwegian ECA supports North Pole cruising in style
(AME Info, Dubai, 7 November 2021) A Swedish aviation company, OceanSky Cruises, announced that it will start cruises to the North Pole aboard luxury airships starting from 2024. The aviation industry made up 2.5% of the total CO2 emissions in 2018 alone, or double the amounts since the mid-1980s. Now, a Swedish aviation company, OceanSky Cruises, announced it will start cruises to the North Pole aboard luxury airships starting from 2024. Norwegian export credit agency Eksfin is playing a major role in accelerating the ‘green shift’ at sea, providing loan guarantees approaching €1 billion ($1.16 bn) for the construction of 35 eco-friendly vessels over the last four years, including ‘Le Commandant Charcot’.
European export finance alliance pushes for green incentives [eventually!]
(Global Trade Review, London, 24 November 2021) Seven European countries have pledged to promote reforms and encourage green incentives in the export credit sector, but dashed campaigners’ hopes that they would axe public finance for fossil fuels more quickly than the end of 2022 deadline set at the Cop26 conference. The Export Finance for Future (E3F) coalition, initially comprising Denmark, France, Germany, the Netherlands, Spain, Sweden and the UK, held its second virtual meeting today, hosted by the Dutch government. Belgium, Finland and Italy also joined the alliance today, Dutch state secretary for finance Hans Vijlbrief told the summit following the nations’ closed-door talks. A statement expected after the meeting had not been published as of press time, but a draft seen by GTR said the E3F countries would collaborate on strategies to meeting a pledge signed by each at the Cop26 climate change summit to end public finance support for fossil fuels by the end of 2022. The E3F members provided €20bn in export finance for fossil fuel projects overseas between 2018 and 2020, according to data cited by Oil Change International, a campaign group, and ODI, a think-tank. This compares to €17bn for clean energy projects over the same period. Vijlbrief indicated that attendees at the closed-door meeting endorsed support for natural gas beyond the end of the [Cop26] 2022 deadline. “We all know gas will play a role for a couple of years in our energy supply, that’s no secret,” he said. Peder Lundquist, chief executive of EKF, Denmark’s ECA, told the summit that “logically you need some kind of transition”, pointing to natural gas as a “stable” energy source for power grids in less-developed countries that would struggle to handle a rapid shift to renewables. Deputy assistant for export finance at France’s Treasury directorate, Paul Teboul, said his government does not plan to end support for upstream gas projects until 2035.
ECAs of UAE and France sign strategic reinsurance agreement
(Insurance News Net, Dubai, 5 October 2021) Etihad Credit Insurance (ECI), the UAE Federal export credit company and the French Export Credit Agency Bpifrance Assurance Export have signed a reinsurance agreement to increase joint Emirati and French projects globally. The agreement will further strengthen the robust trade and economic cooperation between the UAE and France and boost exports in both countries by providing export insurance solutions for Emirati and French companies. The UAE is France’s second-largest trade partner in the region. As part of boosting investment and trade ties, ECI earlier signed agreements with its counterparts in the UK and Italy. The agreement with France has been deemed another milestone in ECI’s mission to deepen the UAE’s economic ties and non-oil trade.Saudi Arabia and Sweden have also discussed enhancing economic cooperation including via their ECAs.
